10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

001-36892

(Commission file number)

JERNIGAN CAPITAL, INC.

(Exact name of registrant as specified in its charter)

Maryland	47-1978772
State or other jurisdiction of incorporation or organization	(I.R.S. Employer Identification No.)

6410 Poplar Avenue, Suite 650
Memphis, Tennessee	38119
(Address of principal executive offices)	(Zip Code)

(901) 567-9510

Registrant’s telephone number, including area code

Indicate by check mark whether the Registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such report(s), and (2) has been subject to such filing requirements for the past 90 days. Yes     ☒    No     ☐

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes     ☒     No     ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer,’’ ‘‘smaller reporting company,’’ and ‘‘emerging growth company’’ in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ☐	Accelerated filer  ☐
Non-accelerated filer   ☒ (Do not check if a smaller reporting company)	Smaller reporting company  ☐
	Emerging growth company  ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes     ☐    No     ☒

As of November 6, 2017, Jernigan Capital, Inc. had 14,271,967 shares of common stock outstanding.

Table of Contents

PART I.  FINANCIAL INFORMATION	3
Item 1. Financial Statements	3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
Item 3. Quantitative and Qualitative Disclosures About Market Risk	54
Item 4. Controls and Procedures	55
PART II.  Other information	56
Item 1. Legal Proceedings	56
Item 1A. Risk Factors	56
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities	57
Item 3. Defaults Upon Senior Securities	57
Item 4. Mine Safety Disclosures	57
Item 5. Other Information	57
Item 6. Exhibits	57

2

In this quarterly report on Form 10-Q (“report”), unless the context indicates otherwise, references to “Jernigan Capital,” “we,” “the Company,” “our” and “us” refer to the activities of and the assets and liabilities of the business and operations of Jernigan Capital, Inc.; “Operating Company” refers to Jernigan Capital Operating Company, LLC, a Delaware limited liability company; and “our Manager” refers to JCap Advisors, LLC, a Florida limited liability company.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

JERNIGAN CAPITAL, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

	As of
	September 30, 2017		December 31, 2016
	(Unaudited)
Assets:
Cash and cash equivalents	$	54,999	$	67,373
Development property investments at fair value, of which $11.0 million and $33.3 million of funded principal is pledged as collateral against certain of the Company’s senior loan participations as of September 30, 2017 and December 31, 2016, respectively		188,540		95,102
Operating property loans at fair value, of which none and $2.8 million of funded principal is pledged as collateral against certain of the Company's senior loan participations as of September 30, 2017 and December 31, 2016, respectively		5,990		9,905
Investment in and advances to real estate venture		12,573		5,373
Self-storage real estate owned, net		15,594		-
Other loans, at cost		1,754		11,752
Deferred costs		3,813		2,207
Prepaid expenses and other assets		734		868
Fixed assets, net		196		199
Total assets	$	284,193	$	192,779
Liabilities:
Senior loan participations	$	668	$	18,582
Secured revolving credit facility		-		-
Due to Manager		1,438		1,008
Accounts payable, accrued expenses and other liabilities		1,035		697
Dividends payable		5,293		4,130
Total liabilities		8,434		24,417
Equity:
Jernigan Capital, Inc. stockholders’ equity:
Cumulative preferred stock, $0.01 par value, 100,000,000 shares authorized, 10,000 issued and outstanding at September 30, 2017 and December 31, 2016, at liquidation preference of $10.0 million, net of allocated costs		9,445		9,448
Common stock, $0.01 par value, 500,000,000 shares authorized at September 30, 2017 and December 31, 2016; 14,235,848 and 8,956,354 issued and outstanding at September 30, 2017 and December 31, 2016, respectively		142		90
Additional paid-in capital		272,726		162,664
Accumulated deficit		(6,554)		(3,840)
Total equity		275,759		168,362
Total liabilities and equity	$	284,193	$	192,779

See accompanying notes to consolidated financial statements.

3

JERNIGAN CAPITAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except per share data)

	Three months ended				Nine months ended
	September 30,				September 30,
	2017		2016		2017		2016
Revenues:
Interest income from investments	$	3,173	$	1,698	$	7,759	$	4,374
Rental and other property-related income from real estate owned		160		-		328		-
Other revenues		28		-		174		-
Total revenues		3,361		1,698		8,261		4,374
Costs and expenses:
General and administrative expenses		1,386		1,463		4,336		4,102
Management fees to Manager		1,036		402		2,373		1,218
Property operating expenses of real estate owned		114		-		188		-
Depreciation and amortization of real estate owned		172		-		233		-
Transaction and other expenses		-		2		-		2,129
Restructuring costs		-		-		-		54
Deferred termination fee to Manager		-		-		-		239
Total costs and expenses		2,708		1,867		7,130		7,742
Operating income (loss)		653		(169)		1,131		(3,368)
Other income (expense):
Equity in earnings from unconsolidated real estate venture		730		436		1,747		854
Change in fair value of investments		3,384		4,867		9,066		14,185
Interest expense		(323)		(148)		(757)		(186)
Loss on modification of debt		(232)		-		(232)		-
Other interest income		245		8		479		43
Total other income		3,804		5,163		10,303		14,896
Net income		4,457		4,994		11,434		11,528
Net income attributable to preferred stockholders		(310)		-		(1,033)		-
Net income attributable to common stockholders	$	4,147	$	4,994	$	10,401	$	11,528
Basic earnings per share attributable to common stockholders	$	0.29	$	0.84	$	0.94	$	1.90
Diluted earnings per share attributable to common stockholders	$	0.29	$	0.84	$	0.94	$	1.90
Dividends declared per share of common stock	$	0.35	$	0.35	$	1.05	$	1.05

See accompanying notes to consolidated financial statements.

4

JERNIGAN CAPITAL, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

(in thousands, except share data)

												Total		Non-
	Preferred Stock				Common Stock			Additional		Accumulated		Stockholders'		Controlling		Total
	Shares		Amount		Shares	Amount		Paid-In-Capital		Deficit		Equity		Interests		Equity
Balance at December 31, 2015		-	$	-	6,162,500	$	62	$	110,634	$	(9,396)	$	101,300	$	464	$	101,764
Repurchase of 213,078 shares of common stock		-		-	(213,078)		(2)		(3,150)		-		(3,152)		-		(3,152)
Repurchase and retirement of 2,052 shares related to vested restricted stock		-		-	(2,052)		-		(33)		-		(33)		-		(33)
Issuances of stock-based awards		-		-	14,340		-		-		-		-		-		-
Stock-based compensation		-		-	-		-		828		-		828		-		828
Deferred termination fee to Manager		-		-	-		-		-		-		-		239		239
Effect of Management Agreement amendment		-		-	-		-		703		-		703		(703)		-
Dividends declared on common stock		-		-	-		-		-		(6,331)		(6,331)		-		(6,331)
Net income		-		-	-		-		-		11,528		11,528		-		11,528
Balance at September 30, 2016		-	$	-	5,961,710	$	60	$	108,982	$	(4,199)	$	104,843	$	-	$	104,843
Balance at December 31, 2016		10,000	$	9,448	8,956,354	$	90	$	162,664	$	(3,840)	$	168,362	$	-	$	168,362
Equity offering costs related to issuance of preferred stock		-		(3)	-		-		-		-		(3)		-		(3)
Stock dividend paid on preferred stock		-		-	57,850		1		1,193		-		1,194		-		1,194
Proceeds from issuance of common stock, net of offering costs		-		-	4,025,000		40		83,887		-		83,927		-		83,927
At-the-market issuance of common stock, net of offering costs		-		-	1,093,202		10		24,146		-		24,156		-		24,156
Repurchase and retirement of 7,972 shares related to vested restricted stock		-		-	(7,972)		-		(177)		-		(177)		-		(177)
Issuance of stock-based awards		-		-	111,414		1		(10)		-		(9)		-		(9)
Stock-based compensation		-		-	-		-		1,023		-		1,023		-		1,023
Dividends declared on preferred stock		-		-	-		-		-		(1,033)		(1,033)		-		(1,033)
Dividends declared on common stock		-		-	-		-		-		(13,115)		(13,115)		-		(13,115)
Net income		-		-	-		-		-		11,434		11,434		-		11,434
Balance at September 30, 2017		10,000	$	9,445	14,235,848	$	142	$	272,726	$	(6,554)	$	275,759	$	-	$	275,759

See accompanying notes to consolidated financial statements.

5

JERNIGAN CAPITAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)

	Nine months ended September 30,
	2017		2016
Cash flows from operating activities
Net income	$	11,434	$	11,528
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Interest capitalized on outstanding loans		(5,522)		(2,635)
Change in fair market value of investments		(9,066)		(14,185)
Stock-based compensation		1,023		828
Equity in earnings from unconsolidated real estate venture		(1,739)		(824)
Return on investment from unconsolidated joint venture		512		-
Deferred termination fee to Manager		-		239
Depreciation and amortization		278		74
Amortization of deferred financing costs		175		3
Loss on modification of debt		232		-
Accretion of origination fees		(462)		(468)
Origination fees received in cash		3,097		205
Changes in operating assets and liabilities:
Prepaid expenses and other assets		41		(268)
Due to Manager		430		(151)
Accounts payable, accrued expenses, and other liabilities		126		(12)
Net cash provided by (used in) operating activities		559		(5,666)
Cash flows from investing activities
Purchase of fixed assets		(43)		(11)
Purchase of self-storage real estate owned		(2,856)		-
Capital contributions to real estate venture		(4,766)		(1,348)
Return of capital from real estate venture		-		7,291
Advances to real estate venture		(40,825)		(11,761)
Repayment of advances to real estate venture		39,618		11,761
Capitalized real estate venture costs		-		(226)
Funding of investment portfolio:
Development property investments		(111,609)		(36,257)
Operating property loans		-		(246)
Funding of other loans		(10,147)		(9,197)
Repayments of investment portfolio investments		22,746		5,500
Repayments of other loans		18,673		4,135
Net cash used in investing activities		(89,209)		(30,359)
Cash flows from financing activities
Senior loan participations		1,755		17,550
Repurchase of senior loan participation		(1,854)		-
Cash received upon closing of the credit facility		403		-
Paydown of the credit facility		(20,000)		-
Costs incurred upon the issuance of the credit facility		(118)		-
Deferred costs		(13)		(2,822)
Stock repurchase		(177)		(3,152)
Net proceeds from issuance of common stock		108,074		-
Costs related to the future issuance of preferred stock		(3)		-
Dividends paid on preferred stock		(525)		-
Dividends paid on common stock		(11,266)		(6,401)
Net cash provided by financing activities		76,276		5,175
Net change in cash and cash equivalents		(12,374)		(30,850)
Cash and cash equivalents at the beginning of the period		67,373		43,859
Cash and cash equivalents at the end of the period	$	54,999	$	13,009

See accompanying notes to consolidated financial statements. 

6

JERNIGAN CAPITAL, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(in thousands, except share and per share data, percentages and as otherwise indicated)

1. ORGANIZATION AND FORMATION OF THE COMPANY

Jernigan Capital, Inc. (together with its consolidated subsidiaries, the “Company”) makes debt and equity investments in newly-constructed and existing self-storage facilities. The Company is a Maryland corporation that was organized on October 1, 2014. The Company closed its initial public offering of its common stock (the “IPO”) on April 1, 2015, and has used proceeds of the IPO and other capital sources primarily to fund real estate loans to private developers, owners and operators of self-storage facilities. The Company is structured as an Umbrella Partnership REIT (“UPREIT”) and conducts its investment activities through its operating company, Jernigan Capital Operating Company, LLC (the “Operating Company”). The Company is externally managed by JCAP Advisors, LLC (the “Manager”).

The Company has elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”). As a REIT, the Company generally will not be subject to U.S. federal income taxes on REIT taxable income, determined without regard to the deduction for dividends paid and excluded capital gains, to the extent that it annually distributes all of its REIT taxable income to stockholders and complies with various other requirements for qualification as a REIT set forth in the Code.

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying interim consolidated financial statements include all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods included therein. Substantially all operations are conducted through the Operating Company, and all significant intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates.

Variable Interest Entities

The Company invests in entities that may qualify as variable interest entities (“VIEs”). A VIE is a legal entity that lacks one or more of the characteristics of a voting interest entity. A VIE is defined as an entity in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The determination of whether an entity is a VIE includes both a qualitative and quantitative analysis. Management bases the qualitative analysis on its review of the design of the entity, its organizational structure including allocation of decision-making authority and relevant financial agreements and the quantitative analysis on the forecasted cash flow of the entity. Management reassesses the initial evaluation of an entity as a VIE upon the occurrence of certain reconsideration events.

A VIE must be consolidated only by its primary beneficiary, which is defined as the party that, along with its affiliates and agents, has both the: (i) power to direct the activities that most significantly impact the VIE’s economic performance and (ii) obligation to absorb the losses of the VIE or the right to receive the benefits from the VIE, which could be significant to the VIE. Management determines whether the Company is the primary beneficiary of a VIE by considering qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of its investment; the obligation or likelihood for the Company or other interests to provide financial support; consideration of the VIE’s purpose and design, including the risks the VIE was designed to create and pass through to its variable interest holders and the similarity with and significance to the Company’s business activities and the other interests. Management reassesses the determination of whether the Company is the primary beneficiary of a VIE each reporting period.

Equity Investments

Investments in real estate ventures and entities over which the Company exercises significant influence but not control are accounted for using the equity method. In accordance with Accounting Standards Codification (“ASC”) 825, Financial Instruments (“ASC 825-10”), issued by the Financial Accounting Standards Board (“FASB”), the Company has elected the fair value option of accounting for its development property investments, which would otherwise be required to be accounted for under the equity method. The Company also holds an investment in a real estate venture that is accounted for under the equity method of accounting.

7

Loan Investments and Election of Fair Value Option of Accounting for Certain Loan Investments

The Company has elected the fair value option of accounting for all of its investment portfolio loan investments, including those that are required under GAAP to be accounted for under the equity method, in order to provide stockholders and others who rely on the Company’s financial statements with a more complete and accurate understanding of the Company’s economic performance including its revenues and value inherent in the Company’s equity participation in development projects. Changes in the fair value of these investments are recorded in change in fair value of investments within other income. All direct loan costs are charged to expense as incurred.

Each loan investment, including those recorded at cost and presented on the Consolidated Balance Sheets as other loans, is evaluated for impairment on a periodic basis. For loans carried at fair value, indicators of impairment are reflected in measurement of the loan. For loans that are carried at cost, the Company estimates an allowance for loan loss at each reporting date. In evaluating loan impairment, the Company also periodically evaluates the extent and impact of any credit deterioration associated with the performance and/or value of the underlying collateral property as well as the financial and operating capability of the borrower on a loan by loan basis. The Company also evaluates the financial wherewithal of any loan guarantors as well as the borrower’s competency in managing and operating the property. In addition, the Company considers the overall economic environment, real estate sector and geographic sub-market in which the borrower operates. A loan will be considered impaired when, based on current information and events, it is probable that the loan will not be collected according to the contractual terms of the loan agreement. Factors to be considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. At September 30, 2017 and December 31, 2016, there were no loans that were deemed to be impaired loans. Additionally, for loans recorded at cost, the Company determined that no allowance for loan loss was necessary at September 30, 2017 and December 31, 2016.

For investments carried at fair value, fees and costs are expensed as incurred.

Fair Value Measurement

The Company carries certain financial instruments at fair value because it has elected to apply the fair value option on an instrument by instrument basis under ASC 825-10. The Company’s financial instruments consist of cash, development property investments (which are typically structured as first mortgages and a 49.9% profits interest in the development project), operating property loans (loans secured by operating properties), the investment in real estate venture, other loans, receivables, the secured revolving credit facility, senior loan participations, and payables.

The following table presents the financial instruments measured at fair value on a recurring basis at September 30, 2017:

	Fair Value Measurements Using
	Total		Level 1		Level 2		Level 3
Development property investments	$	188,540	$	-	$	-	$	188,540
Operating property loans		5,990		-		-		5,990
Total investments	$	194,530	$	-	$	-	$	194,530

The following table presents the financial instruments measured at fair value on a recurring basis at December 31, 2016:

	Fair Value Measurements Using
	Total		Level 1		Level 2		Level 3
Development property investments	$	95,102	$	-	$	-	$	95,102
Operating property loans		9,905		-		-		9,905
Total investments	$	105,007	$	-	$	-	$	105,007

Estimating fair value requires the use of judgment. The types of judgments involved depend upon the availability of observable market information. Management’s judgments include determining the appropriate valuation model to use, estimating unobservable inputs and applying valuation adjustments. See Note 4, Fair Value of Financial Instruments, for additional disclosure on the valuation methodology and significant assumptions, as well as the election of the fair value option for certain financial instruments.

Self-Storage Real Estate Owned

Land is carried at historical cost. Building and improvements are carried at historical cost less accumulated depreciation and impairment losses. The cost primarily reflects the funded principal balance of the loan to the Company, net of unamortized origination fees, unrealized appreciation recognized as of the acquisition date, and the cash consideration paid to the developer to acquire his portion of profits interest. Ordinary repairs and maintenance are expensed as incurred; major replacements and betterments, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives. The costs of building and improvements are generally depreciated using the straight-line method based on a useful life of 40 years.

8

The Company expects that the majority of future self-storage facility acquisitions will be considered asset acquisitions, however the Company will evaluate each acquisition using Accounting Standards Update (“ASU”) 2017-01 - Business Combinations (Topic 805): Clarifying the Definition of a Business to determine whether accounting for a business combination or asset acquisition applies.

When facilities are acquired, the cost is allocated to the tangible and intangible assets acquired and liabilities assumed based on relative fair values. Allocations to the individual assets and liabilities are based upon their relative fair values as estimated by management.

In allocating the purchase price for an acquisition, the Company determines whether the acquisition includes intangible assets or liabilities. The Company allocates a portion of the cost to an intangible asset attributable to the value of in-place leases. This intangible asset is amortized to expense over the expected remaining term of the respective leases, which is generally one year. Substantially all of the leases in place at acquired facilities are at market rates, as the majority of the leases are month-to-month contracts. Accordingly, to date, no portion of the basis for an acquired property has been allocated to above- or below-market lease intangibles. To date, no intangible asset has been recorded for the value of customer relationships, because the Company does not have any concentrations of significant customers and the average customer turnover is fairly frequent.

The Company evaluates long-lived assets for impairment when events and circumstances, such as declines in occupancy and operating results, indicate that there may be an impairment. The carrying value of these long-lived assets is compared to the undiscounted future net operating cash flows, plus a terminal value, attributable to the assets to determine if the facility’s basis is recoverable. If an asset’s basis is not considered recoverable, an impairment loss is recorded to the extent the net carrying value of the asset exceeds the fair value. The impairment loss recognized equals the excess of net carrying value over the related fair value of the asset.

Cash and Cash Equivalents

Cash, investments in money market accounts, and certificates of deposit with original maturities of three months or less are considered to be cash equivalents. The Company places its cash and cash equivalents primarily with three financial institutions, and the balance at each financial institution exceeds the Federal Deposit Insurance Corporation insurance limit of $250,000 per institution.

Other Loans

The Company’s other loans balance primarily includes principal balances for certain revolving loan agreements and short-term mortgage loans made by the Company in situations where it was determined that making such loans would benefit the Company’s primary business. These loans are accounted for under the cost method.

Fixed Assets

Fixed assets are recorded at cost and consist of furniture, office and computer equipment, and software. Depreciation is computed on a straight-line basis over the estimated useful lives of the related assets, which range from three to seven years. Fixed assets are generally purchased by the Manager and the cost reimbursed by the Company. Maintenance and repair costs are charged to expense as incurred. Upon sale or retirement, the asset cost and related accumulated depreciation are eliminated from the respective accounts and any resulting gain or loss is included in income.

Revenue Recognition

Interest income is recognized as earned on a simple interest basis and is reported in interest income from investments in the Consolidated Statements of Operations. Accrual of interest will be discontinued on a loan when management believes, after considering economic and business conditions and collection efforts that the borrower’s financial condition is such that collection of interest is doubtful. The Company will recognize income on impaired loans when they are placed into non-accrual status on a cash basis when the loans are both current and the collateral on the loan is sufficient to cover the outstanding obligation to the Company. If these factors do not exist, the Company will not recognize income on such loans. Accrued interest generally is reversed when a loan is placed on non-accrual status.

The Company’s loan origination fees are accreted into interest income over the term of the investment using the effective yield method.

The operations of the self-storage real estate owned are managed by a third-party self-storage management company. All rental leases are operating leases, and rental income is recognized in accordance with the terms of the leases, which generally are month to month.

Debt Issuance Costs

Costs related to the issuance of a debt instrument are deferred and amortized as interest expense over the estimated life of the related debt instrument using the straight-line method, which approximates the effective interest method. If a debt instrument is repurchased prior to its original maturity date, the Company evaluates both the unamortized balance of debt issuance costs as well as any new debt issuance costs, including third party fees, to determine if the costs should be written off to interest expense or, if significant, included in “loss on modification or extinguishment of debt” in the Consolidated Statements of Operations. Debt issuance costs related to the sale of senior participations are

9

presented in the Consolidated Balance Sheets as a deduction from the carrying amount of the principal balance. Debt issuance costs related to the revolving credit facility are presented in the Consolidated Balance Sheets as Deferred Costs.

Transaction and other expenses

Transaction and other expenses consist of non-capitalizable advisory fees and other unreimbursed expenses incurred in connection with various financing and investment transactions and are expensed as incurred. There were no transaction and other expenses for the three or nine months ended September 30, 2017. During the three and nine months ended September 30, 2016, the Company incurred $2,000and $2.1 million, respectively, in transaction and other expenses. 

Offering and Registration Costs

Offering and registration costs represent underwriting discounts and commissions, professional fees, fees paid to various regulatory agencies, and other costs incurred in connection with the registration and sale of the Company’s securities. Offering and registration costs incurred in connection with the Company’s common stock offerings are reflected as a reduction of additional paid-in capital.

On July 27, 2016, the Company entered into a Purchase Agreement (as defined below) (see Note 10, Stockholders’ Equity) which requires the Company to issue and sell a minimum of $50.0 million of Series A Preferred Stock by July 27, 2018. The Company incurred $2.8 million of preferred stock offering costs in connection with the execution of the Purchase Agreement. Such costs are presented as deferred costs on the Consolidated Balance Sheets until such time as Series A Preferred Stock is issued. A pro rata portion of such deferred costs, based upon the ratio of the amount issued to the $50.0 million minimum issuance of Series A Preferred Stock, is reclassified to cumulative preferred stock upon each issuance of the Series A Preferred Stock. Of the $2.8 million of offering costs incurred, $2.2 million is in deferred costs on the Consolidated Balance Sheet at September 30, 2017, and $0.6 million has reduced the cumulative preferred stock balance on the Consolidated Balance Sheet at September 30, 2017.

Income Taxes

The Company has elected to be taxed as a REIT and to comply with the related provisions of the Code. Accordingly, the Company will generally not be subject to U.S. federal income tax to the extent of its distributions to stockholders and as long as certain asset, income and share ownership tests are met. To qualify as a REIT, the Company must annually distribute at least 90% of its REIT taxable income to its stockholders and meet certain other requirements.

Earnings per Share (“EPS”)

Basic EPS includes only the weighted average number of common shares outstanding during the period. Diluted EPS includes the weighted average number of common shares and the dilutive effect of restricted stock, accrued stock dividends, and redeemable Operating Company units when such instruments are dilutive.

All outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends are treated as participating in undistributed earnings with common shareholders. Awards of this nature are considered participating securities and the two-class method of computing basic and diluted EPS must be applied.

Comprehensive Income

For the three and nine months ended September 30, 2017 and 2016, comprehensive income equaled net income; therefore, separate Consolidated Statements of Comprehensive Income are not included in the accompanying consolidated financial statements.

Segment Reporting

The Company does not evaluate performance on a relationship specific or transactional basis and does not distinguish its principal business or group its operations on a geographical basis for purposes of measuring performance. Accordingly, the Company believes it has a single operating segment for reporting purposes in accordance with GAAP.

Recent Accounting Pronouncements

In January 2017, the FASB issued ASU 2017-01 which provides guidance on whether transactions should be accounted for as acquisitions or disposals of assets or businesses. Specifically, when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or group of similar identifiable assets, the set of assets is not a business. Additionally, ASU 2017-01 also provides other guidance providing a more robust framework to use in determining whether a set of assets and activities is a business. Upon adoption of the new guidance, the Company expects that the majority of future self-storage facility acquisitions will now be considered asset acquisitions. This guidance is effective for annual periods beginning after December 15, 2017. Early adoption is permitted. The Company

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adopted ASU 2017-01 for new acquisitions beginning on July 1, 2017. The costs related to the acquisitions of self-storage facilities that qualify as asset acquisitions will be capitalized as part of the purchase.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This ASU provides guidance on the classification of certain cash receipts and payments in the statement of cash flows, including distributions received from equity method investees. This guidance is effective for public business entities for fiscal years and for interim periods within those fiscal years, beginning after December 15, 2017, with early adoption being allowed. The Company is currently assessing the impact this new accounting guidance will have on its consolidated financial statements; however, the Company does not expect the new accounting guidance to have a material impact on its consolidated financial statements as the Company is currently presenting distributions received from equity method investees consistent with the presentation required under ASU 2016-05.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. This guidance is effective for public business entities for fiscal years and for interim periods within those fiscal years, beginning after December 15, 2019, with early adoption being allowed as of the fiscal years beginning after December 15, 2018. The Company is currently assessing the impact this new accounting guidance will have on its consolidated financial statements; however, the Company does not expect the new accounting guidance to have a material impact on its consolidated financial statements. 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which is the final standard on accounting for leases. The most significant change for lessees is the requirement under the new guidance to recognize right-of-use assets and lease liabilities for all leases not considered short-term leases. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. The amendments in ASU 2016-02 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. The Company is currently assessing the impact this new accounting guidance will have on its consolidated financial statements. 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2017. This ASU outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry specific guidance. Several ASUs expanding and clarifying the initial guidance issued in ASU 2014-09 have been released since May 2014. The Company will adopt the ASU effective January 1, 2018 and does not expect the adoption to have a material effect on its consolidated financial statements as the new guidance does not apply to revenue associated with loans or derived from lease contracts; however, the Company is still in the process of evaluating the impact these standards will have on its consolidated financial statements.

Consolidated Statements of Cash Flows - Supplemental Disclosures

The following table provides supplemental disclosures related to the Consolidated Statements of Cash Flows:

	Nine months ended September 30,
	2017		2016
Supplemental disclosure of cash flow information:
Interest paid	$	705	$	141
Supplemental disclosure of non-cash investing and financing activities:
Stock dividend paid on preferred stock	$	1,194	$	-
Dividends declared, but not paid, on preferred stock		310		-
Dividends declared, but not paid, on common stock		4,983		2,087
Contribution of assets to real estate venture		-		7,693
Reclassification of self-storage real estate owned		12,919		-
Other loans paid off with issuance of development property investments		1,587		-

Upon the closing of the credit facility, the Company received cash of $0.4 million as presented within “Cash received upon closing of the credit facility” in the Consolidated Statement of Cash Flows for the nine months ended September 30, 2017. The amount received was comprised of a $20.0 million draw on the credit facility offset by $17.8 million from the repurchase of senior loan participations and $1.8 million of costs incurred upon closing of the credit facility.

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3. INVESTMENTS

In addition to the self-storage real estate owned as described in Note 7, Self-Storage Real Estate Owned, the Company’s self-storage investments at September 30, 2017 consisted of the following:

 Development Property Investments - The Company had 36 investments totaling an aggregate committed principal amount of approximately $397.5 million to finance the ground-up construction of or conversion of existing buildings into self-storage facilities. Each development property investment is funded as the developer constructs the project, is secured by a first mortgage on the development project and generally includes a 49.9% interest in the positive cash flows (including the sale and refinancing proceeds after debt repayment) of the project. Loans comprising development property investments are non-recourse with customary carve-outs and subject to completion guaranties, are interest-only with a fixed interest rate of typically 6.9% per annum and typically have a term of 72 months. 

The Company also had one construction loan investment with a committed principal amount of approximately $17.7 million, which had an initial term of 18 months that was extended during the first quarter of 2017. This construction loan is interest-only at a fixed interest rate of 6.9% per annum, has no equity participation and is secured by a first priority mortgage on the project. It is also subject to a purchase and sale agreement between the developer and a third-party purchaser pursuant to which the financed project is anticipated to be sold and the loan repaid on or about the time a certificate of occupancy is issued for the financed self-storage facility.

 Operating property loans - The Company had two term loans totaling $6.0 million of aggregate committed principal amount, the proceeds of which were used by borrowers to finance the acquisition of, refinance existing indebtedness on, or recapitalize operating self-storage facilities. These loans are secured by first mortgages on the projects financed, are interest-only with fixed interest rates ranging from 5.85% to 6.9% per annum, and generally have a term of 72 months.

The Company’s development property investments and operating property loans are collectively referred to herein as the Company’s investment portfolio. 

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As of September 30, 2017, the aggregate committed principal amount of the Company’s investment portfolio was approximately $421.2 million and outstanding principal was $173.7 million, as described in more detail in the table below:

	Metropolitan					Remaining
	Statistical Area	Total Investment		Funded		Unfunded
Closing Date	("MSA")	Commitment		Investment (1)		Commitment		Fair Value
Development property investments:
Loan investments with a profits interest:
6/10/2015	Atlanta 1 (2)	$	8,132	$	8,010	$	122	$	10,507
6/19/2015	Tampa 1 (2)		5,369		5,285		84		6,058
6/26/2015	Atlanta 2 (2)		6,050		5,754		296		8,519
6/29/2015	Charlotte 1 (2)		7,624		7,126		498		10,551
7/2/2015	Milwaukee (2)		7,650		7,377		273		8,762
7/31/2015	New Haven (2)		6,930		6,412		518		8,399
8/10/2015	Pittsburgh (2)		5,266		4,574		692		6,591
8/14/2015	Raleigh (3)		8,792		4,277		4,515		4,260
9/30/2015	Jacksonville 1 (2)		6,445		5,988		457		8,830
10/27/2015	Austin (2)		8,658		7,000		1,658		8,779
9/20/2016	Charlotte 2 (3)		12,888		4,517		8,371		4,360
11/17/2016	Jacksonville 2 (3)		7,530		3,899		3,631		4,453
1/4/2017	New York City 1 (2)		16,117		13,165		2,952		16,712
1/18/2017	Atlanta 3		14,115		3,471		10,644		3,314
1/31/2017	Atlanta 4		13,678		5,698		7,980		5,667
2/24/2017	Orlando 3		8,056		1,468		6,588		1,409
2/24/2017	New Orleans		12,549		-		12,549		-
2/27/2017	Atlanta 5		17,492		3,910		13,582		3,790
3/1/2017	Fort Lauderdale		9,952		1,945		8,007		1,875
3/1/2017	Houston		13,630		3,382		10,248		3,283
4/14/2017	Louisville 1		8,523		1,471		7,052		1,394
4/20/2017	Denver 1		9,806		1,906		7,900		1,822
4/20/2017	Denver 2		11,164		2,877		8,287		2,790
5/2/2017	Atlanta 6		12,543		3,117		9,426		3,017
5/2/2017	Tampa 2		8,091		890		7,201		813
5/19/2017	Tampa 3		9,224		729		8,495		639
6/12/2017	Tampa 4		10,266		1,364		8,902		1,266
6/19/2017	Baltimore (4)		10,775		2,672		8,103		2,484
6/28/2017	Knoxville		9,115		1,656		7,459		1,573
6/29/2017	Boston		14,103		2,031		12,072		1,898
6/30/2017	New York City 2 (4)		26,482		16,712		9,770		16,333
7/27/2017	Jacksonville 3		8,096		888		7,208		810
8/30/2017	Orlando 4		9,037		1,790		7,247		1,698
9/14/2017	Los Angeles		28,750		7,382		21,368		7,284
9/14/2017	Miami		14,657		5,761		8,896		5,644
9/28/2017	Louisville 2		9,940		2,230		7,710		2,139
		$	397,495	$	156,734	$	240,761	$	177,723
Construction loans:
12/23/2015	Miami		17,733		10,999		6,734		10,817
		$	17,733	$	10,999	$	6,734	$	10,817
	Subtotal	$	415,228	$	167,733	$	247,495	$	188,540
Operating property loans:
7/7/2015	Newark		3,480		3,480		-		3,477
12/22/2015	Chicago		2,502		2,500		2		2,513
	Subtotal	$	5,982	$	5,980	$	2	$	5,990
	Total investments	$	421,210	$	173,713	$	247,497	$	194,530

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(1)	Represents principal balance of loan gross of origination fees.
(2)	Facility had received certificate of occupancy as of September 30, 2017. See Note 4, Fair Value of Financial Instruments, for information regarding recognition of entrepreneurial profit.
(3)	Facility had achieved at least 40% construction completion but had not received certificate of occupancy as of September 30, 2017. See Note 4, Fair Value of Financial Instruments, for information regarding recognition of entrepreneurial profit.
(4)	These investments contain a higher loan-to-cost ratio and a higher interest rate, some of which interest is payment-in-kind ("PIK") interest. The PIK interest, computed at the contractual rate specified in each debt agreement, is periodically added to the principal balance of the debt and is recorded as interest income. Thus, the actual collection of this interest may be deferred until the time of debt principal repayment.

The following table provides a reconciliation of the funded principal to the fair market value of investments at September 30, 2017:

Funded principal	$	173,713
Adjustments:
Unamortized origination fees		(3,627)
Change in fair value of investments		24,528
Other		(84)
Fair value of investments	$	194,530

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As of December 31, 2016, the aggregate committed principal amount of the Company’s investment portfolio was approximately $141.9 million and outstanding principal was $86.9 million, as described in more detail in the table below:

	Metropolitan					Remaining
	Statistical Area	Total Investment		Funded		Unfunded
Closing Date	("MSA")	Commitment		Investment (1)		Commitment		Fair Value
Development property investments:
Loan investments with a profits interest:
4/21/2015	Orlando 1 (2) (5)	$	5,372	$	5,308	$	64	$	7,302
6/10/2015	Atlanta 1 (2)		8,132		7,694		438		10,404
6/19/2015	Tampa (2)		5,369		5,285		84		6,279
6/26/2015	Atlanta 2 (2)		6,050		5,620		430		8,900
6/29/2015	Charlotte 1 (2)		7,624		6,842		782		9,853
7/2/2015	Milwaukee (2)		7,650		5,608		2,042		7,008
7/31/2015	New Haven (2)		6,930		5,257		1,673		6,730
8/10/2015	Pittsburgh (3)		5,266		3,497		1,769		4,551
8/14/2015	Raleigh		8,792		1,460		7,332		1,396
9/30/2015	Jacksonville 1 (2)		6,445		5,852		593		7,962
10/27/2015	Austin (3)		8,658		4,366		4,292		5,192
9/20/2016	Charlotte 2		12,888		1,446		11,442		1,298
11/17/2016	Orlando 2 (5)		5,134		1,342		3,792		1,237
11/17/2016	Jacksonville 2		7,530		624		6,906		551
		$	101,840	$	60,201	$	41,639	$	78,663
Construction loans:
8/5/2015	West Palm Beach (4)		7,500		6,712		788		6,702
8/5/2015	Sarasota (4)		4,792		3,485		1,307		3,473
12/23/2015	Miami		17,733		6,517		11,216		6,264
		$	30,025	$	16,714	$	13,311	$	16,439
	Subtotal	$	131,865	$	76,915	$	54,950	$	95,102
Operating property loans:
6/19/2015	New Orleans (4)		2,800		2,800		-		2,768
7/7/2015	Newark		3,480		3,480		-		3,441
10/30/2015	Nashville (4)		1,210		1,210		-		1,204
12/22/2015	Chicago		2,502		2,500		2		2,492
	Subtotal	$	9,992	$	9,990	$	2	$	9,905
	Total investments	$	141,857	$	86,905	$	54,952	$	105,007

(1)	Represents principal balance of loan gross of origination fees.
(2)	Facility had received certificate of occupancy as of December 31, 2016. See Note 4, Fair Value of Financial Instruments, for information regarding recognition of entrepreneurial profit.
(3)	Facility had achieved at least 40% construction completion but had not received certificate of occupancy as of December 31, 2016. See Note 4, Fair Value of Financial Instruments, for information regarding recognition of entrepreneurial profit.
(4)	These investments were fully repaid during the nine months ended September 30, 2017.
(5)	In the nine months ended September 30, 2017, the Company purchased the economic rights of the Class A membership units of the limited liability companies which own these development property investments. As such, these investments are presented as self-storage real estate owned in the September 30, 2017 Consolidated Balance Sheet. See Note 7, Self-Storage Real Estate Owned, for additional discussion.

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The following table provides a reconciliation of the funded principal to the fair market value of investments at December 31, 2016:

Funded principal	$	86,905
Adjustments:
Unamortized origination fees		(1,056)
Change in fair value of investments		19,242
Other		(84)
Fair value of investments	$	105,007

The Company has elected the fair value option of accounting for all of its investment portfolio investments in order to provide stockholders and others who rely on the Company’s financial statements with a more complete and accurate understanding of the Company’s economic performance, including its revenues and value inherent in its equity participation in development projects. See Note 4, Fair Value of Financial Instruments, for additional disclosure on the valuation methodology and significant assumptions.

No loans were in non-accrual status as of September 30, 2017 and December 31, 2016.

All of the Company’s development property investments with a profits interest would have been accounted for under the equity method had the Company not elected the fair value option. For these development property investments with a profits interest, the assets and liabilities of the equity method investees totaled approximately $188.2 million and $156.7 million, respectively, at September 30, 2017 and totaled approximately $71.0 million and $60.2 million, respectively, at December 31, 2016. These investees had revenues of approximately $2.2 million and a net operating income, excluding depreciation and interest expense, of approximately $0.2for the nine months ended September 30, 2017. These investees had revenues of approximately $0.3 million and a net operating loss, excluding depreciation and interest expense, of approximately $0.6 million for the nine months ended September 30, 2016. For the nine months ended September 30, 2017, the total income (interest income and change in fair value) from one development property investment with a profits interest exceeded 20% of the Company’s net income. The Company recorded total income for the nine months ended September 30, 2017 of $4.1 million from the New York City 1 MSA development property investment with a profits interest.

For 11 of the Company’s development property investments with a profits interest, an investor has an option to put its interest to the Company upon the event of default of the underlying property loans. The put, if exercised, requires the Company to purchase the member’s interest at the original purchase price plus a yield of 4.5% on such purchase price. The Company concluded that the likelihood of loss is remote and assigned no value to these put provisions as of September 30, 2017.

4. FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value option under ASC 825-10 allows companies to elect to report selected financial assets and liabilities at fair value. The Company has elected the fair value option of accounting for its development property investments and operating property loan investments in order to provide stockholders and others who rely on the Company’s financial statements with a more complete and accurate understanding of the Company’s economic performance, including its revenues and value inherent in its equity participation in self-storage development projects.

The Company applies ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), which defines fair value, establishes a framework for measuring fair value in accordance with GAAP and expands disclosure of fair value measurements. ASC 820 defines fair value as the price that would be received for an investment in a current sale, which assumes an orderly transaction between market participants on the measurement date. ASC 820 requires the Company to assume that the investment is sold in its principal market to market participants or, in the absence of a principal market, the most advantageous market, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact. In accordance with ASC 820, the Company considers its principal market as the market for the purchase and sale of self-storage properties, which the Company believes would be the most likely market for the Company’s loan investments given the nature of the collateral securing such loans and the types of borrowers. ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. In accordance with ASC 820, these inputs are summarized in the three broad levels listed below:

Level 1 - Quoted prices for identical assets or liabilities in an active market.

Level 2 - Financial assets and liabilities whose values are based on the following: (i) Quoted prices for similar assets or liabilities in active markets; (ii) Quoted prices for identical or similar assets or liabilities in non-active markets; (iii) Pricing models whose inputs are derived principally from or corroborated by observable market data for substantially the full term of the asset or liability.

Level 3 - Prices or valuation techniques based on inputs that are both unobservable and significant to the overall fair value measurement.

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The carrying values of cash, other loans, receivables, senior loan participations and payables approximate their fair values due to their short-term nature or due to a variable interest rate. Cash, receivables, and payables are categorized as Level 1 instruments in the measurement of fair value. Other loans and senior loan participations are categorized as Level 2 instruments in the measurement of fair value as the fair values of these investments are determined using a discounted cash flow model with inputs from third-party pricing sources and similar instruments. The table below summarizes the valuation techniques and inputs used to measure the fair value of items categorized in Level 3 of the fair value hierarchy.

Instrument	Valuation technique and assumptions	Hierarchy classification
Development property investments	Valuations are determined using an Income Approach analysis, using the discounted cash flow method model, capturing the prepayment penalty / call price schedule as applicable. The valuation models are calibrated to the total investment net drawn amount as of the issuance date.	Level 3
Development property investments with a profits interest  (a)	Valuations are determined using an Income Approach analysis, using the discounted cash flow method model, capturing the prepayment penalty / call price schedule as applicable. The valuation models are calibrated to the total investment net drawn amount as of the issuance date factoring in the value of the profits interests.	Level 3
	An option-pricing method (OPM) framework is utilized to calculate the value of the profits interests.
Operating property loans	Valuations are determined using an Income Approach analysis, using the discounted cash flow method model, capturing the prepayment penalty / call price schedule as applicable.	Level 3

(a) Certain of the Company's development property investments include profits interests.

The Company’s development property investments and operating property loan investments are valued using two different valuation techniques. The first valuation technique is an income approach analysis of the debt instrument components of the Company’s investments. The second valuation technique is an option pricing model that is used to determine the fair value of any profits interests associated with an investment. The valuation models are calibrated to the total investment net drawn amount as of the issuance date factoring in the value of the profits interests. At the issuance date of each development property investment, generally the value of the property underlying such investment approximates the sum of the net investment drawn amount plus the developer’s equity investment.

For development property investments with a profits interest, at a certain stage of construction, the option pricing method incorporates an adjustment to measure entrepreneurial profit. Entrepreneurial profit is a monetary return above total construction costs that provides compensation for the risk of a development project. Under this method, the value of each property is estimated based on the cost incurred to date, plus an estimated earned entrepreneurial profit. Total entrepreneurial profit is estimated as the difference between the projected value of a property at stabilization and the total development costs, including land, building improvements, and lease-up costs. Utilizing information obtained from the market coupled with the Company’s own experience, the Company has estimated that in most cases, approximately one-third of the entrepreneurial profit is earned during the construction period beginning when construction is approximately 40% complete and ending when construction is 100% complete, and approximately two-thirds of the entrepreneurial profit is earned from construction completion through stabilization. For the three propertiesbetween 40% and 100% complete at September 30, 2017, the Company has estimated the entrepreneurial profit adjustment to the enterprise value input used in the option pricing model to be equal to one-third of the estimated entrepreneurial profit, allocated on a straight-line basis. Ten properties had reached construction completion at September 30, 2017. For the Company’s development property investments at or around completion of construction, a discounted cash flow model, based on periodically updated estimates of rental rates, occupancy and operating expenses, is the primary method for projecting value of a project. The Company also will consider inputs such as appraisals that differ from the developer’s equity investment, bona fide third-party offers to purchase development projects, sales of development projects, or sales of comparable properties in its markets.

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Level 3 Fair Value Measurements

The following tables summarize the significant unobservable inputs the Company used to value its investments categorized within Level 3 as of September 30, 2017 and December 31, 2016. These tables are not intended to be all-inclusive, but instead to capture the significant unobservable inputs relevant to the Company’s determination of fair values.

As of September 30, 2017
		Unobservable Inputs
	Primary Valuation			Weighted
Asset Category	Techniques	Input	Estimated Range	Average
Development property investments (a)	Income approach analysis	Market yields/discount rate	7.72 - 10.37%	8.72%
		Exit date	0.33 - 6.96 years	2.87 years
Development property investments with a profits interest (b)	Option pricing model	Volatility	63.82 - 93.54%	73.85%
		Exit date	0.67 - 6.96 years	3.02 years
		Capitalization rate (c)	5.35 - 6.00%	5.50%
		Discount rate	8.35 - 9.00%	8.50%
Operating property loans	Income approach analysis	Market yields/discount rate	5.86 - 6.76%	6.24%
		Exit date (d)	4.23 - 4.91 years	4.62 years

(a)	The valuation technique for the development property investments with a profits interest does not differ from the development property investments without a profits interest. Therefore, this line item focuses on all development property investments, including those with a profits interest.
(b)	The valuation technique for the development property investments with a profits interest does not differ from the development property investments without a profits interest. The development property investments with a profits interest only require incremental valuation techniques to determine the value of the profits interest. Therefore this line only focuses on the profits interest valuation.
(c)	Thirteen properties were 40% - 100% complete, thus requiring a capitalization rate to derive entrepreneurial profit. Capitalization rates are estimated based on current data derived from independent sources in the markets in which the Company holds investments.
(d)	The exit dates for the operating property loans are the contractual maturity dates.

As of December 31, 2016
		Unobservable Inputs
	Primary Valuation			Weighted
Asset Category	Techniques	Input	Estimated Range	Average
Development property investments (a)	Income approach analysis	Market yields/discount rate	7.23 - 9.28%	8.34%
		Exit date	0.17 - 3.88 years	1.81 years
Development property investments with a profits interest (b)	Option pricing model	Volatility	68.72 - 73.46%	73.17%
		Exit date	1.42 - 3.88 years	2.12 years
		Capitalization rate (c)	5.25 - 5.50%	5.47%
		Discount rate	8.25 - 8.50%	8.47%
Operating property loans	Income approach analysis	Market yields/discount rate	6.09 - 7.20%	6.73%
		Exit date (d)	4.50 - 5.66 years	5.07 years

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(a)	The valuation technique for the development property investments with a profits interest does not differ from the development property investments without a profits interest. Therefore, this line item focuses on all development property investments, including those with a profits interest.
(b)	The valuation technique for the development property investments with a profits interest does not differ from the development property investments without a profits interest. The development property investments with a profits interest only require incremental valuation techniques to determine the value of the profits interest. Therefore this line only focuses on the profits interest valuation.
(c)	Ten properties were 40% - 100% complete, thus requiring a capitalization rate to derive entrepreneurial profit. Capitalization rates are estimated based on current data derived from independent sources in the markets in which the Company holds investments.
(d)	The exit dates for the operating property loans are the contractual maturity dates.

The fair value measurements are sensitive to changes in unobservable inputs. A change in those inputs to a different amount might result in a significantly higher or lower fair value measurement. The following provides a discussion of the impact of changes in each of the unobservable inputs on the fair value measurement.

Market yields - changes in market yields and discount rates, each in isolation, may change the fair value of certain of the Company’s investments. Generally, an increase in market yields or discount rates may result in a decrease in the fair value of certain of the Company’s investments. The following fluctuations in the market yields/discount rates would have had the following impact on the fair value of our investments:

	Increase (decrease) in fair value of investments
Change in market yields/discount rates (in millions)	September 30, 2017		December 31, 2016
Up 25 basis points	$	(0.9)	$	(0.3)
Down 25 basis points, subject to a minimum yield/rate of 10 basis points		1.0		0.3

Capitalization rate - changes in capitalization rate, in isolation and all else equal, may change the fair value of certain of the Company’s development investments containing profits interests. Generally an increase in the capitalization rate assumption may result in a decrease in the fair value of the Company’s investments. The following fluctuations in the capitalization rates would have had the following impact on the fair value of our investments:

	Increase (decrease) in fair value of investments
Change in capitalization rates (in millions)	September 30, 2017		December 31, 2016
Up 25 basis points	$	(2.5)	$	(2.1)
Down 25 basis points		2.7		2.3
Up 50 basis points		(4.8)		(3.8)
Down 50 basis points		5.8		4.6

Exit date - changes in exit date, in isolation and all else equal, may change the fair value of certain of the Company’s investments that have profits interests. Generally, an acceleration in the exit date assumption may result in an increase in the fair value of the profits interests in certain of the Company’s investments.

Volatility - changes in volatility, in isolation and all else equal, may change the fair value of certain of the Company’s investments that have profits interests. Generally, an increase in volatility may result in an increase in the fair value of the profits interests in certain of the Company’s investments.

Operating cash flow projections - changes in the operating cash flow projections of the underlying self-storage facilities, in isolation and all else equal, may change the fair value of certain of the Company’s investments that have profits interests. Generally, an increase in operating cash flow projections may result in an increase in the fair value of the profits interests in certain of the Company’s investments.

The Company also evaluates the impact of changes in instrument-specific credit risk in determining the fair value of investments. There were no gains or losses attributable to changes in instrument-specific credit risk in the three and nine months ended September 30, 2017 and 2016.

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Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may fluctuate from period to period. Additionally, the fair value of the Company’s investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that the Company may ultimately realize. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If the Company was required to liquidate an investment in a forced or liquidation sale, it could realize significantly less than the value at which the Company has recorded it. In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected in the valuations currently assigned. 

The following table presents changes in investments that use Level 3 inputs for the nine month period ended September 30, 2017:

Balance at December 31, 2016	$	105,007
Net realized gains		-
Net unrealized gains		9,066
Fundings of principal and change in unamortized origination fees		110,600
Repayments of loans		(22,746)
Payment-in-kind interest		5,522
Reclassification of self-storage real estate owned		(12,919)
Net transfers in or out of Level 3		-
Balance at September 30, 2017	$	194,530

As of September 30, 2017 and December 31, 2016, the total net unrealized appreciation on the investments that use Level 3 inputs was $24.5 million and $19.2 million, respectively.

For the three and nine months ended September 30, 2017 and 2016, substantially all of the change in fair value of investments in the Company’s Consolidated Statements of Operations was attributable to unrealized gains relating to the Company’s Level 3 assets still held as of the respective balance sheet date.

Transfers between levels, if any, are recognized at the beginning of the quarter in which the transfers occur.

5. INVESTMENT IN REAL ESTATE VENTURE

On March 7, 2016, the Company, through its Operating Company, entered into the Limited Liability Company Agreement (the “JV Agreement”) of Storage Lenders LLC, a Delaware limited liability company, to form a real estate venture (the “SL1 Venture”) with HVP III Storage Lenders Investor, LLC (“HVP III”), an investment vehicle managed by Heitman Capital Management LLC (“Heitman”). The SL1 Venture was formed for the purpose of providing capital to developers of self-storage facilities identified and underwritten by the Company. Upon formation, HVP III committed $110.0 million for a 90% interest in the SL1 Venture, and the Company committed $12.2 million for a 10% interest.

On March 31, 2016, the Company contributed to the SL1 Venture three of its existing development property investments with a profits interest located in Miami and Fort Lauderdale, Florida that were not yet under construction. These investments had an aggregate committed principal amount of approximately $41.9 million and an aggregate drawn balance of $8.1 million. In exchange, the Company’s initial funding commitment of $12.2 million was reduced by $8.1 million, representing the Company’s initial “Net Invested Capital” balance as defined in the JV Agreement. The Company accounted for this contribution in accordance with ASC 845, Nonmonetary Transactions, and recorded an investment in the SL1 Venture based on the fair value of the contributed development property investments, which is the same as carryover basis. The fair value of the contributed development property investments as of March 31, 2016 was $7.7 million. Pursuant to the JV Agreement, Heitman, in fulfilling its initial $110.0 million commitment, provides capital to the SL1 Venture as cash is required, including funding draws on the three contributed development property investments. During the year ended December 31, 2016, HVP III and the Company agreed to true up the balances in the respective members’ capital accounts to be in accordance with the 90% commitment and 10% commitment made by HVP III and the Company, respectively. Accordingly, during the year ended December 31, 2016, HVP III contributed cash of $7.3 million to the SL1 Venture, and the Company received a $7.3 million cash distribution as a return of its capital.

As of September 30, 2017, the SL1 Venture had closed on eight new development property investments with a profits interest with an aggregate commitment amount of approximately $81.4 million, bringing the total aggregate commitment of the SL1 Venture’s investments to $123.3 million as of September 30, 2017. Accordingly, HVP III’s total commitment for a 90% interest in the SL1 Venture is $111.0 million, and the Company’s total commitment for a 10% interest in the SL1 Venture is $12.3 million.

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Under the JV Agreement, the Company receives a priority distribution (after debt service and any reserve but before any other distributions) out of operating cash flow and residual distributions based upon 1% of the committed principal amount of loans made by the SL1 Venture, exclusive of the loans contributed to the SL1 Venture by the Company. Operating cash flow of the SL1 Venture (after debt service, reserves and the foregoing priority distributions) is distributed in accordance with capital commitments. Residual cash flow from capital and other events (after debt service, reserves and priority distributions) will be distributed (i) pro rata in accordance with capital commitments (its “Percentage Interest”) until each member has received a return of all capital contributed; (ii) pro rata in accordance with each member’s Percentage Interest until Heitman has achieved a 14% internal rate of return; (iii) to Heitman in an amount equal to its Percentage Interest less 10% and to the Company in an amount equal to the Company’s Percentage Interest plus 10% until Heitman has achieved a 17% internal rate of return; (iv) to Heitman in an amount equal to its Percentage Interest less 20% and to the Company in an amount equal to the Company’s Percentage Interest plus 20% until Heitman has achieved a 20% internal rate of return; and (v) any excess to Heitman in an amount equal to its Percentage Interest less 30% and to the Company in an amount equal to the Company’s Percentage Interest plus 30%. However, the Company will not be entitled to any such promoted interest prior to the earlier to occur of the third anniversary of the JV Agreement and Heitman receiving distributions to the extent necessary to provide Heitman with a 1.48 multiple on its contributed capital.

Since the allocation of cash distributions and liquidating distributions are determined as described in the preceding paragraph, the Company has applied the hypothetical-liquidation-at-book-value (“HLBV”) method to allocate the earnings of the SL1 Venture. Under the HLBV approach, the Company’s share of the investee’s earnings or loss is calculated by:

 The Company’s capital account at the end of the period assuming that the investee was liquidated or sold at book value, plus

 Cash distributions received by the Company during the period, minus

 Cash contributions made by the Company during the period, minus

 The Company’s capital account at the beginning of the period assuming that the investee were liquidated or sold at book value.

The SL1 Venture has elected the fair value option of accounting for its development property investments with a profits interest, which are equity method investments of the SL1 Venture. The assumptions used to value the SL1 Venture’s investments are materially consistent with those used to value the Company’s investments. As of September 30, 2017, the SL1 Venture had eleven development property investments with a profits interest as described in more detail in the table below:

	Metropolitan					Remaining
	Statistical Area	Total Investment		Funded		Unfunded
Closing Date	("MSA")	Commitment		Investment (1)		Commitment		Fair Value
5/14/2015	Miami 1 (2) (3)	$	13,867	$	9,455	$	4,412	$	10,929
5/14/2015	Miami 2 (2) (3)		14,849		8,486		6,363		8,947
9/25/2015	Fort Lauderdale (2) (3)		13,230		7,298		5,932		7,796
4/15/2016	Washington DC (4)		17,269		14,346		2,923		15,937
4/29/2016	Atlanta 1 (3)		10,223		5,140		5,083		5,459
7/19/2016	Jacksonville (4)		8,127		6,989		1,138		10,541
7/21/2016	New Jersey		7,828		1,621		6,207		1,561
8/15/2016	Atlanta 2 (4)		8,772		6,535		2,237		7,423
8/25/2016	Denver (3)		11,032		7,605		3,427		8,678
9/28/2016	Columbia (4)		9,199		7,651		1,548		8,525
12/22/2016	Raleigh		8,877		2,431		6,446		2,398
	Total	$	123,273	$	77,557	$	45,716	$	88,194

(1)	Represents principal balance of loan gross of origination fees.
(2)	These development property investments (having approximately $8.1 million of outstanding principal at contribution) were contributed to the SL1 Venture on March 31, 2016 by the Company.
(3)	Facility had achieved at least 40% construction completion but had not received certificate of occupancy as of September 30, 2017. See Note 4, Fair Value of Financial Instruments, for information regarding recognition of entrepreneurial profit.
(4)	Facility had received certificate of occupancy as of September 30, 2017. See Note 4, Fair Value of Financial Instruments, for information regarding recognition of entrepreneurial profit.

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As of September 30, 2017, the SL1 Venture had total assets of $88.8 million and total liabilities of $3.6 million. During the three and nine months ended September 30, 2017, the SL1 Venture had net income of $6.6 million and $14.1 million, of which $0.7 million and $1.7 million was allocated to the Company and $5.8 million and $12.4 million was allocated to HVP III, respectively, under the HLBV method. At September 30, 2017, $0.2 million of transaction expenses were included in the carrying amount of the Company’s investment in the SL1 Venture. Additionally, the Company may from time to time make advances to the SL1 Venture. At September 30, 2017 and December 31, 2016, the Company had $3.5 million and $2.3 million, respectively, in advances to the SL1 Venture, and the related interest on these advances are classified in equity in earnings from unconsolidated real estate venture in the Consolidated Statements of Operations.

In accordance with the JV Agreement, for each development property investment, the borrower must deliver to the SL1 Venture a completion guarantee whereby the borrower agrees to cover all costs in excess of the agreed-upon budget amount. Additionally, the Company is required to deliver to the SL1 Venture a backstop completion guarantee for each development property investment to guarantee completion in the event the borrower does not satisfy its obligations. The Company concluded that the likelihood of loss is remote and assigned no value to these guarantees as of September 30, 2017.

Under the JV Agreement, Heitman and the Company seek to obtain and, if obtained, share joint rights of first refusal to acquire self-storage facilities that are the subject of development property investments made by the SL1 Venture. Additionally, so long as the Company, through its operating subsidiary, is a member of the SL1 Venture and the SL1 Venture holds any assets, the Company will not make any investment of debt or equity or otherwise, directly or indirectly, in one or more new joint ventures or similar programs for the purposes of funding or providing development loans or financing, directly or indirectly, for the development, construction or conversion of self-storage facilities, in each case without first offering such opportunity to Heitman to participate on substantially the same terms as those set forth in the JV Agreement, either through the SL1 Venture or a newly formed real estate venture.

The JV Agreement permits Heitman to cause the Company to repurchase from Heitman its Developer Equity Interests (as defined in the JV Agreement) in certain limited circumstances. Under the JV Agreement, if a developer causes to be refinanced a self-storage facility with respect to which the SL1 Venture has made a development property investment and such refinancing does not coincide with a sale of the underlying self-storage facility, then at any time after the fourth anniversary of the commencement of the SL1 Venture, Heitman may either put to the Company its share of the Developer Equity Interests in respect of each such development property investment, or sell Heitman’s Developer Equity Interests to a third party. The Company concluded that the likelihood of loss is remote and assigned no value to these puts as of September 30, 2017.

The Company is the managing member of the SL1 Venture and manages and administers (i) the day-to-day business and affairs of the SL1 Venture and any of its acquired properties and (ii) loan servicing and other administration of the approved development property investments. The Company will be paid a monthly expense reimbursement amount by the SL1 Venture in connection with its role as managing member, as set forth in the JV Agreement. Heitman may remove the Company as the managing member of the SL1 Venture if it commits an event of default (as defined in the JV Agreement), if it undergoes a change of control (as defined in the JV Agreement), or if it becomes insolvent.

Heitman approves all “Major Decisions” of the SL1 Venture, as defined in the JV Agreement, including, but not limited to, each investment of capital, the incurrence of any indebtedness, the sale or other disposition of assets of the SL1 Venture, the replacement of the managing member, the acceptance of new members into the SL1 Venture and the liquidation of the SL1 Venture.

For four of the SL1 Venture development property investments with a profits interest, an investor has an option to put its interest to the Company upon the event of default of the underlying property loans. The put options, if exercised, require the Company to purchase the member’s interest at the original purchase price plus a yield of 4.5% on such purchase price. The Company concluded that the likelihood of loss is remote and assigned no value to these put options at September 30, 2017.

6. VARIABLE INTEREST ENTITIES

Development Property Investments

The Company holds variable interests in its development property investments. The Company has determined that these investees qualify as VIEs because the entities do not have enough equity to finance their activities without additional subordinated financial support. In determining whether the Company is the primary beneficiary of the development property VIEs, the Company identified the activities that most significantly impact thedevelopment property VIEs’ economic performance. Such activities are (1) managing the construction and operations of the project, (2) selecting the property manager, (3) making financing decisions, (4) authorizing capital expenditures and (5) disposing of the property. Although the Company has certain participating and protective rights, it does not have the power to direct the activities that most significantly impact thedevelopment property VIEs’ economic performance and is not the primary beneficiary; therefore, the Company does not consolidate thedevelopment property VIEs.

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The Company has recorded assets of $188.5 million and $95.1 million at September 30, 2017 and December 31, 2016, respectively, for its variable interest in the development property VIEs which is included in the development property investments at fair value line item in the Consolidated Balance Sheets. The Company’s maximum exposure to loss as a result of its involvement with the development property VIEs is as follows:

	September 30, 2017		December 31, 2016
Assets recorded related to VIEs	$	188,540	$	95,102
Unfunded loan commitments to VIEs		247,495		54,950
Maximum exposure to loss	$	436,035	$	150,052

The Company has a construction completion guaranty from the managing members of the development property VIEs or individual affiliates/owners of such managing members.

Investment in Real Estate Venture

The Company determined that the SL1 Venture qualifies as a VIE because it does not have enough equity to finance its activities without additional subordinated financial support. In determining whether the Company is the primary beneficiary of the entity, the Company identified the activities that most significantly impact the entity’s economic performance. Such activities are (1) approving self-storage development investments and acquiring self-storage properties, (2) managing directly-owned properties, (3) obtaining debt financing, and (4) disposing of investments. Although the Company has certain rights, it does not have the power to direct the activities that most significantly impact the entity’s economic performance and thus is not the primary beneficiary. As such, the Company does not consolidate the entity and accounts for its unconsolidated interest in the SL1 Venture using the equity method of accounting. The Company’s investment in the SL1 Venture is included in the investment in and advances to real estate venture balance in the Consolidated Balance Sheets, and earnings from the SL1 Venture are included in equity in earnings from unconsolidated real estate venture in the Company’s Consolidated Statements of Operations. The Company’s maximum contribution to the SL1 Venture is $12.3 million, and as of September 30, 2017 and December 31, 2016, the Company’s remaining unfunded commitment to the SL1 Venture is $4.5 million and $9.4 million, respectively.

7. SELF-STORAGE REAL ESTATE OWNED

On February 3, 2017, the Company purchased 50% of the economic rights of the Class A membership units of a limited liability company that owns the Orlando 1 development property investment with a profits interest for $1.3 million and increased its profits interest on this development property investment from 49.9% to 74.9%. The Class A member retained all management and voting rights in the limited liability company. Previously, the Company accounted for this investment as an equity method investment. Because the Company was entitled to greater than 50% of the residual profits from the investment, the Company accounted for this investment as a real estate investment in its consolidated financial statements in accordance with ASC 310.

On August 9, 2017, the Company purchased the remaining 50% of the economic rights of the Class A membership units of a limited liability company that owns the Orlando 1 development property investment with a profits interest and 100% of the economic rights of the Class A membership units of a limited liability company that owns the Orlando 2 development property investment with a profits interest for $1.6 million and increased its profits interest on these development property investment from 74.9% to 100% and 49.9% to 100%, respectively. The Orlando 2 investment is an additional phase to the Orlando 1 investment that is being operated as one self-storage facility. The Company now owns all management and voting rights in the limited liability companies. Previously, the Company accounted for the Orlando 1 investment as a real estate investment and the Orlando 2 investment as an equity method investment. Because the Company is now entitled to greater than 50% of the residual profits from the Orlando 2 investment, the Company will account for this investment as a real estate investment in its consolidated financial statements. The Company will continue to account for the Orlando 1 investment as a real estate investment. Accordingly, as of August 9, 2017, the Company wholly owns and fully consolidates these investments in the accompanying consolidated financial statements.

The Company evaluated this purchase under ASU 2017-01 and concluded that the transaction consisted of a single identifiable asset that represents substantially all of the fair value of the gross assets acquired. Therefore, this transaction does not constitute the purchase of a business and has been treated as an asset acquisition.

In accordance with ASU 2017-01, as of August 9, 2017, the Company’s basis in the self-storage real estate owned is recorded at cost (equal to the cash consideration paid and the funded loan balance, net of unamortized origination fees), plus unrealized gains recorded at the date of acquisition, which was February 3, 2017 for the Orlando 1 development property investment and August 9, 2017 for the Orlando 2 development property investment. The allocation to the basis of the assets acquired is based on their relative fair values.

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The following table shows the Company’s basis in this facility as of August 9, 2017:

Funded principal balance, net of unamortized origination fees	$	9,139
Unrealized appreciation on investments		3,780
Cash consideration paid		2,856
Net property working capital acquired		52
Total cost basis	$	15,827

The following table shows the impact of this real estate investment on the Company’s Consolidated Balance Sheet as of September 30, 2017:

	September 30, 2017
Cash and cash equivalents	$	60
Prepaid expenses and other assets		2
Land		1,505
Building and improvements		13,720
In-place leases		602
Accumulated depreciation and amortization		(233)
Self-storage real estate owned	$	15,594
Accounts payable, accrued expenses and other liabilities	$	125

The following table shows the impact of this real estate investment on the Company’s Consolidated Statement of Operations for the three and nine months ended September 30, 2017:

	Three months ended		Nine months ended
	September 30, 2017		September 30, 2017
Rental revenues	$	160	$	328
Property operating expenses of real estate owned		(114)		(188)
Depreciation and amortization expense		(172)		(233)
Total expenses of real estate owned	$	(286)	$	(421)

8. OTHER LOANS, AT COST

As of September 30, 2017, the Company had no outstanding bridge loans. During the nine months ended September 30, 2017, the Company received repayments of $17.4 million related to seven bridge loans and entered into two new bridge loans with an aggregate commitment and funded amount of $7.3 million, which are included in the seven bridge loans repaid during the year. At December 31, 2016, the Company had executed five bridge loans with a balance of $10.1 million extended to four limited liability companies that are under common control with borrowers in certain of the Company’s development property investments. These bridge loans were accounted for under the cost method, and fair value approximates cost at December 31, 2016. None of these bridge loans were in non-accrual status as of December 31, 2016. The Company determined that no allowance for loan loss was necessary at December 31, 2016.

The Company also had executed eight revolving loan agreements with an aggregate outstanding principal amount of $1.4 million at September 30, 2017. Seven of the agreements are with individuals who are owners of limited liability companies, one is with a limited liability company, and all are personally guaranteed. Seven of these borrowers are either directly or indirectly owners of certain of the Company’s development property investments and one is a prospective developer. Four of the agreements provide for borrowings of up to $0.5 million, one provides for borrowings of up to $0.1 million, one provides for borrowings of up to $0.4 million, one provides for borrowings of up to $0.7 million, and one agreement provides for borrowings of up to $1.0 million (total of $4.2 million) to fund expenses for pursuit costs to contract for and perform diligence on additional self-storage sites. The revolving loans are typically unsecured but cross-defaulted against development loans. One of the revolving loans is guaranteed by a part owner of one of the Company’s development loan investments, and this guaranty is secured by a pledge of the owner’s membership interest in one of the Company’s development loan investments. The loans bear interest at 6.9 - 7.0% per annum and are due in full in three years. During the nine months ended September 30, 2017, the Company received repayments on these revolving loan agreements of $2.9 million and draws of $2.6 million. At December 31, 2016, the Company had executed six revolving loan agreements with an aggregate outstanding principal amount of $1.7 million. These loans are accounted for under the cost method, and fair value approximates cost at September 30, 2017 and December 31, 2016. None of these loans are in non-accrual status as of September 30, 2017 and December 31, 2016. The Company determined that no allowance for loan loss was necessary at September 30, 2017 and December 31, 2016.

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9. DEBT

Credit Facility

On July 25, 2017, the Operating Company entered into a  $100 million senior secured revolving credit facility with KeyBank National Association, as administrative agent, KeyBanc Capital Markets Inc., as lead arranger, and the other lenders party thereto (the “Credit Facility”). Pursuant to an accordion feature, the Operating Company may from time to time increase the commitments up to an aggregate amount of $200 million, subject to, among other things, an absence of default under the Credit Facility, as well as receiving commitments from lenders for the additional amounts. At closing, the Operating Company borrowed $20.0 million of the $33.3 million then available under the Credit Facility. The Company used the proceeds to repurchase senior participation interests outstanding on five of the Company’s development investments from the commercial banks who held such senior participation interests, each of whom agreed to participate as lenders in the Credit Facility, and to pay fees and expenses of procuring the Credit Facility. On July 26, 2017, the Operating Company used proceeds from the Company’s recently completed offering of its common stock to fully repay the $20.0 million borrowed at closing, leaving $33.3 million available under the credit facility for future draws. The Operating Company intends to use future borrowings under the Credit Facility to fund its investments, to make secured or unsecured loans to borrowers in connection with its investments and for general corporate purposes.

On July 25, 2017, the Company and certain wholly-owned subsidiaries of the Operating Company entered into an Unconditional Guaranty of Payment and Performance whereby they have agreed to unconditionally guarantee the obligations of the Operating Company under the Credit Facility. The Credit Facility is secured by substantially all of the Company’s development investments, and other subsidiaries of the Operating Company may be added as guarantors from time to time during the term of the Credit Facility. The Credit Facility has a scheduled maturity date on July 24, 2020. Borrowings under the Credit Facility are secured by two different pools of collateral: one consisting of the Company’s mortgage loans extended to developers and the other consisting of self-storage properties owned by the Company.

The amount available to borrow under the Credit Facility is limited according to a borrowing base valuation of the assets available as collateral. For loans secured by Company mortgage loans, the borrowing base availability is the lesser of (i) 60% of the value of the Company mortgage loans, (ii) the maximum principal amount which would not cause the outstanding loans under the Credit Facility secured by the Company mortgage loans to be greater than 50% of the underlying real estate asset fair value securing the Company mortgage loans and (iii) for any Company mortgage loan that has been included in the borrowing base for greater than 18 months, the maximum principal amount which would not cause the ratio of (a) adjusted net operating income for the underlying real estate asset securing such Company mortgage loan divided by (b) an implied debt service amount to be less than 1.30 to 1.00. For loans secured by self-storage properties, the borrowing base availability is the lesser of (i) the maximum principal amount that would not cause the outstanding loans under the Credit Facility secured by self-storage properties to be greater than 65% of the value of such self-storage properties and (ii) the maximum principal amount that would not cause the ratio of (i) aggregate adjusted net operating income from all self-storage properties included in the borrowing base divided by (ii) an implied debt service coverage amount to be less than 1.30 to 1.00.

The Credit Facility includes certain requirements that may limit the borrowing capacity available to the Company from time to time. Under the terms of the Credit Facility, the outstanding principal balance of the revolving credit loans, swing loans and letter of credit liabilities under the Credit Facility may not exceed the borrowing base availability.

Each loan made under the Credit Facility will bear interest at either, at the Operating Company’s election, a base rate plus a margin of either 1.75% or 2.75% or LIBOR plus a margin of either 2.75% or 3.75%, in each case depending on the borrowing base available for such loan. In addition, the Operating Company is required to pay a fee of a per diem rate of 0.35% per annum, times the excess of the sum of the commitments of the lenders, as in effect from time to time, over the outstanding principal amount of revolving credit loans under the Credit Facility.

The Credit Facility contains certain customary representations and warranties and financial and other affirmative and negative covenants. The Operating Company’s ability to borrow under the Credit Facility is subject to ongoing compliance by the Company and the Operating Company with various customary restrictive covenants, including but not limited to limitations on its incurrence of indebtedness, investments, dividends, asset sales, acquisitions, mergers and consolidations and liens and encumbrances. In addition, the Credit Facility contains certain financial covenants including the following:

	total consolidated indebtedness not exceeding 50% of gross asset value;
	a minimum fixed charge coverage ratio (defined as the ratio of consolidated adjusted earnings before interest, taxes, depreciation and amortization to consolidated fixed charges) of 0.75 to 1.00 during the period between July 25, 2017 and June 30, 2018, 0.90 to 1 during the period between July 1, 2018 and December 31, 2018 and 1.20 to 1 during the period between January 1, 2019 through the maturity of the Credit Facility;
	a minimum consolidated tangible net worth (defined as gross asset value less total consolidated indebtedness) of $183.3 million plus 75% of the sum of any additional net offering proceeds;
	when aggregate loan commitments under the Credit Facility exceed $50 million, unhedged variable rate debt cannot exceed 25% of consolidated total indebtedness;
	liquidity of no less than $50 million for the period between July 25, 2017 and December 31, 2018 or on and after December 31, 2018, liquidity of no less than the sum of (i) total unfunded loan commitments of the Company and its subsidiaries plus (ii) $25 million; and

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 a debt service coverage ratio (defined as the ratio of consolidated adjusted earnings before interest, taxes, depreciation and amortization to the Company’s consolidated interest expense and debt principal payments for any given period) of 2 to 1.

The Credit Facility provides for standard events of default, including nonpayment of principal and other amounts when due, non-performance of covenants, breach of representations and warranties, certain bankruptcy or insolvency events, and changes in control. If an event of default occurs and is continuing under the Credit Facility, the lenders may, among other things, terminate their commitments under the Credit Facility and require the immediate payment of all amounts owed thereunder.

As of September 30, 2017, no borrowings were outstanding under the Credit Facility and $33.3 million was available for borrowing under the Credit Facility.

As of September 30, 2017, the Company was in compliance with all of its financial covenants and it anticipates being in compliance with all of its financial covenants throughout the term of the Credit Facility.

Senior Participations

On April 29, 2016, the Company sold senior participations (the “Operating Property A Notes”) in two separate operating property loans in the Nashville, Tennessee and New Orleans, Louisiana MSAs, having an aggregate outstanding principal balance of $7.8 million, to a regional commercial bank in exchange for cash consideration of $5.0 million. The sale of Operating Property A Notes was effected pursuant to participation agreements between the bank and the Company (the “Participation Agreements”). On December 14, 2016, the Company received proceeds of $5.2 million for an early payoff on the operating property loan in the Nashville, Tennessee MSA, and the Company repurchased the senior participation on this loan that was included in Operating Property A Notes. The Company paid the regional commercial bank a total of $3.4 million in connection with the repurchase, which included a $0.1 million prepayment penalty that is recorded in interest expense in the Consolidated Statements of Operations. The Company paid to the bank interest on the outstanding balance of the Operating Property A Note at the rate of 30-day LIBOR plus 3.85% for the three and nine months ended September 30, 2017. On July 20, 2017, the Company received proceeds of $2.8 million for an early payoff on the remaining Operating Property A Note in the New Orleans, Louisiana MSA, and the Company repurchased the senior participation on this loan. The Company paid the regional commercial bank a total of $1.8 million in conjunction with the repurchase, which included an $18,000 prepayment penalty. As such, there was no outstanding balance for the Operating Property A Note at September 30, 2017.

On May 27, 2016, the Company sold a third senior participation in a construction loan on a facility in the Miami, Florida MSA (“the Miami A Note”), having a commitment amount of $17.7 million, to the same commercial bank that purchased the Operating Property A Notes in exchange for a commitment by the bank to provide net proceeds of $10.0 million to fund construction draws under the construction loan (the “Miami A Note Sale”) once the total outstanding principal balance exceeds $7.7 million. The Miami A Note Sale was effected pursuant to a participation agreement between the bank and the Company (the “Miami Participation Agreement”). Under the Miami Participation Agreement, the Company will continue to service the underlying loan as long as it is not in default under the Miami Participation Agreement. The bank has the option to “put” the senior participation to the Company in the event the underlying borrower defaults on the underlying loan or if the Company defaults under the Miami Participation Agreement. As part of the Participation Agreement, the Company will maintain a minimum aggregate balance of $0.5 million in depository or money market accounts at the bank, and if such balance is not maintained, the interest rate will increase. The Company will pay to the bank interest on the outstanding balance of the Miami A Note at the rate of 30-day LIBOR plus 3.10%, or 4.33% at September 30, 2017. The Company also paid a loan fee of 100 basis points, or $0.1 million upon closing of the loan. The Miami A Note initially had a maturity date of July 1, 2017. During the nine months ended September 30, 2017, the maturity date was extended to January 31, 2018, at which time the Company is obligated to repurchase the Miami A Note at the then outstanding principal balance thereof. The outstanding balance for the Miami A Note as of September 30, 2017 was $0.7 million.

On July 26, 2016, the Company sold to a national commercial bank operating in the Company’s markets senior participations in the construction loans of four separate development property investments with a profits interest (the “July 2016 A Notes”) (one in the Orlando, Florida MSA, two in the Atlanta, Georgia MSA, and one in the Tampa, Florida MSA) having an aggregate committed principal balance of approximately $21.8 million and earning interest at a rate of 6.9% per annum, in exchange for a commitment by the bank to provide net proceeds of $14.2 million (the “July 2016 A Note Sales”). Construction has been completed and certificates of occupancy have been issued for these properties. At closing, the bank paid to the Company approximately $12.5 million for senior participations in the construction loans and will fund up to a total of $14.2 million as future draws are made on the construction loans. The Company paid interest to the bank on its senior participations at the annual rate of 30-day LIBOR plus 3.50%,  for the three and nine months endedSeptember 30, 2017. On July 25, 2017, the Company entered into the Credit Facility and subsequently repurchased the July 2016 A Notes. As such, there is no outstanding balance as of September 30, 2017.

On October 18, 2016, the Company sold to a local Memphis, Tennessee-based community bank a senior participation in the construction loan of one of the Company’s development property investments with a profits interest (the “October 2016 A Note”) in Charlotte, North Carolina having a committed principal balance of approximately $6.8 million and earning interest at a rate of 6.9% per annum, in exchange for a commitment by the bank to provide net proceeds of $4.4 million (the “October 2016 A Note Sale”). Construction has been completed and a certificate of occupancy has been issued for this property. At closing, the bank paid to the Company approximately $3.4 million for the senior participation in the construction loan and will fund up to a total of $4.4 million as future draws are made on the construction loans. The Company paid interest to the bank on the senior participation at the annual rate of 30-day LIBOR plus 3.50%,  for the three and nine months

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endedSeptember 30, 2017. On July 25, 2017, the Company entered into the Credit Facility and subsequently repurchased the October 2016 A Note. As such, there is no outstanding balance as of September 30, 2017.

In connection with the repurchase of the July 2016 A Notes and the October 2016 A Notes and entering into the Credit Facility, the Company recorded a loss on modification of debt of $0.2 million for the three and nine months ended September 30, 2017.

The table below details the bank commitment and outstanding balance of our senior participation at September 30, 2017:

	Commitment by Bank		Amount Borrowed		Remaining Funds		Interest Rate	Effective Interest Rate at  September 30, 2017		Maturity Date
Miami A Note	$	10,001	$	732	$	9,269	30-day LIBOR + 3.10%	4.33	%	January 31, 2018
Unamortized fees				(64)
Net balance			$	668

 The table below details the bank commitments and outstanding balances of our senior participations at December 31, 2016:

	Commitment by Bank		Amount Borrowed		Remaining Funds		Interest Rate	Effective Interest Rate at  December 31, 2016		Maturity Date
Operating Property A Note	$	1,820	$	1,820	$	-	30-day LIBOR + 3.85%	4.47	%	April 1, 2019
Miami A Note		10,001		-		10,001	30-day LIBOR + 3.10%	3.72	%	July 1, 2017
July 2016 A Notes		14,185		13,420		765	30-day LIBOR + 3.50%	4.12	%	August 1, 2019
October 2016 A Note		4,405		3,375		1,030	30-day LIBOR + 3.50%	4.12	%	September 1, 2021
Total	$	30,411		18,615	$	11,796
Unamortized fees				(33)
Net balance			$	18,582

10. STOCKHOLDERS’ EQUITY

The Company had 14,235,848 and 8,956,354 shares of common stock issued and outstanding, which included 185,002 and 120,001 of nonvested restricted stock, as of September 30, 2017 and December 31, 2016, respectively. The Company had 10,000 shares of Series A Preferred Stock issued and outstanding as of September 30, 2017 and December 31, 2016.

Common Stock Offerings

On December 13, 2016, the Company received $53.5 million in proceeds, net of underwriter’s discount and offering costs, related to the issuance of 2,996,311 shares of common stock.

On April 5, 2017, the Company entered into an at-the-market continuous equity offering program (“ATM Program”) with an aggregate offering price of up to $50.0 million. As of September 30, 2017, the Company has issued and sold an aggregate of 1,093,202 shares of common stock at a weighted average price of $22.69 per share under the ATM Program, receiving net proceeds after commissions of $24.2 million.

On June 27, 2017, the Company received $83.9 million in proceeds, net of underwriter’s discount and offering costs, related to the public offering of 4,025,000 shares of common stock.

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Stock Repurchase Plan

On May 20, 2016, the Company’s Board of Directors authorized a share repurchase program for the repurchase of up to $10.0 million of the outstanding shares of common stock of the Company. As of September 30, 2017, the Company had repurchased and retired a total of 213,078 shares of its common stock at an aggregate cost of approximately $3.2 million. As of September 30, 2017, the Company has $6.8 million remaining under the Board’s authorization to repurchase shares of its common stock.

Equity Incentive Plan

In connection with the IPO, the Company established the 2015 Equity Incentive Plan for the purpose of attracting and retaining directors, executive officers, investment professionals and other key personnel and service providers, including officers and employees of the Manager and other affiliates, and to stimulate their efforts toward the Company’s continued success, long-term growth and profitability. The 2015 Equity Incentive Plan provides for the grant of stock options, share awards (including restricted common stock and restricted stock units), stock appreciation rights, dividend equivalent rights, performance awards, annual incentive cash awards and other equity-based awards, including Long-Term Incentive Plan (“LTIP”) units, which are convertible on a one-for-one basis into Operating Company Units (“OC Units”).  A total of 200,000 shares of common stock were reserved for issuance pursuant to the 2015 Equity Incentive Plan, subject to certain adjustments set forth in the plan. On April 1, 2015, each non-employee director of the Company received an award of 2,500 shares of restricted common stock (total of 10,000 shares) which vest ratably over a three-year period. On June 15, 2015, in connection with the appointment of the Company’s President and Chief Operating Officer (an employee of the Manager), 100,000 shares of restricted common stock were granted, which shares vest ratably over a five-year period. During the year ended December 31, 2015, the Company granted 52,500 shares of restricted common stock to an executive officer (an employee of the Manager) and key employees of the Manager, which shares vest ratably over a three-year period. The Manager provides services to the Company. On May 20, 2016, each non-employee director of the Company received an award of 3,585 shares of common stock (total of 14,340 shares) which immediately vested on the grant date. On May 3, 2017, the Company’s stockholders approved, and the Company adopted, the Amended and Restated 2015 Stock Incentive Plan increasing the number of shares of common stock reserved for issuance under the Plan by 170,000 shares from 200,000 shares to 370,000 shares and extending the term of the Plan until May 2, 2027. On May 3, 2017, three non-employee directors of the Company were each granted an award of 2,138 shares of common stock (total of 6,414 shares), which immediately vested on the grant date. In addition, certain of the Company’s officers and certain employees of the Manager were granted a cumulative total of 105,000 shares of restricted common stock, which vest ratably over a three-year period.

Restricted Stock Awards

The Amended and Restated 2015 Equity Incentive Plan permits the issuance of restricted shares of the Company’s common stock to employees of the Manager (as the Company has no employees) and the Company’s non-employee directors. As of September 30, 2017 and December 31, 2016,  288,254 and 176,840shares of restricted stock, respectively, had been granted, of which 55,172 vested in 2016, 46,413 vested during the nine months ended September 30, 2017, 75,003 will vest in 2018, 55,001 will vest in 2019 and 54,998 will vest in 2020. Additionally, 1,667 were forfeited during the year ended December 31, 2016. Non-vested shares are earned over the respective vesting period based on a service condition only. Expenses related to restricted stock awards are charged to compensation expense and are recognized over the respective vesting period (primarily three to five years) of the awards. For restricted stock issued to non-employee directors of the Company, compensation expense is based on the market value of the shares at the grant date. For restricted stock awards issued to employees of the Manager, compensation expense is re-measured at each reporting date until service is complete and the restricted shares become vested based on the then current value of the Company’s common stock.

The Company recognized approximately $0.3 million of stock-based compensation expense for the three months ended September 30, 2017 and 2016, and $1.0 million and $0.8 million of stock-based compensation expense for the nine months ended September 30, 2017 and 2016, respectively. As of September 30, 2017 and December 31, 2016, the total unrecognized compensation cost related to the Company’s restricted shares was approximately $3.3 million and $2.0 million, respectively, based on the grant date market value for awards issued to non-employee directors of the Company and based on the measurement of awards using the Company’s stock price of $20.55 and $21.05 as of September 30, 2017 and December 31, 2016, respectively, for awards issued to employees of the Manager. This cost is expected to be recognized over the remaining weighted average period of 2.5 years. The Company presents stock-based compensation expense in general and administrative expenses in the Consolidated Statements of Operations.

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A summary of changes in the Company’s restricted shares of common stock for the three and nine months ended September 30, 2017 and 2016 is as follows:

	Three months ended				Three months ended
	September 30, 2017				September 30, 2016
			Weighted				Weighted
			average grant				average grant
	Shares		date fair value		Shares		date fair value
Nonvested at June 30,		202,502	$	21.33		139,168	$	19.91
Granted		-		-		-		-
Vested		(17,500)		18.64		(17,500)		18.64
Forfeited		-		-		-		-
Nonvested at September 30,		185,002	$	21.58		121,668	$	20.10

	Nine months ended				Nine months ended
	September 30, 2017				September 30, 2016
			Weighted				Weighted
			average grant				average grant
	Shares		date fair value		Shares		date fair value
Nonvested at December 31,		120,001	$	20.10		162,500	$	20.08
Granted		111,414		22.59		14,340		13.95
Vested		(46,413)		20.28		(55,172)		18.27
Forfeited		-		-		-		-
Nonvested at September 30,		185,002	$	21.58		121,668	$	20.10

Nonvested restricted shares of common stock receive dividends which are nonforfeitable.

Series A Preferred Stock Private Placement

On July 27, 2016 (the “Effective Date”), the Company entered into a Stock Purchase Agreement (the “Purchase Agreement”) with accounts managed by NexPoint Advisors, L.P., an affiliate of Highland Capital Management, L.P. (collectively, the “Buyers”) relating to the issuance and sale, from time to time until the second anniversary of the Effective Date (such period, the “Commitment Period”), of up to $100 million in shares of the Company’s Series A Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”), at a price of $1,000 per share (the “Liquidation Value”) (subject to a minimum amount of $50 million of Series A Preferred Stock to be issued and sold by the Company on or prior to the expiration of the Commitment Period), which may be increased at the request of the Company up to $125 million. The sale of shares of Series A Preferred Stock pursuant to the Purchase Agreement may occur from time to time, in minimum monthly increments of $5 million, maximum monthly increments of $15 million and maximum increments of $35 million over any rolling three month period, all to be completed during the Commitment Period.

The Series A Preferred Stock ranks senior to the shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”), with respect to distribution rights and rights upon liquidation, winding up and dissolution of the Company, on parity with any class or series of capital stock of the Company expressly designated as ranking on parity with the Series A Preferred Stock with respect to distribution rights and rights upon liquidation, winding up and dissolution of the Company, junior to any class or series of capital stock of the Company expressly designated as ranking senior to the Series A Preferred Stock with respect to distribution rights and rights upon liquidation, winding up and dissolution of the Company and junior in right of payment to the Company’s existing and future indebtedness.

Holders of Series A Preferred Stock are entitled to a cumulative cash distribution (“Cash Distribution”) equal to (A) 7.0% per annum on the Liquidation Value for the period beginning on the respective date of issuance until the sixth anniversary of the Effective Date, payable quarterly in arrears, (B) 8.5% per annum on the Liquidation Value for the period beginning the day after the sixth anniversary of the Effective Date and for each year thereafter as long as the Series A Preferred Stock remains issued and outstanding, payable quarterly in arrears, and (C) an amount in addition to the amounts in (A) and (B) equal to 5.0% per annum on the Liquidation Value upon the occurrence of certain triggering events (a “Cash Premium”). In addition, the holders of the Series A Preferred Stock will be entitled to a cumulative dividend payable in-kind in shares of Common Stock or additional shares of Series A Preferred Stock, at the election of the holders (the “Stock Dividend”), equal in the aggregate to the lesser of (Y) 25% of the incremental increase in the Company’s book value (as adjusted for equity capital issuances, share repurchases and certain non-cash expenses) plus, to the extent the Company owns equity interests in income-producing real property, the incremental increase in net asset value (provided, however, that no interest in the same real estate asset will be double counted) and (Z) an amount that would, together with the Cash Distribution, result in a 14.0% internal rate of return for the holders of the Series A

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Preferred Stock from the date of issuance of the Series A Preferred Stock, as set forth in the Articles Supplementary classifying the Series A Preferred Stock (the “Articles Supplementary”). Triggering events that will trigger the payment of a Cash Premium with respect to a Cash Distribution include: (i) the occurrence of certain change of control events affecting the Company after the third anniversary of the Effective Date, (ii) the Company’s ceasing to be subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act, (iii) the Company’s failure to remain qualified as a real estate investment trust, (iv) an event of default under the Purchase Agreement, (v) the failure by the Company to register for resale shares of Common Stock pursuant to the Registration Rights Agreement (a “Registration Default”), (vi) the Company’s failure to redeem the Series A Preferred Stock as required by the Purchase Agreement, or (vii) the filing of a complaint, a settlement with, or a judgment entered by the Securities and Exchange Commission against the Company or any of its subsidiaries or a director or executive officer of the Company relating to the violation of the securities laws, rules or regulations with respect to the business of the Company. Accrued but unpaid Cash Distributions and Stock Dividends on the Series A Preferred Stock will accumulate and will earn additional Cash Distributions and Stock Dividends as calculated above, compounded quarterly.

The holders of Series A Preferred Stock have the right to purchase their pro rata share of any qualified offering of Common Stock, which consists of any offering by the Company of Common Stock except any shares of Common Stock issued (i) in connection with a merger, consolidation, acquisition or similar business combination, (ii) in connection with a joint venture, strategic alliance or similar corporate partnering arrangement, (iii) in connection with any acquisition of assets by the Company, (iv) at market prices pursuant to a registered at-the-market program and/or (v) as part of a compensatory or employment arrangement.

As long as shares of Series A Preferred Stock remain outstanding, the Company is required to maintain a ratio of debt to total tangible assets determined under U.S. generally accepted accounting principles of no more than 0.4:1, measured as of the last day of each fiscal quarter. The Company has complied with this covenant as of September 30, 2017.

The Series A Preferred Stock may be redeemed at the Company’s option (i) after five years from the Effective Date at a price equal to 105% of the Liquidation Value per share plus the value of all accumulated and unpaid Cash Distributions and Stock Dividends, and (ii) after six years from the Effective Date at a price equal to 100% of the Liquidation Value per share plus the value of all accumulated and unpaid Cash Distributions and Stock Dividends. In the event of certain change of control events affecting the Company prior to the third anniversary of the Effective Date, the Company must redeem all shares of Series A Preferred Stock for a price equal to (a) the Liquidation Value, plus (b) accumulated and unpaid Cash Distributions and Stock Dividends, plus (c) a make-whole premium designed to provide the holders of the Series A Preferred Stock with a return on the redeemed shares equal to a 14.0% internal rate of return through the third anniversary of the Effective Date.

Holders of Series A Preferred Stock will be entitled to a separate class vote with respect to (i) any amendments to the Company’s Amended and Restated Articles of Incorporation (the “Charter”), as supplemented by the Articles Supplementary, or bylaws that would alter or change the rights, preferences, privileges or restrictions of the Series A Preferred Stock so as to materially and adversely affect such Series A Preferred Stock and (ii) reclassification or otherwise, any issuances by the Company of securities that are senior to, or equal in priority with, the Series A Preferred Stock.

In the event of any liquidation, dissolution or winding up of the Company, the holders of the Series A Preferred Stock shall be entitled to receive an amount equal to the greater of (i) the Liquidation Value, plus all accumulated but unpaid Cash Distributions and Stock Dividends thereon to, but not including, the date of any liquidation, but excluding any Cash Premium and (ii) the amount that would be paid on such date in the event of a redemption following a change of control.

Pursuant to the Purchase Agreement and the Articles Supplementary, the Company increased the size of its Board by one director and elected James Dondero, as representative of the Buyers, to the Board for a term expiring at the Company’s 2017 annual meeting of stockholders (Mr. Dondero has subsequently been reelected to the Board for a term expiring at the Company’s 2018 annual meeting of stockholders). Thereafter, so long as any shares of the Series A Preferred Stock are outstanding, the holders of the Series A Preferred Stock, voting as a single class, are entitled to nominate and elect one individual to serve on our Board of Directors. If the Company has not paid the full amount of the Cash Distribution or the Stock Dividend on the shares of the Series A Preferred Stock for six or more quarterly dividend periods (whether or not consecutive), the Company will increase the size of the Board by two directors and the holders of the our Series A Preferred Stock are entitled to elect two additional directors to serve on our Board of Directors until the Company pays in full all accumulated and unpaid Cash Distributions and Stock Dividends.

Further, at any time that the Series A Preferred Stock remains outstanding, if Dean Jernigan, the Company’s current Chief Executive Officer and Chairman of the Board, voluntarily leaves the position of Chief Executive Officer, and is not serving as the Executive Chairman of the Board (a “Key Man Event”), the holders of the Series A Preferred Stock shall have the right to accept or reject the service of any person as Chief Executive Officer (or such person serving as the principal executive officer) of the Company.

The Purchase Agreement requires that the Company and its subsidiaries conduct their business in the ordinary course of business consistent with past practice and use reasonable best efforts to (i) preserve substantially intact the business organization and (ii) avoid becoming subject to the requirements of the Investment Company Act of 1940, as amended (the “1940 Act”). Additionally, the Company and its subsidiaries may not change or alter materially its method of accounting or the manner in which it keeps its accounting books and records unless required by the Securities and Exchange Commission to reflect changes in U.S. generally accepted accounting principles or, in the business judgment of the Board, such change would be in the best interests of the Company or stockholders.

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Future issuances of shares of Series A Preferred Stock at any one or more closings after the Effective Date are contingent upon the satisfaction of certain conditions at the time of such proposed purchase, including that (i) the representations and warranties of the Purchase Agreement remain true and correct in all material respects and the Company has complied with all covenants and conditions under the Purchase Agreement, the Articles Supplementary, the Registration Rights Agreement and the documents related thereto, (ii) no material adverse effect (as such term is defined in the Purchase Agreement) has occurred, (iii) there is no suspension of trading of the Common Stock on the New York Stock Exchange or such other market or exchange on which the Common Stock is then listed or traded (the “Principal Market”), (iv) a Key Man Event shall not have occurred, as described above, and (v) the Company has delivered certain customary closing deliverables.

An event of default under the Purchase Agreement terminates the obligation of the Buyers to acquire shares of Series A Preferred Stock from the Company and also triggers the Cash Premium described above. Such events of default under the Purchase Agreement include (i) a Registration Default, (ii) the suspension of trading or delisting of the Common Stock on the Principal Market, (iii) the failure by the transfer agent of the Company to issue shares of the Series A Preferred Stock to the Buyers (subject to an applicable cure period), (iv) the Company’s breach of a representation or warranty, covenant or other term or condition under the Purchase Agreement, Articles Supplementary, the Registration Rights Agreement or the documents related thereto that has a material adverse effect (subject to an applicable cure period), (v) the failure of the Company to sell $50 million of shares of Series A Preferred Stock on or prior to the tenth business day after the expiration of the Commitment Period, (vi) an event of default under any secured indebtedness of the Company, or (vii) certain bankruptcy proceedings.

The holders of the Series A Preferred Stock will have certain customary registration rights with respect to the Common Stock issued as Stock Dividends pursuant to the terms of a Registration Rights Agreement.

The issuance and sale of the Series A Preferred Stock, and the issuance of shares of common stock and/or additional shares of Series A Preferred Stock issuable as Stock Dividends, will be exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”) pursuant to Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D thereunder. The Buyers represented to the Company that they are “accredited investors” as defined in Rule 501 of the Securities Act and that the Series A Preferred Stock is being acquired for investment purposes and not with a view to, or for sale in connection with, any distribution thereof, and appropriate legends will be affixed to any certificates evidencing the shares of Series A Preferred Stock or Common Stock issuable pursuant to the Purchase Agreement.

As of September 30, 2017, the Company had issued 10,000 restricted shares of the Series A Preferred Stock to the Buyers and received $10.0 million in proceeds pursuant to the terms of the Purchase Agreement. On October 26, 2017, the Company issued an additional 10,000 restricted shares of the Series A Preferred Stock and received an additional $10.0 million in proceeds pursuant to the terms of the Purchase Agreement.

On March 7, 2017, the Company declared a (i) cash distribution of $17.50 per share of Series A Preferred Stock, payable on April 14, 2017, to holders of Series A Preferred Stock of record on the close of business on April 1, 2017, and (ii) distributions payable in kind in a number of shares of common stock as determined in accordance with the terms of the designation of the Series A Preferred Stock, payable on April 17, 2017, to holders of Series A Preferred Stock of record on the close of business on April 1, 2017.

On May 3, 2017, the Company declared a cash distribution of $17.69 per share of Series A Preferred Stock, payable on July 14, 2017, to holders of Series A Preferred Stock of record on the close of business on July 1, 2017. No distributions in kind were payable in connection with the July distribution.

On August 1, 2017, the Company declared a cash distribution of $17.89 per share of Series A Preferred Stock, payable on October 13, 2017, to holders of Series A Preferred Stock of record on the close of business on October 1, 2017, and (ii) distributions payable in kind in a number of shares of common stock as determined in accordance with the terms of the designation of the Series A Preferred Stock, payable on October 13, 2017, to holders of Series A Preferred Stock of record on the close of business on October 2, 2017.

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11. EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income by the weighted average number of shares outstanding during the period.  All outstanding unvested restricted share awards contain rights to non-forfeitable dividends and participate in undistributed earnings with common shareholders and, accordingly, are considered participating securities that are included in the two-class method of computing basic earnings per share. Both the unvested restricted shares and the assumed share-settlement of the stock dividend to holders of the Series A Preferred Stock, and the related impacts to earnings, are considered when calculating earnings per share on a diluted basis with our diluted earnings per share being the more dilutive of the treasury stock or two-class methods. For the three and nine months ended September 30, 2017 and 2016, the Company’s basic earnings per share is computed using the two-class method, and our diluted earnings per share is computed using the more dilutive of the treasury stock method or two-class method:

	Three months ended September 30,				Nine months ended September 30,
	2017		2016		2017		2016
Shares outstanding
Weighted average common shares - basic		14,042,350		5,831,135		10,935,776		5,926,215
Effect of dilutive securities		201,995		131,958		172,764		149,971
Weighted average common shares, all classes		14,244,345		5,963,093		11,108,540		6,076,186
Calculation of Earnings per Share - basic
Net income	$	4,457	$	4,994	$	11,434	$	11,528
Less:
Net income allocated to preferred stockholders		310		n/a		1,033		n/a
Net income allocated to unvested restricted shares		57		111		156		285
Net income attributable to common shareholders - two-class method	$	4,090	$	4,883	$	10,245	$	11,243
Weighted average common shares - basic		14,042,350		5,831,135		10,935,776		5,926,215
Earnings per share - basic	$	0.29	$	0.84	$	0.94	$	1.90
Calculation of Earnings per Share - diluted
Net income	$	4,457	$	4,994	$	11,434	$	11,528
Less:
Net income allocated to preferred stockholders		310		n/a		1,033		n/a
Net income attributable to common shareholders - two-class method	$	4,147	$	4,994	$	10,401	$	11,528
Weighted average common shares - diluted		14,244,345		5,963,093		11,108,540		6,076,186
Earnings per share - diluted	$	0.29	$	0.84	$	0.94	$	1.90

(1) Unvested restricted shares of common stock participate in dividends with unrestricted shares of common stock on a 1:1 basis and thus are considered participating securities under the two-class method for the three and nine months ended September 30, 2017 and 2016.

12. RELATED PARTY TRANSACTIONS

Equity Method Investments

Certain of the Company’s development property investments are equity method investments for which the Company has elected the fair value option of accounting. The fair value of these equity method investments as of September 30, 2017 and December 31, 2016 was$177.7 million and $78.7 million, respectively. The interest income realized and the change in fair value from these equity method investments was $4.8 million and $5.7 million for the three months ended September 30, 2017 and 2016, respectively, and $13.0 million and $15.7 million for the nine months ended September 30, 2017 and 2016, respectively.

The Company’s investment in the real estate venture, the SL1 Venture, has a carrying amount of $12.6 million and $5.4 million at September 30, 2017 and December 31, 2016, respectively, and the earnings from this venture were $0.7 million and $1.7 million for the three and nine months ended September 30, 2017. The earnings from this venture were $0.4 million and $0.9 million for the three and nine months ended September 30, 2016.

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Management Agreement

On April 1, 2015, the Company entered into a management agreement with its Manager (as subsequently amended, the “Management Agreement”). Pursuant to the terms of the Management Agreement, the Manager is responsible for (a) the Company’s day-to-day operations, (b) determining investment criteria and strategy in conjunction with the Company’s Board of Directors, (c) sourcing, analyzing, originating, underwriting, structuring, and acquiring the Company’s portfolio investments, and (d) performing portfolio management duties. The Manager has an Investment Committee that approves investments in accordance with the Company’s investment guidelines, investment strategy, and financing strategy.

On May 23, 2016, the Company entered into an Amended and Restated Management Agreement (the “Amended and Restated Management Agreement”) by and among the Company, the Operating Company and the Manager that amends and restates the original Management Agreement dated April 1, 2015. The Amended and Restated Management Agreement was approved on behalf of the Company and the Operating Company by a unanimous vote of the Nominating and Corporate Governance Committee of the Company’s Board of Directors, which consists solely of independent directors.

The Amended and Restated Management Agreement modified certain procedures with respect to the future internalization of the Manager (as described in the Amended and Restated Management Agreement, an “Internalization Transaction”). Prior to entry into the Amended and Restated Management Agreement, if no Internalization Transaction had occurred prior to the end of the last renewal term, the Manager would have been entitled to the Termination Fee (as defined in the Amended and Restated Management Agreement) and the Company would not have acquired the assets of the Manager. The Amended and Restated Management Agreement, however, requires an Internalization Transaction at the end of the last renewal term (if an Internalization Transaction or termination of the Amended and Restated Management Agreement has not occurred prior to that date). The Internalization Price in such event would equal the Termination Fee amount and the Company would receive the Manager’s assets.  Accordingly, the amount the Manager would receive has not changed, but the Company now would receive the assets of the Manager, which it would not have received prior to the Amended and Restated Management Agreement.

Under the Amended and Restated Management Agreement, if an Internalization Transaction has not occurred prior to March 31, 2023, the last day of the last renewal term, then the Manager and the Company shall consummate an Internalization Transaction to be effective as of that date and all assets of the Manager (or, alternatively, all of the equity interests in the Manager) shall be conveyed to and acquired by the Operating Company in exchange for the Internalization Price (as described herein). At such time, all employees of the Manager shall become employees of the Operating Company and the Manager shall discontinue all business activities. Unlike an Internalization Transaction that occurs prior to the end of the final renewal term of the Amended and Restated Management Agreement, an Internalization Transaction that occurs at the end of the final renewal term shall not require a fairness opinion, the approval of a special committee of the Company’s Board of Directors or the approval of the Company’s stockholders.

The “Internalization Price” payable in the event of an Internalization Transaction at the end of the last renewal term shall be equal to the Termination Fee and the Board of Directors of the Company has no discretion to change such Internalization Price or the conditions applicable to its payment.

The Internalization Price paid to the Manager in any Internalization Transaction will be payable by the Operating Company in the number of units of limited liability company interests (“OC Units”) of the Operating Company equal to the Internalization Price, divided by the volume-weighted average of the closing market price of the common stock of the Company for the ten consecutive trading days immediately preceding the date with respect to which value must be determined. However, if the common stock of the Company is not traded on a national securities exchange at the time of closing of any Internalization Transaction, then the number of OC Units shall be determined by agreement between the Board of Directors of the Company and the Manager or, in the absence of such agreement, the Internalization Price shall be paid in cash.

Prior to entry into the Amended and Restated Management Agreement, any Termination Fee would have been payable by the Operating Company in OC Units equal to the Termination Fee divided by the average of the daily market price of the Common Stock for the ten consecutive trading days immediately preceding the date of termination within 90 days after occurrence of the event requiring the payment of the Termination Fee. In accordance with ASC 505-50, Equity - Equity-based Payments to Non-Employees, since the number of OC Units to be issued was dependent upon different possible outcomes, the Company recognized the lowest aggregate amount within the range of outcomes. Accordingly, the Company estimated the deferred termination fee payable and accrued the expense over the term of the Management Agreement. Upon entry into the Amended and Restated Management Agreement, the Company ceased recognizing the deferred termination fee expense and reclassified the Non-Controlling Interests to Additional Paid-In-Capital since the Termination Fee is no longer certain of being paid other than in exchange for either the assets or equity of the Manager. Accordingly, the Company recorded no expense for the deferred termination fee in the three and nine months ended September 30, 2017, and it recorded no expense and $0.2 million of expense for the three and nine months ended September 30, 2016, respectively.

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On April 1, 2017, the Company, the Operating Company and the Manager entered into a Second Amended and Restated Management Agreement to modify the manner in which certain expenses incurred by the Manager are accounted for and paid by the Company. Under the Amended and Restated Management Agreement, the Manager may engage independent contractors that provide investment banking, securities brokerage, mortgage brokerage and other financial, legal and account services as may be required for the Company’s investments, and the Company agrees to reimburse the Manager for costs and expenses incurred in connection with these services. The Second Amended and Restated Management Agreement now provides that expenses incurred by the Manager are reimbursable to the Manager by the Company only to the extent such expenses are not otherwise directly reimbursed by an unaffiliated third party. The amount of expenses to be reimbursed to the Manager by the Company will be reduced dollar-for-dollar by the amount of any such payment or reimbursement.

The initial term of the Management Agreement will expire on March 31, 2020, with up to a maximum of three, one-year extensions that end on March 31, 2023. The Company’s independent directors review the Manager’s performance annually. Following the initial term, the Management Agreement may be terminated annually upon the affirmative vote of at least two-thirds of the Company’s independent directors based upon: (a) the Manager’s unsatisfactory performance that is materially detrimental to the Company; or (b) the Company’s determination that the management fees payable to the Manager are not fair, subject to the Manager’s right to prevent termination based on unfair fees by accepting a reduction of management fees agreed to by at least two-thirds of the independent directors. The Company is required to provide its Manager with 180 days’ prior notice of such a termination. Upon such a termination, the Company will pay the Manager a Termination Fee except as provided below.

No later than 180 days prior to the end of the initial term of the Management Agreement, the Manager will offer to contribute to the Company’s Operating Company at the end of the initial term all of the assets or equity interests in the Manager at the internalization price and on such terms and conditions included in a written offer provided by the Manager.

Upon receipt of the Manager’s initial internalization offer, a special committee consisting solely of the Company’s independent directors may accept the Manager’s proposal or submit a counter offer to the Manager. If the Manager and the special committee are unable to agree, the Manager and the special committee will repeat this process annually during the term of any extension of the Management Agreement. Acquisition of the Manager pursuant to this process requires a fairness opinion from a nationally recognized investment banking firm and stockholder approval, in addition to approval by the special committee. As described above, if an Internalization Transaction has not occurred prior to March 31, 2023, the last day of the last renewal term, then the Manager and the Company shall consummate an Internalization Transaction to be effective as of that date, and such Internalization Transaction shall not require a fairness opinion, the approval of a special committee of the Company’s Board of Directors or the approval of the Company’s stockholders.

If the Management Agreement terminates other than for Cause (as defined below), voluntary non-renewal by the Manager or the Company being required to register as an investment company under the 1940 Act, then the Company shall pay to the Manager, on the date on which such termination is effective, a Termination Fee equal to the greater of (i) three times the sum of the average annual Base Management Fee and Incentive Fee earned by the Manager during the 24-month period prior to such termination, calculated as of the end of the most recently completed fiscal quarter prior to the date of termination, or (ii) the offer price, which will be based on the lesser of (a) the Manager’s earnings before interest, taxes, depreciation and amortization (adjusted for unusual, extraordinary and non-recurring charges and expenses), or “EBITDA” annualized based on the most recent quarter ended, multiplied by a specific multiple, or EBITDA Multiple, depending on the Company’s achieved total annual return, and (b) the Company’s equity market capitalization multiplied by a specific percentage, or Capitalization Percentage, depending on the Company’s achieved total return (the Internalization Price). Any Termination Fee will be payable by the Operating Company in cash.

The Company also may terminate the Management Agreement at any time, including during the initial term, without the payment of any Termination Fee, with 30 days’ prior written notice from the Board of Directors, for cause. “Cause” is defined as: (i) the Manager’s continued breach of any material provision of the Management Agreement following a prescribed period; (ii) the occurrence of certain events with respect to the bankruptcy or insolvency of the Manager; (iii) a change of control of the Manager that a majority of the Company’s independent directors determines is materially detrimental to the Company; (iv) the Manager committing fraud against the Company, misappropriating or embezzling the Company’s funds, or acting grossly negligent in the performance of its duties under the Management Agreement; (v) the dissolution of the Manager; (vi) the Manager fails to provide adequate or appropriate personnel that are reasonably necessary for the Manager to identify investment opportunities for the Company and to manage and develop the Company’s investment portfolio if such default continues uncured for a period of 60 days after written notice thereof, which notice must contain a request that the same be remedied; (vii) the Manager is convicted (including a plea of nolo contendere) of a felony; or (viii) both the current Chief Executive Officer and the current President and Chief Operating Officer are no longer senior executive officers of the Manager or the Company during the term of the Management Agreement other than by reason of death or disability.

The Manager may terminate the Management Agreement if the Company becomes required to register as an investment company under the 1940 Act, with such termination deemed to occur immediately before such event, in which case the Company would not be required to pay the Manager a Termination Fee. The Manager may also decline to renew the Management Agreement by providing the Company with 180 days’ written notice, in which case the Company would not be required to pay a Termination Fee.

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The Management Agreement provides for the Manager to earn a base management fee and an incentive fee, both of which are described further below. In addition, the Company will reimburse certain expenses of the Manager, excluding the salaries and cash bonuses of the Manager’s chief executive officer and chief financial officer, a portion of the salary of the president and chief operating officer, and certain other costs as determined by the Manager in accordance with the Management Agreement. Certain prepaid expenses and fixed assets are also purchased through the Manager and reimbursed by the Company. In the event that the Company terminates the Management Agreement pursuant to its terms, other than for Cause or the Company being required to register as an investment company under the 1940 Act, there will be a Termination Fee due to the Manager. Amounts reimbursable to the Manager for expenses are included in general and administrative expenses in the Consolidated Statements of Operations and totaled $0.8 million for both the three months ended September 30, 2017 and 2016 and $2.3 million and $2.4 million for the nine months ended September 30, 2017 and 2016, respectively.

On November 1, 2017, the Company, the Operating Company and the Manager entered into a Third Amended and Restated Management Agreement, which is described below in Note 13, Subsequent Events.

Management Fees

As of September 30, 2017, the Company did not have any personnel. As a result, the Company is relying on the properties, resources and personnel of the Manager to conduct operations. Pursuant to the Management Agreement, the Company pays the Manager a base management fee in an amount equal to 0.375% of the Company’s stockholders’ equity (a 1.5% annual rate) calculated and payable quarterly in arrears in cash. For purposes of calculating the base management fee, the Company’s stockholder’s equity means: (a) the sum of (i) the net proceeds from all issuances of the Company’s equity securities since inception (allocated on a pro rata daily basis for such issuances during the fiscal quarter of any such issuance), plus (ii) the Company’s retained earnings at the end of the most recently completed fiscal quarter (without taking into account any non-cash equity compensation expense incurred in current or prior periods); less (b) any amount that the Company pays to repurchase the Company’s common stock since inception, provided that if the Company’s retained earnings are in a net deficit position (following any required adjustments set forth below), then retained earnings shall not be included in stockholders’ equity. It also excludes (x) any unrealized gains and losses and other non-cash items that have impacted stockholders’ equity as reported in the Company’s financial statements prepared in accordance with accounting principles generally accepted in the United States, or GAAP, and (y) one-time events pursuant to changes in GAAP (such as a cumulative change to the Company’s operating results as a result of a codification change pursuant to GAAP), and certain non-cash items not otherwise described above (such as depreciation and amortization), in each case after discussions between the Company’s Manager and the Company’s independent directors and approval by a majority of the Company’s independent directors. As a result, the Company’s stockholders’ equity, for purposes of calculating the base management fee, could be greater or less than the amount of stockholders’ equity shown on the Company’s financial statements. The base management fee is payable independent of the performance of the Company’s portfolio. The Manager computes the base management fee within 30 days after the end of the fiscal quarter with respect to which such installment is payable and promptly delivers such calculation to the Company’s Board of Directors. The amount of the installment shown in the calculation is due and payable no later than the date which is five business days after the date of delivery of such computation to the Board of Directors. The calculation generally will be reviewed by the Board of Directors at their regularly scheduled quarterly board meeting. The base management fee was $1.0 million and $0.4 million for the three months ended September 30, 2017 and 2016, respectively, and $2.4 million and $1.2 million for the nine months ended September 30, 2017 and 2016, respectively. At September 30, 2017 and December 31, 2016, the Company had outstanding fees due to Manager of $1.4 million and $1.0 million consisting of the management fees payable and certain general and administrative reimbursements payable.

Incentive Fee

The Manager is entitled to an incentive fee with respect to each fiscal quarter (or part thereof that the Management Agreement is in effect) in arrears in cash. The incentive fee is an amount, not less than zero, determined pursuant to the following formula:

IF = .20 times (A minus (B times .08)) minus C

In the foregoing formula:

 A equals the Company’s Core Earnings (as defined below) for the previous 12-month period;

 B equals (i) the weighted average of the issue price per share of the Company’s common stock of all of its public offerings of common stock, multiplied by (ii) the weighted average number of all shares of common stock outstanding (including (i) any restricted stock units and any restricted shares of common stock in the previous 12-month period and (ii) shares of common stock issuable upon conversion of outstanding OC Units); and

 C equals the sum of any incentive fees earned by the Manager with respect to the first three fiscal quarters of such previous 12-month period.

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Notwithstanding application of the incentive fee formula, no incentive fee shall be paid with respect to any fiscal quarter unless cumulative annual stockholder total return for the four most recently completed fiscal quarters is greater than 8%. Any computed incentive fee earned but not paid because of the foregoing hurdle will accrue until such 8% cumulative annual stockholder total return is achieved. The total return is calculated by adding stock price appreciation (based on the volume-weighted average of the closing price of the Company’s common stock on the New York Stock Exchange (or other applicable trading market) for the last ten consecutive trading days of the applicable computation period minus the volume-weighted average of the closing market price of the Company’s common stock for the last ten consecutive trading days of the period immediately preceding the applicable computation period) plus dividends per share paid during such computation period, divided by the volume-weighted average of the closing market price of the Company’s common stock for the last ten consecutive trading days of the period immediately preceding the applicable computation period. For purposes of computing the Incentive Fee, “Core Earnings” is defined as net income (loss) determined under GAAP, plus non-cash equity compensation expense, the incentive fee, depreciation and amortization (to the extent that the Company forecloses on any facilities underlying the Company’s target investments), any unrealized losses or other non-cash expense items reflected in GAAP net income (loss), less any unrealized gains reflected in GAAP net income. The amount will be adjusted to exclude one-time events pursuant to changes in GAAP and certain other non-cash charges after discussions between the Manager and the Company’s independent directors and after approval by a majority of the independent directors. Going forward, “Core Earnings” will be calculated based on the new formulation set forth in the Third Amended and Restated Management Agreement, which the Company, the Operating Company and the Manager entered into on November 1, 2017 and is described further below in Note 13, Subsequent Events.

The Manager computes each quarterly installment of the incentive fee within 45 days after the end of the fiscal quarter with respect to which such installment is payable and promptly delivers such calculation to the Company’s Board of Directors. The amount of the installment shown in the calculation is due and payable no later than the date which is five business days after the date of delivery of such computation to the Board of Directors. The calculation generally will be reviewed by the Board of Directors at their regularly scheduled quarterly board meeting. The Manager has not earned an incentive fee for the three and nine months ended September 30, 2017 and 2016.

13. SUBSEQUENT EVENTS

The Company’s management has evaluated subsequent events through the date of issuance of the consolidated financial statements included herein. Other than those disclosed below, there have been no subsequent events that occurred during such period that require disclosure or recognition in the accompanying consolidated financial statements.

Investment Activity

Subsequent to September 30, 2017, the Company closed on the following development property investment with a profits interest:

		Total Investment
Closing Date	MSA	Commitment
10/12/2017	Miami 2	$	9,459
10/30/2017	New Jersey		14,701
	Total	$	24,160

At-the-Market Offering Program

On October 6, 2017, the Company issued and sold 29,416 shares of common stock at a weighted average price of $20.50 per share under the ATM Program, receiving net proceeds after commissions of $0.6 million.

Series A Preferred Stock

On October 26, 2017, the Company issued 10,000 restricted shares of the Series A Preferred Stock to the Buyers and received $10.0 million in proceeds pursuant to the terms of the Purchase Agreement.

Dividend Declarations

On November 1, 2017, the Company’s Board of Directors declared a cash dividend to the holders of the Series A Preferred Stock and a distribution payable in kind, if applicable, in a number of shares of common stock or Series A Preferred Stock as determined in accordance with the election of the holders of the Series A Preferred Stock for the quarter ending December 31, 2017. The dividends are payable on January 15, 2018 (or if not a business day, on the next business day) to holders of Series A Preferred Stock of record on January 1, 2018.

On November 1, 2017, the Company’s Board of Directors also declared a cash dividend of $0.35 per share of common stock for the quarter ending December 31, 2017. The dividend is payable on January 12, 2018 to stockholders of record on January 2, 2018.

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Third Amended and Restated Management Agreement

On November 1, 2017, the Company, the Operating Company and the Manager entered into the Third Amended and Restated Management Agreement in order to clarify the original intent of the parties with respect to the definition of Core Earnings and to make other minor changes necessary to reflect the current and anticipated business model from and after this time. The Third Amended and Restated Management Agreement is otherwise substantially consistent with the Second Amended and Restated Management Agreement.

Under the Third Amended and Restated Management Agreement, “Core Earnings” is defined as (1) net income (loss) determined under GAAP, plus (2) non-cash equity compensation expense, the incentive fee, depreciation and amortization, plus (3) any unrealized losses or other non-cash expense items reflected in GAAP net income (loss), less (4) any unrealized gains reflected in GAAP net income (including any unrealized appreciation with respect to self-storage facilities that the Company has not yet acquired). The Third Amended and Restated Management Agreement clarifies that in addition to certain previously agreed upon adjustments, with respect to any self-storage facility acquired by the Company with respect to which the Company had an outstanding loan as of the time of such acquisition, the amount of Core Earnings determined pursuant to the formula above in the period of such acquisition shall also be increased by the difference between (A) the appraised value, as determined by a nationally recognized, independent third-party appraiser mutually agreed to by the Company and the Manager who has significant expertise in valuing self-storage properties, and (B) (i) the outstanding principal amount of any Company loan secured by such acquired self-storage facility at the time of such acquisition plus (ii) any other consideration given to the former owner upon such acquisition. This addition is intended to include in Core Earnings the amount of the Company’s unrealized gain on account of the Company’s acquisition of a self-storage facility without such facility being sold to a third party buyer in the open market.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Note Regarding Forward-Looking Statements

We make statements in this Quarterly Report on Form 10-Q that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). These forward-looking statements include, without limitation, statements about our estimates, expectations, predictions and forecasts of our future business plans and financial and operating performance and/or results, as well as statements of management’s goals and objectives and other similar expressions concerning matters that are not historical facts. When we use the words “may,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” or similar expressions or their negatives, as well as statements in future tense, we intend to identify forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, beliefs and expectations, such forward-looking statements are not predictions of future events or guarantees of future performance and our actual financial and operating results could differ materially from those set forth in the forward-looking statements. Some factors that might cause such differences are described in the section entitled “Risk Factors” in this report and in our Annual Report on Form 10-K for the year ended December 31, 2016 (the “2016 Form 10-K”), which was filed with the Securities and Exchange Commission (“SEC”) on March 8, 2017, and in other filings we make with the SEC from time to time, which factors include, without limitation, the following:

	our ability to successfully source, structure, negotiate and close investments in self-storage facilities;
	changes in our business strategy and the market’s acceptance of our investment terms;
	our ability to fund our outstanding and future investment commitments;
	availability, terms and our rate of deployment of equity and debt capital;
	our manager’s ability to hire and retain qualified personnel;
	changes in the self-storage industry, interest rates or the general economy;
	the degree and nature of our competition;
	volatility in the value of our assets carried at fair market value; and
	general volatility of the capital markets and the market price of our common stock.

Given these uncertainties, undue reliance should not be placed on our forward-looking statements. We assume no duty or responsibility to publicly update or revise any forward-looking statement that may be made to reflect future events or circumstances or to reflect the occurrence of unanticipated events. We urge you to review the disclosures concerning risks in the sections entitled “Risk Factors,” “Forward-Looking Statements,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2016 Form 10-K and in other filings we make with the SEC from time to time.

Overview

We are a commercial real estate company incorporated in Maryland that provides capital to private developers, owners and operators of self-storage facilities. Our principal business objective is to deliver attractive, long-term risk-adjusted returns to our stockholders by investing primarily in newly-constructed self-storage facilities, which we refer to as development property investments. We expect to generate attractive long-term returns on development property investments through interest payments (typically at a fixed rate) on our invested capital together with a 49.9% interest in the positive cash flows from operations, sales and/or refinancings of self-storage facilities, which we refer to herein as “Profits Interests.” We have selectively made construction loans, operating property loans, and bridge loans where we have determined that making such loans will benefit our primary business. In addition, in connection with many of our development property investments, we obtain a right of first refusal to acquire the subject property. In the future, we expect to acquire self-storage properties by exercising our rights of first refusal.

We account for our development property investments and operating property loans at fair value. Under fair value accounting, each of our development property investments and operating property loans is re-valued each quarter, and any unrealized appreciation and depreciation from those financial instruments is reflected in the carrying values of those investments in our Consolidated Balance Sheets and in our Consolidated Statements of Operations. We believe reflecting our investments at fair value provides our stockholders and others who rely on our financial statements with a more complete and accurate understanding of our financial condition and economic performance, including our revenues and the intrinsic value inherent in our Profits Interests as self-storage facilities we finance are constructed, occupied, leased-up and become stabilized.

As of September 30, 2017, we had 39 on-balance sheet investments, for an aggregate committed principal amount of $421.2 million, including 36 development property investments totaling approximately $397.5 million of aggregate committed principal amount, each of which provides us with a Profits Interest, one construction loan with approximately $17.7 million of committed principal amount and two operating property loans totaling approximately $6.0 million of aggregate committed principal amount. Each of the development property investments is located in a submarket within a major U.S. market with demographics that management believes will support successful lease-up and value creation in the property. As of September 30, 2017, we had funded approximately $173.7 million of the aggregate committed principal amount of our closed investments.

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During the quarter ended September 30, 2017, the Company purchased its partner’s remaining 25.1% profits interest in the Orlando 1 investment and its partner’s 50.1% profits interest in the Orlando 2 investment, the 287-unit addition to the Orlando 1 investment, for $1.6 million. This Orlando facility is operated as a single self-storage facility and is now wholly-owned and fully consolidated in the accompanying consolidated financial statements.  

We have funded all of our investments to date with or have access to the following sources of capital:

	net proceeds from our initial public offering (“IPO”) and concurrent private placement, which were consummated on April 1, 2015;
	proceeds from the sale of senior participations, which we also refer to as “A notes”, in certain investments;
	net proceeds from the issuance of our Series A Preferred Stock (“Series A Preferred Stock”) pursuant to a Stock Purchase Agreement (the “Purchase Agreement”) between us and funds managed by Highland Capital Management, L.P. providing for the issuance and sale of up to $125.0 million of Series A Preferred Stock from time to time until July 28, 2018;
	net proceeds from our follow-on public offerings of common stock, which were consummated on December 13, 2016 and June 27, 2017;
	net proceeds from our at-the-market continuous equity offering program (“ATM Program”) which we commenced on April 5, 2017; and
	available proceeds from our $100 million revolving credit with KeyBanc Capital Markets, Inc., as lead arranger, and other lenders party thereto(the “Credit Facility”), that may from time to time, pursuant to an accordion feature, be increased to commitments up to an aggregate amount of $200 million.

On March 7, 2016, we, through our Operating Company, entered into the Limited Liability Company Agreement of Storage Lenders (the “SL1 Venture”) with HVP III Storage Lenders Investor, LLC (“HVP III”), an investment vehicle managed by Heitman. The SL1 Venture was formed for the purpose of providing capital to developers of self-storage facilities identified and underwritten by us. Upon formation, HVP III committed $110.0 million for a 90% interest in the SL1 Venture, and we committed $12.2 million for a 10% interest. On March 31, 2016, we contributed to the SL1 Venture three self-storage development investments with an aggregate commitment amount of $41.9 million. As of September 30, 2017, the SL1 Venture had closed on eight additional development property investments with a profits interest with an aggregate commitment amount of approximately $81.4 million, bringing the total aggregate commitment of SL1 Venture’s investments to $123.3 million as of September 30, 2017.

The Company is externally managed and advised by the Manager. The Manager is led by our founder and chief executive officer, Dean Jernigan, and our president and chief operating officer, John A. Good. Mr. Jernigan is a 30-year veteran of the self-storage industry, including a combined 16 years as the chief executive officer of Storage USA and CubeSmart, both New York Stock Exchange listed self-storage REITs. During his time at these two companies, Mr. Jernigan oversaw the investment of over $3 billion of capital in the self-storage industry. Mr. Good has over 28 years working with senior management teams and boards of directors of public companies in the REIT and financial services industries on corporate finance, corporate governance, merger and acquisition, tax, executive compensation, joint venture, and strategic planning projects as a nationally recognized corporate and securities lawyer. Prior to joining the Company, he served as lead counsel on over 200 securities offerings, including our IPO, raising in excess of $25 billion over the past 25 years, with more than 125 of those deals being in the REIT industry. We believe the industry experience and depth of relationships of our senior management team and other investment professionals provide us with a significant competitive advantage in sourcing, evaluating, underwriting and servicing self-storage investments.

The Company is a Maryland corporation that was organized on October 1, 2014 that has elected to be taxed as a REIT under the Internal Revenue Code of 1986 (the “Code”). As a REIT, we generally will not be subject to U.S. federal income taxes on our taxable income, determined without regard to the deduction for dividends paid and excluding any net capital gains, to the extent that we annually distribute all of our REIT taxable income to stockholders and comply with certain other requirements for qualification as a REIT set forth in the Code. We are structured as an UPREIT and conduct our investment activities through our Operating Company. We also intend to operate our business in a manner that will permit us to maintain our exemption from registration under the 1940 Act.

Factors Impacting Our Operating Results

The results of our operations are affected by a number of factors including, among other things;

	the pace at which we are able to deploy capital into development property investments and begin earning interest income, which pace can be dependent on the timing of government issuance of building permits, weather and other factors outside our control;
	the timing of certificates of occupancy of facilities we finance and the pace of lease-up of such facilities;
	availability of capital and whether investments are made on-balance sheet or through off-balance sheet joint ventures;
	changes in the fair value of our assets; and
	the performance of self-storage facilities in which we have invested, either directly or through the SL1 Venture.

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Our total investment income includes interest income from investments, which also reflects the accretion of origination fees, and is recognized utilizing the interest method based on the contractual rate and the outstanding principal balance of the loans we originate. The objective of the interest method is to arrive at periodic interest income that yields a level rate of return over the loan term. Interest rates may vary according to the type of loan, conditions in the financial markets, creditworthiness of our borrowers, competition and other factors, none of which can be predicted with any certainty. Our operating results may also be impacted by credit losses in excess of initial anticipations or unanticipated credit events experienced by borrowers. Our income also includes earnings from our investment in the SL1 Venture, which is calculated based on the allocation of earnings as prescribed in the JV Agreement. In addition, our operating results are affected by the valuation of our development property investments and our operating property loans. These investments are marked to fair value each quarter, and increases and decreases in fair value are reflected in the carrying values of the investments in our Consolidated Balance Sheets and as unrealized increases/decreases in fair value in our Consolidated Statements of Operations. In one event we made, and in the future we may make, additional equity investments in self-storage facilities, either for fee simple ownership by our Operating Company or in joint ventures with our developers, institutional or other strategic partners. Our operating results include rental income and related operating expenses from owned self-storage facilities. In that regard, in connection with many of our development investments, we have obtained rights of first refusal in connection with potential future sales of self-storage facilities that we finance. Our results for the three and nine months ended September 30, 2017 and 2016 also were impacted by our accounting methods as discussed below.

Changes in Fair Value of Our Assets

We have elected the fair value option of accounting for our investment portfolio. We have elected fair value accounting for these financial instruments because we believe such accounting provides stockholders and others who rely on our financial statements with a more complete and accurate understanding of our economic performance, including our revenues and the intrinsic value inherent in the Profits Interests we possess. Under the fair value option, we mark our development property investments and operating property loans to estimated fair value at the end of each accounting period, with corresponding increases or decreases in fair value being reflected in our Consolidated Statements of Operations. There is no active secondary market for our development property investments and operating property loans and no readily available market value; accordingly, our determination of fair value requires judgment and extensive use of estimates. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our development property investments and operating property loans may fluctuate from period to period. Additionally, the fair value of our development property investments and operating property loans may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that we may ultimately realize. Our development property investments and operating property loans are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If we were required to liquidate an investment in a forced or liquidation sale, we could realize significantly less than the value at which we have recorded it. In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected in the valuations currently assigned.

Changes in Market Interest Rates

With respect to our business operations, increases in interest rates, in general, may over time cause: the interest expense associated with our borrowings to increase; the value of our loan portfolio to decline; interest rates on any floating rate loans to reset, although on a delayed basis, to higher interest rates; and to the extent we enter into interest rate swap agreements as part of our hedging strategy, the value of these agreements to increase. Conversely, decreases in interest rates, in general, may over time cause: the interest expense associated with our borrowings to decrease; the value of our mortgage loan portfolio to increase; interest rates on any floating rate loans to reset, although on a delayed basis, to lower interest rates; and to the extent we enter into interest rate swap agreements as part of our hedging strategy, the value of these agreements to decrease.

Credit Risk

We are subject to varying degrees of credit risk in connection with our target investments and other loans. Our Manager seeks to mitigate this risk by seeking to originate or acquire loans of higher quality at appropriate prices given anticipated and unanticipated losses, by utilizing a comprehensive selection, underwriting and due diligence review process, and by proactively monitoring originated or acquired loans. Nevertheless, unanticipated credit losses could occur that could adversely impact our operating results.

Market Conditions

We believe that present conditions in certain markets continue to be conducive to realizing attractive risk-adjusted returns on investments in self-storage facilities owned by private operators. The self-storage sector has experienced increased construction starts recently and the trend is expected to continue upwards. The key demand drivers of the self-storage sector include population mobility and new job creation, both of which are experiencing increases since the recession, as well as population growth. These drivers have created demand for self-storage, which in turn have developers looking to develop and match demand with supply. The main deterrents for developers are government regulations (primarily zoning restrictions) and the lack of financing available in the sector. Currently, lenders are only willing to lend up to 70% LTV, whereas our substantial industry knowledge enables us to make loans at ratios of approximately 90% LTC. In certain situations, we will advance more than 90% of cost and receive a higher rate of interest, some of which will be received as payment-in-kind (“PIK”) interest rather than cash interest.

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Recent Developments

Investment Activity

Subsequent to September 30, 2017, we closed on the following development property investment with a profits interest:

		Total Investment
Closing Date	MSA	Commitment
10/12/2017	Miami 2	$	9,459
10/30/2017	New Jersey		14,701
	Total	$	24,160

At-the-Market Offering Program

On October 6, 2017, we issued and sold 29,416 shares of common stock at a weighted average price of $20.50 per share under our ATM Program (as defined below), receiving net proceeds after commissions of $0.6 million.

Series A Preferred Stock

On October 26, 2017, we issued 10,000 restricted shares of the Series A Preferred Stock to the Buyers and received $10.0 million in proceeds pursuant to the terms of the Purchase Agreement.

Dividend Declarations

On November 1, 2017, our Board of Directors declared a cash dividend to the holders of the Series A Preferred Stock and a distribution payable in kind in a number of shares of common stock or Series A Preferred Stock as determined in accordance with the election of the holders of the Series A Preferred Stock for the quarter ending December 31, 2017. The dividends are payable on January 15, 2018 (or if not a business day, on the next business day) to holders of Series A Preferred Stock of record on January 1, 2018.

On November 1, 2017, our Board of Directors also declared a cash dividend of $0.35 per share of common stock for the quarter ending December 31, 2017. The dividend is payable on January 12, 2018 to stockholders of record on January 2, 2018.

Third Amended and Restated Management Agreement

On November 1, 2017, we, the Operating Company and the Manager entered into the Third Amended and Restated Management Agreement in order to clarify the original intent of the parties with respect to the definition of Core Earnings and to make other minor changes necessary to reflect the current and anticipated business model from and after this time. The Third Amended and Restated Management Agreement is otherwise substantially consistent with the Second Amended and Restated Management Agreement.

Under the Third Amended and Restated Management Agreement, “Core Earnings” is defined as (1) net income (loss) determined under GAAP, plus (2) non-cash equity compensation expense, the incentive fee, depreciation and amortization, plus (3) any unrealized losses or other non-cash expense items reflected in GAAP net income (loss), less (4) any unrealized gains reflected in GAAP net income (including any unrealized appreciation with respect to self-storage facilities that we have not yet acquired). The Third Amended and Restated Management Agreement clarifies that in addition to certain previously agreed upon adjustments, with respect to any self-storage facility acquired by us with respect to which we had an outstanding loan as of the time of such acquisition, the amount of Core Earnings determined pursuant to the formula above in the period of such acquisition shall also be increased by the difference between (A) the appraised value, as determined by a nationally recognized, independent third-party appraiser mutually agreed to by us and the Manager who has significant expertise in valuing self-storage properties, and (B) (i) the outstanding principal amount of any Company loan secured by such acquired self-storage facility at the time of such acquisition plus (ii) any other consideration given to the former owner upon such acquisition. This addition is intended to include in Core Earnings the amount of our unrealized gain on account of our acquisition of a self-storage facility without such facility being sold to a third party buyer in the open market.

Investment Activity

In addition to the self-storage real estate asset owned, our self-storage investments at September 30, 2017 consisted of the following:

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 Development Property Investments - We had 36 investments totaling an aggregate committed principal amount of approximately $397.5 million to finance the ground-up construction of or conversion of existing buildings into self-storage facilities. Each development property investment is funded as the developer constructs the project. Each development property investment is typically comprised of a first mortgage loan and a 49.9% interest in the positive cash flows (including the sale and refinancing proceeds after debt repayment) of the project. The loans are secured by the first mortgages on the projects and in certain cases a first priority security interests in the membership interests of the owners of the projects. Loans comprising development property investments are non-recourse with customary carve-outs and subject to completion guaranties, are interest-only with a fixed interest rate of typically 6.9% per annum and typically have a term of 72 months.

We also had one construction loan investment with a committed principal amount of approximately $17.7 million, which had an initial term of 18 months that was extended during the first quarter of 2017. This construction loan is interest-only at a fixed interest rate of 6.9% per annum, has no equity participation and is secured by a first priority mortgage on the project. It is also subject to a purchase and sale agreement between the developer and a third-party purchaser pursuant to which the financed project is anticipated to be sold and the loan repaid on or about the time a certificate of occupancy is issued for the financed self-storage facility.

 Operating property loans - We had two term loans totaling $6.0 million of aggregate committed principal amount, the proceeds of which were used by borrowers to finance the acquisition of, refinance existing indebtedness on, or recapitalize operating self-storage facilities. These loans are secured by first mortgages on the projects financed, are interest-only with fixed interest rates ranging from 5.85% to 6.9% per annum, and generally have a term of 72 months.

Our development property investments and operating property loans are collectively referred to herein as our investment portfolio.

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As of September 30, 2017, the aggregate committed principal amount of our investment portfolio was approximately $421.2 million and outstanding principal was $173.7 million, as described in more detail in the table below (dollars in thousands):

	Metropolitan					Remaining
	Statistical Area	Total Investment		Funded		Unfunded
Closing Date	("MSA")	Commitment		Investment (1)		Commitment		Fair Value
Development property investments:
Loan investments with a profits interest:
6/10/2015	Atlanta 1 (2)	$	8,132	$	8,010	$	122	$	10,507
6/19/2015	Tampa 1 (2)		5,369		5,285		84		6,058
6/26/2015	Atlanta 2 (2)		6,050		5,754		296		8,519
6/29/2015	Charlotte 1 (2)		7,624		7,126		498		10,551
7/2/2015	Milwaukee (2)		7,650		7,377		273		8,762
7/31/2015	New Haven (2)		6,930		6,412		518		8,399
8/10/2015	Pittsburgh (2)		5,266		4,574		692		6,591
8/14/2015	Raleigh (3)		8,792		4,277		4,515		4,260
9/30/2015	Jacksonville 1 (2)		6,445		5,988		457		8,830
10/27/2015	Austin (2)		8,658		7,000		1,658		8,779
9/20/2016	Charlotte 2 (3)		12,888		4,517		8,371		4,360
11/17/2016	Jacksonville 2 (3)		7,530		3,899		3,631		4,453
1/4/2017	New York City 1 (2)		16,117		13,165		2,952		16,712
1/18/2017	Atlanta 3		14,115		3,471		10,644		3,314
1/31/2017	Atlanta 4		13,678		5,698		7,980		5,667
2/24/2017	Orlando 3		8,056		1,468		6,588		1,409
2/24/2017	New Orleans		12,549		-		12,549		-
2/27/2017	Atlanta 5		17,492		3,910		13,582		3,790
3/1/2017	Fort Lauderdale		9,952		1,945		8,007		1,875
3/1/2017	Houston		13,630		3,382		10,248		3,283
4/14/2017	Louisville 1		8,523		1,471		7,052		1,394
4/20/2017	Denver 1		9,806		1,906		7,900		1,822
4/20/2017	Denver 2		11,164		2,877		8,287		2,790
5/2/2017	Atlanta 6		12,543		3,117		9,426		3,017
5/2/2017	Tampa 2		8,091		890		7,201		813
5/19/2017	Tampa 3		9,224		729		8,495		639
6/12/2017	Tampa 4		10,266		1,364		8,902		1,266
6/19/2017	Baltimore (4)		10,775		2,672		8,103		2,484
6/28/2017	Knoxville		9,115		1,656		7,459		1,573
6/29/2017	Boston		14,103		2,031		12,072		1,898
6/30/2017	New York City 2 (4)		26,482		16,712		9,770		16,333
7/27/2017	Jacksonville 3		8,096		888		7,208		810
8/30/2017	Orlando 4		9,037		1,790		7,247		1,698
9/14/2017	Los Angeles		28,750		7,382		21,368		7,284
9/14/2017	Miami		14,657		5,761		8,896		5,644
9/28/2017	Louisville 2		9,940		2,230		7,710		2,139
		$	397,495	$	156,734	$	240,761	$	177,723
Construction loans:
12/23/2015	Miami		17,733		10,999		6,734		10,817
		$	17,733	$	10,999	$	6,734	$	10,817
	Subtotal	$	415,228	$	167,733	$	247,495	$	188,540
Operating property loans:
7/7/2015	Newark		3,480		3,480		-		3,477
12/22/2015	Chicago		2,502		2,500		2		2,513
	Subtotal	$	5,982	$	5,980	$	2	$	5,990
	Total investments	$	421,210	$	173,713	$	247,497	$	194,530

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(1)	Represents principal balance of loan gross of origination fees.
(2)	Facility had received certificate of occupancy as of September 30, 2017. See Note 4 to the accompanying unaudited consolidated financial statements, Fair Value of Financial Instruments, for information regarding recognition of entrepreneurial profit.
(3)	Facility had achieved at least 40% construction completion but had not received certificate of occupancy as of September 30, 2017. See Note 4 to the accompanying unaudited consolidated financial statements, Fair Value of Financial Instruments, for information regarding recognition of entrepreneurial profit.
(4)	These investments contain a higher LTC ratio and a higher interest rate, some of which interest is PIK interest. The PIK interest, computed at the contractual rate specified in each debt agreement, is periodically added to the principal balance of the debt and is recorded as interest income. Thus, the actual collection of this interest may be deferred until the time of debt principal repayment.

As of September 30, 2017, the SL1 Venture had 11 development property investments with a profits interest as described in more detail in the table below (dollars in thousands):

	Metropolitan					Remaining
	Statistical Area	Total Investment		Funded		Unfunded
Closing Date	("MSA")	Commitment		Investment (1)		Commitment		Fair Value
5/14/2015	Miami 1 (2) (3)	$	13,867	$	9,455	$	4,412	$	10,929
5/14/2015	Miami 2 (2) (3)		14,849		8,486		6,363		8,947
9/25/2015	Fort Lauderdale (2) (3)		13,230		7,298		5,932		7,796
4/15/2016	Washington DC (4)		17,269		14,346		2,923		15,937
4/29/2016	Atlanta 1 (3)		10,223		5,140		5,083		5,459
7/19/2016	Jacksonville (4)		8,127		6,989		1,138		10,541
7/21/2016	New Jersey		7,828		1,621		6,207		1,561
8/15/2016	Atlanta 2 (4)		8,772		6,535		2,237		7,423
8/25/2016	Denver (3)		11,032		7,605		3,427		8,678
9/28/2016	Columbia (4)		9,199		7,651		1,548		8,525
12/22/2016	Raleigh		8,877		2,431		6,446		2,398
	Total	$	123,273	$	77,557	$	45,716	$	88,194

(1)	Represents principal balance of loan gross of origination fees.
(2)	These development property investments (having approximately $8.1 million of outstanding principal balances at contribution) were contributed to the SL1 Venture on March 31, 2016.
(3)	Facility had achieved at least 40% construction completion but had not received certificate of occupancy as of September 30, 2017. See Note 4to the accompanying unaudited consolidated financial statements, Fair Value of Financial Instruments, for information regarding recognition of entrepreneurial profit.
(4)	Facility had received certificate of occupancy as of September 30, 2017.See Note 4to the accompanying unaudited consolidated financial statements, Fair Value of Financial Instruments, for information regarding recognition of entrepreneurial profit.

Business Outlook

We continue to experience strong demand for our capital for the development of state-of-the-art Class A self-storage facilities in top U.S. markets. As of November 1, 2017, we had projects that were in various stages of our underwriting process, including several subject to executed term sheets, for prospective investment amounts in excess of $700 million. While we typically estimate closing dates for investment transactions subject to executed term sheets, often the closings of such investments are subject to events, such as site plan approval, and other occurrences outside of our control, which can result in delays beyond our estimated closing dates. Moreover, we can provide no assurance that any of the existing or future projects subject to term sheets will produce actual investment commitments or if all term sheets will meet all conditions necessary to consummate investment commitments, and we can provide no assurance that we will have adequate capital to close all such prospective commitments in the future.  

Throughout the third quarter of 2017, we funded development draws on the 11 development property investments to which we had committed an aggregate of approximately $76.5 million at December 31, 2015. As of September 30, 2017, ten of those development properties had achieved certificates of occupancy, and we have realized a significant portion of the potential profit on these developments through our fair value adjustments. We currently expect a certificate of occupancy to be issued on the remaining project in early 2018.

During the period January 1 through August 31, 2016, we made no on-balance sheet development property investments sheet, with all such investments being made through the SL1 Venture pursuant to the terms of our joint venture agreement executed in March 2016. We have a 10% capital interest in SL1 Venture that entitles us to 10% of operating earnings and profits from sales of properties by the joint venture, as well as potential residual interests upon our SL1 Venture partners achieving certain internal rates of return on their invested capital. 

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Insofar as we have already realized a substantial percentage of fair value increases on 10 of our 11 on-balance sheet development property investments made in 2015 and have only a 10% interest in SL1 Venture until certain return hurdles are met, our 2017 fair value adjustments are likely to be less than the fair value adjustments we realized in 2016. However, with substantially greater access to capital during the second half of 2016 and into 2017, we resumed investing “on-balance sheet” and closed three development property investments prior to the end of 2016 and 26more with an aggregate committed principal of $330.3 million through November 6,  2017, although these development projects are not expected to be completed until 2018 or 2019. Accordingly, the amount of fair value adjustments for anticipated profits on projects during 2017 will be less than in 2016 but should accelerate substantially in 2018.

During the nine months ended September 30, 2017, the underlying self-storage facility of seven of our development property investments with a profits interest, four of which are in the SL1 Venture, received a certificate of occupancy and commenced operations. The following table reflects occupancy data as of November 5, 2017 for all of the underlying self-storage facilities of our development property investments with a profits interest that have received a certificate of occupancy:  

Location	Date Opened	# Months Open		Occupancy
Riverview, Florida (Tampa 1)	April 11, 2016		19		84.0	%
Ocoee, Florida (Orlando 1 and Orlando 2) (3)	May 1, 2016		18		70.7	%
Marietta, Georgia (Atlanta 2)	May 24, 2016		17		73.6	%
Alpharetta, Georgia (Atlanta 1)	May 25, 2016		17		63.0	%
Jacksonville, Florida (Jacksonville 1)	August 12, 2016		15		90.4	%
Charlotte, North Carolina (Charlotte 1)	August 18, 2016		15		42.1	%
Milwaukee, Wisconsin	October 9, 2016 (1)		13		29.4	%
New Haven, Connecticut	December 16, 2016		11		47.2	%
Round Rock, Texas (Austin)	March 16, 2017		8		27.6	%
Pittsburgh, Pennsylvania	May 11, 2017		6		16.1	%
Jacksonville, Florida (4)	July 26, 2017		3		31.4	%
Columbia, SC (4)	August 23, 2017		2		14.2	%
Atlanta, Georgia (Atlanta 2) (4)	September 14, 2017		2		5.1	%
Washington DC (4)	September 25, 2017		1		6.2	%
New York, NY (New York City 1)	September 29, 2017		1		5.1	%
Average			9.9		40.4	%	(2)

(1)	Certificate of Occupancy was received in August 2016, prior to the property being ready for opening by the manager of the project. Property opened to partial leasing in October 2016. All floors opened to leasing in February 2017.
(2)	Represents mean average occupancy.
(3)	Orlando 1 was at 86.2% physical occupancy on July 18, 2017. On July 19, 2017, an addition (Orlando 2) opened for business. Occupancy reflected is for combined facility. As of September 30, 2017, we wholly own this investment.
(4)	Investment is included in SL1 Venture portfolio.

The occupancy rates noted above pertain to the aforementioned 15 properties only and are not indicative of future lease-up rates of other facilities that will commence operations.

Critical Accounting Policies

There have been no significant changes to our critical accounting policies as disclosed in the 2016 Form 10-K.

Recent Accounting Pronouncements

A discussion of recent accounting pronouncements affecting us is included in Note 2 of the accompanying interim consolidated financial statements.

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Results of Operations

The following discussion of our results of operations for the three and nine months ended September 30, 2017 and 2016 should be read in conjunction with the interim consolidated financial statements and the accompanying notes thereto included elsewhere in this Quarterly Report on Form 10-Q. 

Comparison of the three months ended September 30, 2017 and September 30, 2016:

(Dollars in thousands)	Three months ended
	September 30, 2017		September 30, 2016
Revenues:
Interest income from investments	$	3,173	$	1,698
Rental and other property-related income from real estate owned		160		-
Other revenues		28		-
Total revenues		3,361		1,698
Costs and expenses:
General and administrative expenses		1,386		1,463
Management fees to Manager		1,036		402
Property operating expenses of real estate owned		114		-
Depreciation and amortization of real estate owned		172		-
Transaction and other expenses		-		2
Total costs and expenses		2,708		1,867
Operating income (loss)		653		(169)
Other income (expense):
Equity in earnings from unconsolidated real estate venture		730		436
Change in fair value of investments		3,384		4,867
Interest expense		(323)		(148)
Loss on modification of debt		(232)		-
Other interest income		245		8
Total other income		3,804		5,163
Net income		4,457		4,994
Net income attributable to preferred stockholders		(310)		-
Net income attributable to common stockholders	$	4,147	$	4,994

Revenues

Total interest income from investments for the three months ended September 30, 2017 was $3.2 million, an increase of approximately $1.5 million from the three months ended September 30, 2016, and consists of interest earned on the outstanding principal balances on our investment portfolio and other loans and accretion of origination fees. The interest rate on the majority of our investment portfolio and other loans is 6.9% per annum. The increase is primarily attributed to the increase in the outstanding principal balances of our investment portfolio and other loans. We also had rental revenue of $0.2 million from real estate owned during the three months ended September 30, 2017 that is related to our interest in the revenues generated by the self-storage real estate owned that was acquired during 2017. Other revenues of $28,000 earned during the three months ended September 30, 2017 is derived primarily from management fee revenue generated from the SL1 Venture.

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Expenses

The following table provides a detail of total general and administrative expenses (dollars in thousands):

	Three months ended
	September 30, 2017		September 30, 2016
Compensation and benefits	$	861	$	944
Occupancy		88		114
Business development		84		96
Professional fees		156		128
Other		197		181
Total general and administrative expenses	$	1,386	$	1,463

Total general and administrative expenses

Total general and administrative expenses for the three months ended September 30, 2017 were $1.4 million, a decrease of $77,000 from the three months ended September 30, 2016. Compensation and benefits included non-cash expense of stock-based compensation of $296,000 and $341,000 for the three months ended September 30, 2017 and 2016, respectively. Compensation and benefits also included $0.1 million of third party reimbursements to the Manager during the three months ended September 30, 2017, which offset expenses reimbursed to the Manager by us on a dollar-for-dollar basis.

Other operating expenses

The management fees of $1.0 million and $0.4 million in the three months ended September 30, 2017 and 2016, respectively, relate to the fee earned by the Manager pursuant to the management agreement. The increase in management fees was primarily a result of the completion of the follow-on offerings of our common stock during the fourth quarter of 2016 and the second quarter of 2017, which increased stockholders' equity on which the base management fee is calculated. Property operating expenses of real estate owned and depreciation and amortization of real estate owned for the three months ended September 30, 2017 relate to the operating activities of our self-storage real estate owned.

Other income (expense)

For the three months ended September 30, 2017 and 2016, we recorded other income of $3.8 million and $5.2 million, respectively, which primarily relates to the change in fair value of investments. The change in fair value of investments decreased primarily due to a significant portion of the entrepreneurial profit adjustments on our on-balance sheet investments that were closed in 2015 being recognized in 2016. We made no on-balance sheet investments from January through August 31, 2016. The $0.7 million and $0.4 million of equity in earnings from unconsolidated real estate venture in the three months ended September 30, 2017 and 2016, respectively, relates to our allocated earnings from the SL1 Venture. Interest expense for the three months ended September 30, 2017 was $0.3 million and relates to interest incurred on our senior A note participations, amortization of deferred financing costs that were incurred in connection with the closing of the Credit Facility, and unused commitment fees related to the Credit Facility. Interest expense for the three months ended September 30, 2016 was $0.1 million and relates to interest incurred on our senior A note participations. The $0.2 million loss on modification of debt was incurred in conjunction with the closing of the Credit Facility. Other interest income for the three months ended September 30, 2017 and 2016 was $0.2 million and $8,000, respectively, and relates to interest earned on our cash deposits.

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Comparison of the nine months ended September 30, 2017 and September 30, 2016:

(Dollars in thousands)	Nine months ended
	September 30, 2017		September 30, 2016
Revenues:
Interest income from investments	$	7,759	$	4,374
Rental and other property-related income from real estate owned		328		-
Other revenues		174		-
Total revenues		8,261		4,374
Costs and expenses:
General and administrative expenses		4,336		4,102
Management fees to Manager		2,373		1,218
Property operating expenses of real estate owned		188		-
Depreciation and amortization of real estate owned		233		-
Transaction and other expenses		-		2,129
Restructuring costs		-		54
Deferred termination fee to Manager		-		239
Total costs and expenses		7,130		7,742
Operating income (loss)		1,131		(3,368)
Other income (expense):
Equity in earnings from unconsolidated real estate venture		1,747		854
Change in fair value of investments		9,066		14,185
Interest expense		(757)		(186)
Loss on modification of debt		(232)		-
Other interest income		479		43
Total other income		10,303		14,896
Net income		11,434		11,528
Net income attributable to preferred stockholders		(1,033)		-
Net income attributable to common stockholders	$	10,401	$	11,528

Revenues

Total interest income from investments for the nine months ended September 30, 2017 was $7.8 million, an increase of $3.4 million from the nine months ended September 30, 2016, and consists of interest earned on the outstanding principal balances on our investment portfolio and other loans and accretion of origination fees. The interest rate on the majority of our investment portfolio and other loans is 6.9% per annum. The increase is primarily attributed to the increase in the outstanding principal balances of our investment portfolio and other loans. We also had rental revenue of $0.3 million from real estate owned during the nine months ended September 30, 2017 that is related to our interest in the revenues generated by the self-storage real estate owned that was acquired during 2017. Other revenues of $0.2 million earned during the nine months ended September 30, 2017 is derived from borrower payment of internal costs in connection with closings during the first quarter and management fee revenue generated from the SL1 Venture.

Expenses

The following table provides a detail of total general and administrative expenses (dollars in thousands): 

	Nine months ended
	September 30, 2017		September 30, 2016
Compensation and benefits	$	2,646	$	2,547
Occupancy		283		303
Business development		216		316
Professional fees		597		526
Other		594		410
Total general and administrative expenses	$	4,336	$	4,102

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Total general and administrative expenses

Total general and administrative expenses for the nine months ended September 30, 2017 were $4.3 million, an increase of $0.2 million from the nine months ended September 30, 2016. Compensation and benefits included non-cash expense of stock-based compensation of $1.0 million and $0.8 million for the nine months ended September 30, 2017 and 2016, respectively. On May 3, 2017, certain of our officers and certain employees of the Manager were granted an aggregate of 105,000 shares of restricted stock. Stock-based compensation expense is also affected by changes in the market price of our common stock. The increase in stock-based compensation expense was offset by a decline in compensation and benefits for the nine months ended September 30, 2017 primarily due to $0.3 million of third party reimbursements to the Manager which offset expenses reimbursed to the Manager by us on a dollar-for-dollar basis. Other expenses increased primarily due to additional franchise taxes accrued in the first nine months of 2017 as well as increased expenses related to directors and officers insurance and annual fees paid to certain of our independent directors.

Transaction and other expenses

For the nine months ended September 30, 2017, there were no transaction and other expenses. The $2.1 million of transaction and other expenses for the nine months ended September 30, 2016 primarily consists of advisory fees and other expenses incurred in connection with our various financing transactions.

Other operating expenses

The management fees of $2.4 million and $1.2 million in the nine months ended September 30, 2017 and 2016, respectively, relate to the fee earned by the Manager pursuant to the management agreement. The increase in management fees was primarily a result of the completion of the follow-on offerings of our common stock during the fourth quarter of 2016 and second quarter of 2017, which increased stockholders' equity on which the base management fee is calculated. Property operating expenses of real estate owned and depreciation and amortization of real estate owned for the nine months ended September 30, 2017 relate to the operating activities of our self-storage real estate owned. There were no restructuring costs incurred during the nine months ended September 30, 2017. The $54,000 of restructuring costs incurred during the nine months ended September 30, 2016 related to remaining lease termination costs incurred by closing the Miami, Florida office. The deferred termination fee to our Manager of $0.2 million for the nine months ended September 30, 2016 represented the accrual over the term of the management agreement of the deferred termination fee payable by our Operating Company in OC Units pursuant to the management agreement. On May 23, 2016, we amended the management agreement thus resulting in the cessation of this accrual.

Other income (expense)

For the nine months ended September 30, 2017 and 2016, we recorded other income of $10.3 million and $14.9 million, respectively, which primarily relates to the change in fair value of investments. The change in fair value of investments decreased primarily due to a significant portion of the entrepreneurial profit adjustments on our on-balance sheet investments that were closed in 2015 being recognized in 2016. We made no on-balance sheet investments from January through August 31, 2016. The $1.7 million and $0.9 million of equity in earnings from unconsolidated real estate venture in the nine months ended September 30, 2017 and 2016, respectively, relates to our allocated earnings from the SL1 Venture, which was entered into on March 31, 2016. Interest expense for the nine months ended September 30, 2017 and 2016 was $0.8 million and $0.2 million, respectively, and relates to interest incurred on our senior A note participations, amortization of deferred financing costs that were incurred in conjunction with the closing of the Credit Facility, and unused commitment fees related to the Credit Facility. The $0.2 million loss on modification of debt was incurred in conjunction with the closing of the Credit Facility. Other interest income for the nine months ended September 30, 2017 and 2016 was $0.5 million and $43,000, respectively, and relates to interest earned on our cash deposits.

Adjusted Earnings

Adjusted Earnings is a performance measure that is not specifically defined by GAAP and is defined as net income attributable to common stockholders (computed in accordance with GAAP) plus stock dividends payable to preferred stockholders, stock-based compensation expense, depreciation and amortization on real estate assets, loss on modification of debt, transaction and other expenses, restructuring costs, and deferred termination fee to Manager.

Adjusted Earnings should not be considered as an alternative to net income or any other GAAP measurement of performance or as an alternative to cash flow from operating, investing, and financing activities as a measure of liquidity. We believe that Adjusted Earnings is helpful to investors as a starting point in measuring our operational performance, because it excludes various equity-based payments (including stock dividends) and other items included in net income that do not relate to or are not indicative of our operating performance, which can make periodic and peer analyses of operating performance more difficult. Our computation of Adjusted Earnings may not be comparable to other key performance indicators reported by other REITs or real estate companies.

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The following tables are reconciliations of Adjusted Earnings to net income attributable to common stockholders (dollars in thousands): 

	Three months ended
	September 30, 2017		September 30, 2016
Net income attributable to common stockholders	$	4,147	$	4,994
Plus: stock dividends payable to preferred stockholders		132		-
Plus: stock-based compensation		296		341
Plus: depreciation and amortization on real estate assets		172		-
Plus: loss on modification of debt		232		-
Plus: transaction and other expenses		-		2
Adjusted Earnings	$	4,979	$	5,337

	Nine months ended
	September 30, 2017		September 30, 2016
Net income attributable to common stockholders	$	10,401	$	11,528
Plus: stock dividends payable to preferred stockholders		503		-
Plus: stock-based compensation		1,023		828
Plus: depreciation and amortization on real estate assets		233		-
Plus: loss on modification of debt		232		-
Plus: transaction and other expenses		-		2,129
Plus: restructuring costs		-		54
Plus: deferred termination fee to Manager		-		239
Adjusted Earnings	$	12,392	$	14,778

Liquidity and Capital Resources

Liquidity is a measure of our ability to meet potential cash requirements, including commitments to fund our investment portfolio, repay borrowings, fund and maintain our assets and operations, make distributions to our stockholders and other general business needs. We will use significant cash to originate our target investments, make distributions to our stockholders and fund our operations.

Cash and Cash Flows

The following table sets forth changes in cash and cash equivalents:

	Nine months ended September 30,
	2017		2016
Net income	$	11,434	$	11,528
Adjustments to reconcile net income to net cash provided by (used in) operating activities:		(10,875)		(17,194)
Net cash provided by (used in) operating activities		559		(5,666)
Net cash used in investing activities		(89,209)		(30,359)
Net cash provided by financing activities		76,276		5,175
Change in cash and cash equivalents	$	(12,374)	$	(30,850)

Cash decreased $12.4 million during the nine months ended September 30, 2017 as compared to a decrease in cash of $30.9 million during the nine months ended September 30, 2016. Net cash provided by operating activities for the nine months ended September 30, 2017 was $0.6 million and net cash used in operating activities for the nine months ended September 30, 2016 was $5.7 million. The primary components of cash provided by operating activities during the nine months ended September 30, 2017 were $3.1 million of origination fees received in cash, $0.5 million of return on investment from the SL1 Venture, and the change in cash from working capital of $0.6 million, offset, in part, by net income adjusted for non-cash transactions of $3.6 million. The primary components of cash used in operating activities during the nine months ended September 30, 2016were net income adjusted for non-cash transactions of $5.4 million and the change in cash required for working capital of $0.4 million, offset, in part, by $0.2 million of origination fees received in cash.

Net cash used in investing activities for the nine months ended September 30, 2017 and 2016 was $89.2 million and $30.4 million, respectively. For the nine months ended September 30, 2017, the cash used for investing activities consisted primarily of $111.6  million to fund investments, $10.1  million to fund other loans, $2.9 million to purchase additional interests in two of our development property investments, $4.8 million to fund capital contributions to the SL1 Venture, and a net use of $1.2 million for advancements made on behalf of the SL1 Venture, offset, in part, by $41.4 million from repayments of construction loans and other loan investments. For the nine months ended September 30, 2016, the cash used for investing activities consisted primarily of $36.5 million to fund investments, $9.2 million to fund other

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loans, and $1.3 million to fund capital contributions to the SL1 Venture, offset, in part, by a $7.3 million return of capital from the SL1 Venture and $9.6 million from repayments of an operating property loan investment and other loan investments.

Net cash provided by financing activities for the nine months ended September 30, 2017 totaled $76.3 million and primarily related to $108.1 million of common stock issuances, $1.8 million of cash received in connection with draws on senior loan participations on certain of our investments, and $0.4 million received upon closing of the credit facility, offset, in part, by a $20.0 million paydown of the credit facility, $1.9 million paid to repurchase certain senior loan participations, and  $11.8 million of dividends paid. For the nine months ended September 30, 2016, cash provided by financing activities totaled $5.2 million related to $17.6 million of cash received in conjunction with the sale of senior loan participations on certain of our investments, offset, in part, by $6.4 million of dividends paid, $3.2 million of stock repurchases and $2.8 million of deferred costs.

Liquidity Outlook and Capital Requirements

As of September 30, 2017, we had unrestricted cash of approximately $55.0 million, and we had remaining unfunded commitments of $247.5 million related to our investment portfolio and $4.5 million related to the SL1 Venture. We believe that the sources of capital discussed below will provide us with adequate liquidity to fund our operations and investment activities for at least the next 12 months.

Senior Participation

On May 27, 2016, we sold a senior participation in a construction loan on a facility in the Miami, Florida MSA (“the Miami A Note”), having a commitment amount of $17.7 million, to a regional commercial bank for a commitment by the bank to provide net proceeds of $10.0 million to fund construction draws under the construction loan (the “Miami A Note Sale”) once the total outstanding principal balance exceeds $7.7 million. The outstanding balance for the Miami A Note at September 30, 2017 was $0.7 million, thus leaving $9.3 million of available funding as of September 30, 2017.

Series A Preferred Stock

On July 27, 2016, we entered into the Purchase Agreement with accounts managed by NexPoint Advisors, L.P., an affiliate of Highland Capital Management, L.P., which provides that we may issue and sell up to $125.0 million of Series A Preferred Stock from time to time until July 28, 2018. As of September 30, 2017, we had issued 10,000 restricted shares of the Series A Preferred Stock and received $10.0 million in proceeds pursuant to the terms of the Purchase Agreement. On October 26, 2017, we issued an additional 10,000 restricted shares of the Series A Preferred Stock and received an additional $10.0 million in proceeds pursuant to the terms of the Purchase Agreement. Accordingly, as of November 6, 2017, we have $105.0 million available for issuance under the Purchase Agreement.

ATM Program

On April 5, 2017, we entered into the ATM Program whereby we may issue and sell up to $50.0 million of our common stock from time to time. Since the inception of the ATM Program, we have sold 1,122,618 shares of common stock at a weighted average price of $22.63, receiving net proceeds after commissions of $24.8 million. As of November 6, 2017, we have approximately $24.6 million available for issuance under the ATM Program.

Credit Facility

On July 25, 2017, we entered into a $100 million credit facility, which has an accordion feature permitting expansion up to $200 million. Our development property investments are eligible to be added to the base of collateral available to secure loans under the credit facility once they receive a certificate of occupancy, thereby increasing the borrowing capacity under the credit facility. Accordingly, the Company believes its availability under the credit facility will increase substantially over the next twelve months as construction on several investments in the Company’s portfolio is completed. Based on expected certificates of occupancy, the Company anticipates the ability to reach full capacity of $200 million by December 31, 2018. As of November 6, 2017, the current borrowing capacity under the credit facility is $33.3 million.

Equity Capital Policies

Subject to applicable law and NYSE listing standards, our board of directors has the authority, without further stockholder approval, to issue additional authorized common stock and preferred stock or otherwise raise capital, including through the issuance of senior securities, in any manner and on the terms and for the consideration it deems appropriate, including in exchange for property. Stockholders will have no preemptive right to additional shares issued in any offering, and any offering may cause a dilution of your investment.

Additionally, the holders of our Series A Preferred Stock have the right to purchase their pro rata share of any qualified offering of common stock, which consists of any offering of common stock except any shares of common stock issued (i) in connection with a merger, consolidation, acquisition or similar business combination, (ii) in connection with a joint venture, strategic alliance or similar corporate partnering arrangement, (iii) in connection with any acquisition of assets by us, (iv) at market prices pursuant to a registered at-the-market program and/or (v) as part of a compensatory or employment arrangement.

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Leverage Policies

To date, we have funded all of our investments with the net proceeds from our IPO and concurrent private placement, which were consummated on April 1, 2015, proceeds from the sale of senior participations in certain investments, proceeds from the issuance of our Series A Preferred Stock, proceeds from two follow-on public offerings of common stock, which were consummated on December 13, 2016 and June 27, 2017, and proceeds received from sales of shares from time to time under the ATM Program. In the future, we may utilize equity raised in follow-on offerings, through the ATM Program and/or borrowings under our Credit Facility or other borrowings against our target investments in accordance with our investment guidelines in order to increase the size of our loan portfolio and potential return to stockholders. Our investment guidelines state that our leverage will generally not exceed 50% of the total value of our loan portfolio. Additionally, as long as shares of Series A Preferred Stock remain outstanding, we are required to maintain a ratio of debt to total tangible assets determined under GAAP of no more than 0.4:1, measured as of the last day of each fiscal quarter. Our ability to issue shares of Series A Preferred Stock is also subject to certain conditions as outlined in Note 10 of the accompanying interim consolidated financial statements. Our Credit Facility contains certain financial covenants including: (i) total consolidated indebtedness not exceeding 50% of gross asset value; (ii) a minimum fixed charge coverage ratio (defined as the ratio of consolidated adjusted earnings before interest, taxes, depreciation and amortization to consolidated fixed charges) of 0.75 to 1.00 during the period between July 25, 2017 and June 30, 2018, 0.90 to 1 during the period between July 1, 2018 and December 31, 2018 and 1.20 to 1 during the period between January 1, 2019 through the maturity of the Credit Facility; (iii) a minimum consolidated tangible net worth (defined as gross asset value less total consolidated indebtedness) of $183.3 million plus 75% of the sum of any additional net offering proceeds; (iv) when aggregate loan commitments under the Credit Facility exceed $50 million, unhedged variable rate debt cannot exceed 25% of consolidated total indebtedness; (v) liquidity of no less than $50 million for the period between July 25, 2017 and December 31, 2018 or on and after December 31, 2018, liquidity of no less than the sum of (a) total unfunded loan commitments of us and our subsidiaries plus (b) $25 million; and (vi) a debt service coverage ratio (defined as the ratio of consolidated adjusted earnings before interest, taxes, depreciation and amortization to our consolidated interest expense and debt principal payments for any given period) of 2 to 1.

The amount available to borrow under the Credit Facility is limited according to a borrowing base valuation of the assets available as collateral. For loans secured by Company mortgage loans, the borrowing base availability is the lesser of (i) 60% of the value of our mortgage loans, (ii) the maximum principal amount which would not cause the outstanding loans under the Credit Facility secured by our mortgage loans to be greater than 50% of the underlying real estate assets securing our mortgage loans and (iii) for any of our mortgage loans that have been included in the borrowing base for greater than 18 months, the maximum principal amount which would not cause the ratio of (a) adjusted net operating income for the underlying real estate asset securing such Company mortgage loan divided by (b) an implied debt service amount to be less than 1.30 to 1.00. For loans secured by self-storage properties, the borrowing base availability is the lesser of (i) the maximum principal amount that would not cause the outstanding loans under the Credit Facility secured by self-storage properties to be greater than 65% of the value of such self-storage properties and (ii) the maximum principal amount that would not cause the ratio of (i) aggregate adjusted net operating income from all self-storage properties included in the borrowing base divided by (ii) an implied debt service coverage amount to be less than 1.30 to 1.00.

Our actual leverage will depend on our mix of loans. Our charter and bylaws do not limit the amount of indebtedness we can incur, and our board of directors has discretion to deviate from or change our investment guidelines at any time. We will use corporate leverage for the sole purpose of financing our portfolio and not for the purpose of speculating on changes in interest rates. Our financing strategy focuses on the use of match-funded financing structures. This means that we will seek to match the maturities and/or repricing schedules of our financial obligations with those of our loan portfolio to minimize the risk that we will have to refinance our liabilities prior to the maturities of our loans and to reduce the impact of changing interest rates on earnings, which our new Credit Facility will help us better achieve. We will disclose any material changes to our leverage policies in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of the quarterly report on Form 10-Q or annual report on Form 10-K for the period in which the change was made, or in a Current Report on Form 8-K if required by the rules of the SEC or the board of directors deems it advisable, in its sole discretion.

Future Revisions in Policies and Strategies

The board of directors has the power to modify or waive our investment policies and strategies without the consent of our stockholders to the extent that the board of directors (including a majority of our independent directors) determines that a modification or waiver is in the best interest of our stockholders. Among other factors, developments in the market that either affect the policies and strategies mentioned herein or that change our assessment of the market may cause our board of directors to revise our policies and strategies. 

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Contractual Obligations and Commitments

The following table reflects our total contractual cash obligations as of September 30, 2017: 

Contractual Obligations	2017		2018		2019		2020		2021		Total
Long-term debt obligations (1) (2)	$	-	$	732	$	-	$	-	$	-	$	732
Operating lease obligations		76		237		171		145		-		629
Total	$	76	$	969	$	171	$	145	$	-	$	1,361

(1)	Represents principal payments gross of discounts and debt issuance costs.
(2)	Amount excludes interest, which is variable based on 30-day LIBOR plus a spread of 3.10%.

At September 30, 2017, we had $247.5 million of unfunded loan commitments related to our investment portfolio and $4.5 million related to the SL1 Venture. These commitments are funded over the 18-24 months following the investment closing date as construction is completed. At September 30, 2017, we had $2.7 million of unfunded loan commitments related to our other assets.

As of September 30, 2017, we had unrestricted cash of approximately $55.0 million.

Off-Balance Sheet Arrangements

At September 30, 2017, we did not have any relationships, including those with unconsolidated entities or financial partnerships, for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that are material to investors.

Our investment in real estate venture is recorded using the equity method as we do not have a controlling interest.

Dividends

For the quarter ended September 30, 2017, we declared a cash dividend to our stockholders of $0.35 per share, payable on October 13, 2017 to stockholders of record on October 2, 2017. We intend to make regular quarterly distributions to holders of our common stock. U.S. federal income tax law generally requires that a REIT annually distribute at least 90% of its REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and that it pay tax at regular corporate rates to the extent that it annually distributes less than 100% of its net taxable income. We intend to pay regular quarterly dividends to our stockholders in an amount equal to or greater than our net taxable income, if and to the extent authorized by our Board of Directors. Before we pay any dividend, whether for U.S. federal income tax purposes or otherwise, we must first meet both our operating requirements and debt service on any secured funding facilities, other lending facilities, repurchase agreements and other debt payable. If our cash available for distribution is less than our net taxable income, we could be required to reduce our dividends, sell assets or borrow funds to make cash distributions or we may make a portion of the required distribution in the form of a taxable stock distribution or distribution of debt securities.

Additionally, holders of our Series A Preferred Stock are entitled to a cumulative cash distribution (“Cash Distribution”) equal to (A) 7.0% per annum on the liquidation value, or $1,000 per share of Series A Preferred Stock (the “Liquidation Value”) for the period beginning on the respective date of issuance until the sixth anniversary of the Effective Date, payable quarterly in arrears, (B) 8.5% per annum on the Liquidation Value for the period beginning the day after the sixth anniversary of the Effective Date and for each year thereafter so long as the Series A Preferred Stock remains issued and outstanding, payable quarterly in arrears, and (C) an amount in addition to the amounts in (A) and (B) equal to 5.0% per annum on the Liquidation Value upon the occurrence of certain triggering events (a “Cash Premium”). In addition, the holders of the Series A Preferred Stock will be entitled to a cumulative dividend payable in-kind in shares of Common Stock or additional shares of Series A Preferred Stock, at the election of the holders (the “Stock Dividend”), equal in the aggregate to the lesser of (Y) 25% of the incremental increase in our book value (as adjusted for equity capital issuances, share repurchases and certain non-cash expenses) plus, to the extent we own equity interests in income-producing real property, the incremental increase in net asset value (provided, however, that no interest in the same real estate asset will be double counted) and (Z) an amount that would, together with the Cash Distribution, result in a 14.0% internal rate of return for the holders of the Series A Preferred Stock from the date of issuance of the Series A Preferred Stock, as set forth in the Articles Supplementary classifying the Series A Preferred Stock (the “Articles Supplementary”). Triggering events that will trigger the payment of a Cash Premium with respect to a Cash Distribution include: (i) the occurrence of certain change of control events affecting us after the third anniversary of the Effective Date, (ii) our ceasing to be subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act, (iii) our failure to remain qualified as a real estate investment trust, (iv) an event of default under the Purchase Agreement, (v) the failure by us to register for resale shares of Common Stock pursuant to the Registration Rights Agreement (a “Registration Default”), (vi) our failure to redeem the Series A Preferred Stock as required by the Purchase Agreement, or (vii) the filing of a complaint, a settlement with, or a judgment entered by the Securities and Exchange Commission against us or any of our subsidiaries or any of our directors or executive officers relating to the violation of the securities laws, rules or regulations with respect to our business. Accrued but unpaid Cash

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Distributions and Stock Dividends on the Series A Preferred Stock will accumulate and will earn additional Cash Distributions and Stock Dividends as calculated above, compounded quarterly.

On August 1, 2017, we declared a (i) cash distribution of $17.89 per share of Series A Preferred Stock, payable on October 13, 2017, to holders of Series A Preferred Stock of record on the close of business on October 1, 2017, and (ii) distributions payable in kind in a number of shares of common stock or Series A Preferred Stock as determined in accordance with the election of the holders of the Series A Preferred Stock, payable on October 13, 2017, to holders of Series A Preferred Stock of record on the close of business on October 1, 2017.  

Inflation

Virtually all of our assets and liabilities will be interest rate sensitive in nature. As a result, interest rates and other factors influence our performance far more so than does inflation. Changes in interest rates do not necessarily correlate with inflation rates or changes in inflation rates. Our financial statements are prepared in accordance with GAAP and our distributions will be determined by our board of directors consistent with our obligation to distribute to our stockholders at least 90% of our REIT taxable income on an annual basis in order to maintain our REIT qualification; in each case, our activities and balance sheet are measured with reference to historical cost and/or fair market value without considering inflation.  

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We seek to manage our risks related to the credit quality of our assets, interest rates, liquidity, prepayment speeds and market value while, at the same time, seeking to provide an opportunity to stockholders to realize attractive risk-adjusted returns through ownership of our capital stock. While we do not seek to avoid risk completely, we believe the risk can be quantified from historical experience and seek to actively manage that risk, to earn sufficient compensation to justify taking those risks and to maintain capital levels consistent with the risks we undertake.

There have been no material changes in our credit risk, interest rate risk, interest rate mismatch risk, or real estate risks from what was disclosed in the 2016 Form 10-K.

Market Risk

Our development property investments and operating property loans generally will be reflected at their estimated fair value, with changes in fair market value recorded in our income. The estimated fair value of these investments fluctuates primarily due to changes in interest rates, capitalization rates, and other factors. Generally, in a rising interest rate environment, the estimated fair value of the fixed-rate securities would be expected to decrease; conversely, in a decreasing interest rate environment, the estimated fair value of the fixed-rate securities would be expected to increase. As market volatility increases or liquidity decreases, the fair value of our investments may be adversely impacted. If we are unable to readily obtain independent pricing to validate our estimated fair value of any loan investment in our portfolio, the fair value gains or losses recorded in income may be adversely affected.

The following fluctuations in the market yields/discount rates would have had the following impact on the fair value of our investments: 

	Increase (decrease) in fair value of investments
Change in market yields/discount rates (in millions)	September 30, 2017		December 31, 2016
Up 25 basis points	$	(0.9)	$	(0.3)
Down 25 basis points, subject to a minimum yield/rate of 10 basis points		1.0		0.3

The following fluctuations in the capitalization rates would have had the following impact on the fair value of our investments:

	Increase (decrease) in fair value of investments
Change in capitalization rates (in millions)	September 30, 2017		December 31, 2016
Up 25 basis points	$	(2.5)	$	(2.1)
Down 25 basis points		2.7		2.3
Up 50 basis points		(4.8)		(3.8)
Down 50 basis points		5.8		4.6

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q. The controls evaluation was conducted under the supervision and with the participation of management, including our Chief Executive Officer, President and Chief Operating Officer, and Chief Financial Officer. Disclosure controls and procedures are controls and procedures designed to reasonably assure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), such as this quarterly report on Form 10-Q, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures are also designed to reasonably assure that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Based on the controls evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified by the SEC, and that material information related to our company and our consolidated subsidiaries is made known to management, including the Chief Executive Officer and Chief Financial Officer.

Changes in Internal Control over Financial Reporting

There were no changes in our internal controls over financial reporting during the quarter ended September 30, 2017 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we may be involved in various claims and legal actions in the ordinary course of business. As of September 30, 2017, we were not involved in any legal proceedings.

ITEM 1A. RISK FACTORS

The discussion of our business and operations should be read together with the risk factors contained in our Form 10-Q for the quarter ended June 30, 2017 and the risk factors contained in Part I, Item 1A of our 2016 Form 10-K, which describes the various additional risks and uncertainties to which we are or may be subject. These risks and uncertainties have the potential to affect our business, financial condition, results of operations, cash flows and prospects in a material adverse manner.

Risks Related to the Credit Facility

The Credit Facility restricts our ability to engage in certain business activities, including our ability to incur additional indebtedness and make certain investments.

The Credit Facility contains customary negative covenants and other financial and operating covenants that, among other things:

 restrict our ability to incur additional indebtedness;

 restrict our ability to incur additional liens;

 restrict our ability to make certain investments;

 restrict our ability to merge with another company

 restrict our ability to make distributions to our stockholders above our existing dividend per share, subject to other limitations; and

 require us to satisfy minimum financial coverage ratios, minimum tangible net worth requirements, maximum leverage ratios and minimum liquidity ratios.

These limitations restrict our ability to engage in certain business activities, which could materially adversely affect our financial condition, results of operations, cash flow, cash available for distribution and our ability to service our debt obligations.

The Credit Facility will bear interest at a variable rate and is secured by substantially all of our development investments.

The Credit Facility will bear interest at a variable rate on all amounts drawn under the facility. Increases in interest rates on variable rate debt will increase our interest expense, unless we make arrangements that hedge the risk of rising interest rates. These increased costs could reduce our profitability, impair our ability to meet our debt obligations, or increase the cost of financing. An increase in interest rates also could limit our ability to refinance existing debt upon maturity or cause us to pay higher rates upon refinancing.

Further, the Credit Facility is secured by substantially all of our development investments. If we are unable to repay or refinance the Credit Facility upon maturity or otherwise have an event of default under the Credit Facility, then the assets securing the Credit Facility could be foreclosed upon, or we might be forced to dispose of some of our assets on disadvantageous terms, with a consequent loss of income and asset value. A foreclosure or disadvantageous disposal on one or more of our assets could adversely affect our financial condition, results of operations, cash flow and ability to pay distributions on, and the market price of, our common stock.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS FROM REGISTERED SECURITIES

Unregistered Sales of Equity Securities

None.

Repurchases of Common Stock

The following table							Maximum Dollar
provides information					Total Number of		Value
about repurchases of our	Total				Shares Purchased		that May Yet Be
common shares during	Number of		Average		as Part of Publicly		Purchased Under the
the three months	Shares		Price Paid		Announced Plans or		Plans or Programs (1)
ended September 30, 2017:	Purchased		Per Share		Programs		(dollars in thousands)
July 1-July 31		-	$	-		-	$	6,848
August 1-August 31		-		-		-		6,848
September 1-September 30		-		-		-		6,848
Total		-	$	-		-	$	6,848

(1) On May 23, 2016, we announced a program permitting us to repurchase a portion of our outstanding common stock not to exceed a dollar maximum of $10.0 million established by our Board of Directors.

On September 1, 2017, William H. Mathieu, our General Counsel, returned 2,052 shares of our common stock to us in connection with the vesting of 7,500 shares of restricted stock in order to satisfy tax withholding obligations.

On September 23, 2017, Kelly P. Luttrell, our Chief Financial Officer, returned 450 shares of our common stock to us in connection with the vesting of 1,667 shares of restricted stock in order to satisfy tax withholding obligations.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

(a)       On November 1, 2017, the Company, the Operating Company and the Manager entered into the Third Amended and Restated Management Agreement. See “Management’s Discussion and Analysis of Financial Condition—Recent Developments—Third Amended and Restated Management Agreement.”

(b)       Not applicable.

ITEM 6. EXHIBITS

The exhibits listed in the accompanying Exhibit Index, which is incorporated herein by reference, are filed or furnished as part of this Quarterly Report on Form 10-Q.

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EXHIBIT INDEX

*This certification is deemed not filed for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.

Exhibit No.		Exhibit Description
	10.1*	Third Amended and Restated Management Agreement, dated as of November 1, 2017, by and among Jernigan Capital, Inc., Jernigan Capital Operating Company, LLC and JCap Advisors, LLC.
	31.1*	Certification by CEO pursuant to Rule 13(a)-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of Sarbanes-Oxley Act of 2002 (1)
	31.2*	Certification by CFO pursuant to Rule 13(a)-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of Sarbanes-Oxley Act of 2002 (1)
	32.1*	Certification by CEO and CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	101.INS	XBRL Instance Document*
	101.SCH	XBRL Taxonomy Extension Schema Document*
	101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document*
	101.DEF	XBRL Taxonomy Extension Definition Linkbase Document*
	101.LAB	XBRL Taxonomy Extension Label Linkbase Document*
	101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document*

* Filed herewith

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		JERNIGAN CAPITAL, INC.
Date: November 7, 2017	By:	/s/ Dean Jernigan
		Dean Jernigan
		Chairman and Chief Executive Officer (Principal Executive Officer)
Date: November 7, 2017	By:	/s/ Kelly P. Luttrell
		Kelly P. Luttrell
		Senior Vice President, Chief Financial Officer, and Treasurer (Principal Financial and Accounting Officer)

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EX-10.1

Exhibit 10.1

THIRD AMENDED AND RESTATED MANAGEMENT AGREEMENT

This THIRD AMENDED AND RESTATED MANAGEMENT AGREEMENT (this “Management Agreement”), is effective as of November1, 2017, is made and entered into by and among JERNIGAN CAPITAL, INC., a Maryland corporation, (the “Company”), JERNIGAN CAPITAL OPERATING COMPANY LLC (f/k/a Jernigan Capital Operating Partnership LP, a Delaware limited liability company (the “Operating Company”) and JCap Advisors, LLC, a Delaware limited liability company (the “Manager”).

WITNESSETH:

WHEREAS, the Company is a corporation operating in a manner that qualifies for election as a real estate investment trust (“REIT”) for U.S. federal income tax purposes and that intends to make such election;  

WHEREAS, the Operating Companyis a wholly owned subsidiary of the Company;

WHEREAS, the Company and each of its Subsidiaries, including the Operating Company,  effective April 1, 2015, engaged the Manager to provide certain management and advisory services to them on the terms and conditions hereinafter set forth, and the Manager has continuously provided such services since that time in compliance with this Agreement; and

WHEREAS, the parties desire to amend and restate this Agreement to clarify the original intent of the parties with respect to the definition of Core Earnings and to make other changes necessary to reflect the Company’s current and anticipated business model from and after this time.

NOW, THEREFORE, for the mutual promises made herein and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree to amend and restate this Management Agreement as follows:

Section 1.  Definitions.  The following terms have the following meanings assigned to them:

(a) “Affiliate” means with respect to any Person, (i) any other Person directly or indirectly controlling, controlled by, or under common control with such other Person, (ii) any executive officer, general partner or employee of such Person, (iii) any member of the board of directors or board of managers (or bodies performing similar functions) of such Person, and (iv) any legal entity for which such Person acts as an executive officer or general partner.

(b) “Agreement” means this Management Agreement, as amended, restated or supplemented from time to time.

(c) “Bankruptcy” means with respect to any Person, (a) the filing by such Person of a voluntary petition seeking liquidation, reorganization, arrangement or readjustment, in any form, of its debts under Title 11 of the United States Code or any other federal, state or foreign insolvency law, or such Person’s filing an answer consenting to or acquiescing in any such petition, (b) the making by such Person of any assignment for the benefit of its creditors, (c) the expiration of 90 days after the filing of an involuntary petition under Title 11 of the Unites States Code, an application for the appointment of a receiver for a material portion of the assets of such Person, or an involuntary petition seeking liquidation, reorganization, arrangement or readjustment of its debts under any other federal, state or foreign insolvency law, provided that the same shall not have been vacated, set aside or stayed within such 90­day period or (d) the entry against it of a final and non­appealable order for relief under any bankruptcy, insolvency or similar law now or hereinafter in effect.

(d) “Base Management Fee” means an amount equal to 0.375% of the Company stockholders’ equity (a 1.5% annual rate) calculated and payable quarterly in arrears in cash.

For purposes of calculating the base management fee, the Company stockholders’ equity means: (a) the sum of (i) the net proceeds from all issuances of the Company’s equity securities since inception (allocated on a pro rata daily basis for such issuances during the fiscal quarter of any such issuance), plus (ii) the Company’s retained earnings at the end of the most recently completed fiscal quarter (without taking into account any non-cash equity compensation expense incurred in current or prior periods); less (b) any amount that the Company pays to repurchase the Common Stock since inception; provided that if the Company’s retained earnings are in a net deficit position (following any required adjustments set forth below), then retained earnings shall not be included in stockholders’ equity.   Stockholders’ equity also excludes any unrealized gains and losses and other non-cash items that have impacted stockholders’ equity as reported in the Company’s financial statements prepared in accordance with accounting principles generally accepted in the United States, or GAAP, and one-time events pursuant to changes in GAAP (such as a cumulative change to the Company’s operating results as a result of a codification change pursuant to GAAP), and certain non-cash items not otherwise described above (such as depreciation and amortization), in each case after discussions between the Company’s Manager and the Independent Directors and approval by a majority of the Independent Directors.

(e) “Board of Directors” means the Board of Directors of the Company.

(f) “Business Day” means any day except a Saturday, a Sunday or a day on which banking institutions in New York, New York are not required to be open.

(g) “Code” means the Internal Revenue Code of 1986, as amended.

(h) “Common Stock” means the common stock, par value $0.01, of the Company.

(i) “Company Account” shall have the meaning set forth in Section 5 of this Agreement.

(j) “Core Earnings” means an amount equal to (1) net income (loss) determined under accounting principles generally accepted in the United States of America, or GAAP, plus (2) non-cash equity compensation expense, the incentive fee, depreciation and amortization, plus (3) any unrealized losses or other non-cash expense items reflected in GAAP net income (loss),less (4) any unrealized gains reflected in GAAP net income(including any unrealized appreciation with respect to self-storage facilities that the Company has not yet acquired). The amount will be adjusted to exclude one-time events pursuant to changes in GAAP and certain other non-cash charges after discussions between the Manager and the Independent Directors and after approval by a majority of the Independent Directors. Notwithstanding any other provision in this Agreement to the contrary, and in addition to the adjustments described above in the immediately preceding sentence, with respect to any self-storage facility acquired by the Company with respect to which the Company had an outstanding loan as of the time of such acquisition, the amount determined pursuant to the formula above in the period of such acquisition shall also be increased by the difference between (A) the appraised value, as determined by a nationally recognized, independent third-party appraiser mutually agreed to by the Company and the Manager who has significant expertise in valuing self-storage properties, and (B) the sum of (i) the outstanding principal amount of any loan made by the Company, the Operating Company or any subsidiary that is secured by such acquired self-storage facility at the time of such acquisition, plus(ii) any other consideration given to the former owner upon such acquisition. For the avoidance of doubt, this addition is intended to include in Core Earnings the amount of the Company’s unrealized gain on account of the Company’sacquisition of a self-storage facility without such facility being sold to a  third party buyer in the open market.

(k) “Covered Person” shall have the meaning set forth in Section 12(a) of this Agreement.

(l) “Effective Termination Date” shall have the meaning set forth in Section 13(a) of this Agreement.

(m) “Excess Funds” shall have the meaning set forth in Section 2(l) of this Agreement.

(n) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(o) “Expenses” shall have the meaning set forth in Section 10(a) of this Agreement.

(p) “GAAP” means generally accepted accounting principles, as applied in the United States.

(q) “Governing Instruments” means, with regard to any entity, the articles of incorporation and bylaws in the case of a corporation, certificate of limited partnership (if applicable) and the partnership agreement in the case of a general or limited partnership, the articles of formation and the operating agreement in the case of a limited liability company, the trust instrument in the case of a trust, or similar governing documents, in each case as amended from time to time.

(r) “Incentive Fee” means an amount, not less than zero, determined pursuant to the following formula:

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IF = .20 times (A minus (B times .08)) minus  C

In the foregoing formula:

(i) “A” equals the Company’s Core Earnings for the previous 12-month period;

(ii) “B” equals (A) the weighted average of the issue price per share to the public of the Common Stock of all of the Company’s public offerings of the Common Stock, multiplied by (B) the weighted average number of all shares of the Common Stock outstanding (including any restricted stock units and any restricted stock shares of the Company’s Common Stock in the previous 12-month period and shares of the Common Stock which may be issued upon the conversion of any outstanding units of the Operating Company); and

(iii) “C” equals the sum of any incentive fees earned by the Manager with respect to the first three fiscal quarters of such previous 12-month period.

;  provided, however, that no incentive fee shall be paid with respect to any fiscal quarter unless cumulative annual stockholder total return for the four most recently completed fiscal quarters is greater than 8%.  Any computed incentive fee earned but not paid because of the foregoing hurdle will accrue until such 8% cumulative annual stockholder total return is achieved. The total return for this purpose will be calculated by adding stock price appreciation (based on the volume-weighted average of the closing price of the Company’s Common Stock on the NYSE (or other applicable trading market) for the last ten consecutive trading days of the applicable computation period minus the volume-weighted average of the closing market price of the Company’s Common Stock for the last ten consecutive trading days of the period immediately preceding the applicable computation period) plus dividends per share of Common Stock paid during such computation period, divided by the volume-weighted average of the closing market price of the Company’s Common Stock for the last ten consecutive trading days of the period immediately preceding the applicable computation period.

(s) “Independent Directors” means the members of the Board of Directors who are not officers or employees of the Manager or any Person directly or indirectly controlling or controlled by the Manager, and who are otherwise “independent” in accordance with the NYSE’s corporate governance listing standards (or the rules of any other national securities exchange on which the Common Stock is listed).

(t) “Initial Public Offering” means the Company’s sale of the Common Stock to the public through underwriters pursuant to the Company’s Registration Statement on Form S-11 (No. 333-202219)

(u) “Initial Term” shall have the meaning set forth in Section 13(a) of this Agreement.

(v) “Internalization Formulas” means (i) the Manager’s earnings before interest, taxes, depreciation and amortization (adjusted for unusual, extraordinary and non-recurring charges and expenses), or “EBITDA” (excluding any reimbursements from the Company), annualized based on the most recent quarter ended, multiplied by a specific multiple, or EBITDA Multiple, set forth below depending on the Company’s achieved total annual return, and (ii) the Company’s equity market capitalization multiplied by a specific percentage, or Capitalization Percentage, set forth below depending on the Company’s achieved total return.

For purposes of the computations above, the EBITDA Multiple and Capitalization Percentage, respectively, for specific levels of total return are (i) 5.0 and 5.0% if total return is less than 8.0%; (ii) 5.5 and 5.5% if total return is at least 8.0% and not more than 12.0%; and (iii) 6.0 and 6.0% if total return is greater than 12.0%.  For purposes of the foregoing computation, total return will be calculated by adding (i) the difference (if any, but not a negative number) between the volume-weighted average of the closing price per share of the Common Stock on the NYSE (or other applicable trading market) for the last ten consecutive trading days of the computation period and the Initial Public Offering price per share (taking into account any stock splits, subdivisions, or reclassifications), plus (ii) dividends per share paid in respect of the Common Stock since the Initial Public Offering, dividing the result by the number of full months elapsed since the Initial Public Offering, and multiplying the result by 12.

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(w) “Internalization Price”  has the meaning set forth in Section 17(e) of this Agreement.

(x) “Internalization Transaction” means a transaction in which the Manager contributes to the Operating Company all of the assets of the Manager including, without limitation, all furniture, fixtures, leasehold improvements, contract rights, computer software, employment and customer relationships, goodwill, going concern value, other identifiable intangible assets and other business assets then owned by the Manager, or, in the alternative, the equity owners of the Manager contribute to the Operating Company 100% of the outstanding equity interests in the Manager.

(y) “Investment Company Act” means the Investment Company Act of 1940, as amended.

(z) “Investment Committee” shall have the meaning set forth in Section 2(k) of this Agreement.

(aa) “Investment Guidelines” shall have the meaning set forth in Section 2(b)(i) of this Agreement.

(bb) “Investments” means the investments of the Company and the Subsidiaries.

(cc) “Manager Change of Control” means the sale, lease, transfer or other disposition, in one or a series of related transactions, of interests in the Manager which will transfer to any Person other than an Affiliate of the Company the power to direct or control the Manager; provided, however, that Manager Change of Control shall not include (i) any public offering of the equity interests of the Manager, or (ii) any assignment of this Agreement by the Manager as permitted hereby and in accordance with the terms hereof.

(dd) “Monitoring Services” shall have the meaning set forth in Section 2(b) of this Agreement.

(ee) “Notice of Proposal to Negotiate” shall have the meaning set forth in Section 13(a) of this Agreement.

(ff) “NYSE” means the New York Stock Exchange.

(gg) “OC Units” means units of limited liability company interests in the Operating Company.

(hh) “Person” means any individual, corporation, partnership, joint venture, limited liability company, estate, trust, unincorporated association, any federal, state, county or municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing.

(ii) “Portfolio Management Services” shall have the meaning set forth in Section 2(b) of this Agreement.

(jj) “REIT” shall have the meaning set forth in the recitals of this Agreement.

(kk) “Renewal Term” shall have the meaning set forth in Section 13(a) of this Agreement, with the last day of the last Renewal Term being March 31, 2023.

(ll) “SEC” means the U.S. Securities and Exchange Commission.

(mm) “Securities Act” means the Securities Act of 1933, as amended.

(nn) “Subsidiary” means a corporation, limited liability company, partnership, joint venture or other entity or organization of which: (a) the Company or any other subsidiary of the Company is a general partner or managing member; or (b) voting power to elect a majority of the board of directors, trustees or others performing similar functions with respect to such entity or organization is held by the Company or by any one or more of the Company’s subsidiaries. 

(oo) “Target Assets” means the types of investments described under “Business—Our Investment Strategy”and “Business—Target Investments” in the Company’s prospectus dated  March 26, 2015, relating to the Initial Public Offering, subject to, and including any changes to the Investment Guidelines that may be approved by the Manager and the Board of Directors from time to time.

(pp) “Termination Fee” shall have the meaning set forth in Section 13(b) of this Agreement.

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(qq) “Termination Notice” shall have the meaning set forth in Section 13(a) of this Agreement.

(rr) “Treasury Regulations” means the regulations promulgated under the Code, as amended from time to time.

(ss) The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section references are to this Agreement unless otherwise specified.

(tt) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. The words include, includes and including shall be deemed to be followed by the phrase “without limitation.”

Section 2.  Appointment and Duties of the Manager.

(a) The Company and each of its Subsidiaries hereby appoint the Manager to (i) manage the Investments and day-to-day operations of the Company and each of its Subsidiaries subject to the terms and conditions set forth in this Agreement.  The Manager hereby agrees to use its commercially reasonable efforts to perform each of the duties set forth herein.  The appointment of the Manager shall be exclusive to the Manager except to the extent that the Manager otherwise agrees, in its sole and absolute discretion, and except to the extent that the Manager elects, in accordance with the terms of this Agreement, to cause the duties of the Manager hereunder to be provided by third parties.

(b) The Manager, in its capacity as manager of the Investments and the day-to-day operations of the Company and its Subsidiaries, at all times will be subject to the supervision of the Board of Directors, and the Manager will have only such functions and authority as the Company may delegate to it including, without limitation, managing the Company’s business affairs in conformity with the Investment Guidelines and policies that are approved and monitored by the Board of Directors. The Company and the Manager hereby acknowledge the recommendation by the Manager and the approval by the Board of Directors, of the Investment Guidelines, including the Company’s investment strategy in the Target Assets. The Company and the Manager hereby acknowledge and agree that, during the term of this Agreement, any proposed changes to the Company’s investment strategy that would modify or expand the Target Assets may only be recommended by the Manager and shall require the approval of the Board of Directors and the Manager.  The Manager will be responsible for the day-to-day operations of the Company and the Subsidiaries and will perform (or cause to be performed) such services and activities relating to the assets and operations of the Company and the Subsidiaries as may be appropriate, including, without limitation:

(i) serving as consultant to the Company and the Subsidiaries with respect to the periodic review of the investment guidelines and other parameters for the Investments, financing activities and operations, which review shall occur no less often than annually, any modification to which shall be approved by a majority of the Independent Directors (such guidelines as initially approved and attached hereto as Exhibit A, as the same may be modified, supplemented or waived with such approval, the “Investment Guidelines”);

(ii) representing and making recommendations to the Company and the Subsidiaries in connection with the origination and finance of, and commitment to originate and finance, commercial mortgage loans on and related equity interests in self-storage facilities (including on a portfolio basis), including conducting loan underwriting and the execution of loan transactions, as well as the purchase of real estate-related debt securities and other real estate-related assets, and the sale and commitment to sell such assets;

(iii) identifying, investigating, analyzing and selecting possible investment opportunities and originating, acquiring, financing, retaining, selling, restructuring or disposing of Investments consistent with the Investment Guidelines;

(iv) with respect to prospective purchases, sales or exchanges of Investments, conducting negotiations on behalf of the Company and the Subsidiaries with sellers, purchasers and brokers and, if applicable, their respective agents and representatives;

(v) negotiating and entering into, on behalf of the Company and the Subsidiaries, bank credit facilities, repurchase agreements, interest rate swap agreements and all other agreements and instruments required for the Company and the Subsidiaries to conduct its business;

5

(vi) engaging and supervising, on behalf of, and at the expense of, the Company and the Subsidiaries, independent contractors that provide investment banking, securities brokerage, mortgage brokerage and other financial services, due diligence services, underwriting review services, legal and account services, and all other services (including transfer agent and registrar services) as may be required relating to the Investments (or potential Investments) and, to the extent the Manager is able to negotiate same, procuring the direct payment by any borrower or other counterparty to any Investment of all third party costs, including, without limitation, legal fees and expenses, incurred in connection with such Investment, provided that such third party costs may be paid out of the proceeds of any Investment funded by the Company or the Operating Company

(vii) coordinating and managing operations of any joint venture or co-investment interests held by the Company and the Subsidiaries and conducting all matters with the joint venture or co-investment partners;

(viii) providing executive and administrative personnel, office space and office services required in rendering services to the Company and the Subsidiaries;

(ix) administering the day-to-day operations and performing and supervising the performance of such other administrative functions necessary to the management of the Company and the Subsidiaries as may be agreed upon by the Manager and the Board of Directors, including, without limitation, services in respect of any equity incentive plans of the Company, the collection of revenues and the payment of debts and obligations of the Company and the Subsidiaries and maintenance of appropriate computer services to perform such administrative functions;

(x) communicating on behalf of the Company and the Subsidiaries with the holders of any of their equity or debt securities as required to satisfy the reporting and other requirements of any governmental bodies or agencies or trading markets and to maintain effective relations with such holders, including website maintenance, logo design, analyst presentations, investor conferences and annual meeting arrangements;

(xi) counseling the Company in connection with policy decisions to be made by the Board of Directors;

(xii) evaluating and recommending to the Board of Directors hedging strategies and engaging in hedging activities on behalf of the Company and the Subsidiaries, consistent with such strategies as modified from time to time, while maintaining the Company’s qualification as a REIT and within the Investment Guidelines;

(xiii) counseling the Company regarding the maintenance of its qualification as a REIT and monitoring compliance with the various REIT qualification tests and other rules set out in the Code and Treasury Regulations thereunder and using commercially reasonable efforts to cause the Company to qualify for taxation as a REIT;

(xiv) counseling the Company and the Subsidiaries regarding the maintenance of their exemptions from the status of an investment company required to register under the Investment Company Act, monitoring compliance with the requirements for maintaining such exemptions and using commercially reasonable efforts to cause them to maintain such exemptions from such status;

(xv) furnishing reports and statistical and economic research to the Company and the Subsidiaries regarding their activities and services performed for the Company and the Subsidiaries by the Manager;

(xvi) monitoring the operating performance of the Investments and providing periodic reports with respect thereto to the Board of Directors, including comparative information with respect to such operating performance and budgeted or projected operating results;

(xvii) investing and reinvesting any money and securities of the Company and the Subsidiaries (including investing in short-term Investments pending investment in other Investments, payment of fees, costs and expenses, or payment of dividends or distributions to stockholders and partners of the Company and the Subsidiaries) and advising the Company and the Subsidiaries as to their capital structure and capital raising;

(xviii) causing the Company and the Subsidiaries to retain qualified accountants and legal counsel, as applicable, to assist in developing appropriate accounting procedures and systems, internal controls and other compliance procedures and testing systems with respect to financial reporting obligations and compliance with the provisions of  the Code applicable to REITs and, if applicable, TRSs, and to conduct quarterly compliance reviews with respect thereto;

(xix) assisting the Company and the Subsidiaries in qualifying to do business in all applicable jurisdictions and to obtain and maintain all appropriate licenses;

6

(xx) assisting the Company and the Subsidiaries in complying with all regulatory requirements applicable to them with respect to their business activities, including preparing or causing to be prepared all financial statements required under applicable regulations and contractual undertakings and all reports and documents, if any, required under the Exchange Act, the Securities Act, or by the NYSE;

(xxi) assisting the Company and the Subsidiaries in taking all necessary action to enable them to make required tax filings and reports, including soliciting stockholders for all information required by the provisions of the Code and Treasury Regulations applicable to REITs;

(xxii) placing, or arranging for the placement of, all orders pursuant to the Manager’s investment determinations on behalf of the Company and the Subsidiaries, either directly with the issuer or with a broker or dealer (including any affiliated broker or dealer);

(xxiii) handling and resolving on behalf of the Company and/or the Subsidiaries all claims, disputes or controversies (including all litigation, arbitration, settlement or other proceedings or negotiations) in which the Company and/or the Subsidiaries may be involved or to which they may be subject arising out of their day-to-day operations (other than with the Manager or its Affiliates), subject to such limitations or parameters as may be imposed from time to time by the Board of Directors;

(xxiv) using commercially reasonable efforts to cause expenses incurred by the Company and the Subsidiaries or on their behalf to be commercially reasonable or commercially customary and within any budgeted parameters or expense guidelines set by the Board of Directors from time to time;

(xxv) advising the Company and the Subsidiaries with respect to (A) long-term financing vehicles for Investments and (B) the offering and selling of securities publicly or privately in connection with any such structured financing;

(xxvi) serving as the Company’s and the Subsidiaries’ consultant with respect to decisions regarding any financings, hedging activities or borrowings undertaken by the Company and the Subsidiaries, including (A) assisting the Company and the Subsidiaries in developing criteria for debt and equity financing that are specifically tailored to their investment objectives, and (B) advising the Company and the Subsidiaries with respect to obtaining appropriate financing for the Investments;

(xxvii) providing the Company and the Subsidiaries with portfolio management services and monitoring services as described below;

(xxviii) arranging marketing materials, advertising, industry group activities (such as conference participations and industry organization memberships) and other promotional efforts designed to promote the Company’s and the Subsidiaries’ business;

(xxix) performing such other services as may be required from time to time for the management of, and other activities relating to, the assets and business of the Company and the Subsidiaries as the Board of Directors shall reasonably request or as the Manager shall deem appropriate under the particular circumstances; and

(xxx) using commercially reasonable efforts to cause the Company and the Subsidiaries to comply with all applicable laws.

Without limiting the foregoing, the Manager will perform portfolio management services (the “Portfolio Management Services”) on behalf of the Company and the Subsidiaries with respect to the Investments.  Such services will include, but not be limited to, consulting with the Company on the purchase and sale of, and other investment opportunities in connection with, the Investments; the collection of information and the submission of reports pertaining to the assets of the Company and the Subsidiaries, interest rates and general economic conditions; periodic review and evaluation of the performance of the Company’s and the Subsidiaries’ portfolio of assets; acting as a liaison between the Company and the Subsidiaries and banking, mortgage banking, investment banking and other parties with respect to the purchase, financing and disposition of assets; and other customary functions related to portfolio management.  Additionally, the Manager will perform monitoring services (the “Monitoring Services”) on behalf of the Company and the Subsidiaries with respect to any activities provided by third parties.  Such Monitoring Services will include, but not be limited to, negotiating servicing agreements; acting as a liaison between servicer providers of the assets and the Company and the Subsidiaries; reviewing servicers’ delinquency, foreclosure and other reports on assets; supervising claims filed under and insurance policies; and enforcing the obligation of any servicer to repurchase assets.

7

(c) For the period and on the terms and conditions set forth in this Agreement, the Company and each of the Subsidiaries hereby constitutes, appoints and authorizes the Manager as its true and lawful agent and attorney-in-fact, in its name, place and stead, to negotiate, execute and deliver and enter into such finance agreements and arrangements and securities repurchase and reverse repurchase agreements and arrangements, brokerage agreements, interest rate swap agreements, “to be announced” forward contracts, agreements relating to borrowings under programs established by the U.S. Government and/or any agencies thereunder and such other agreements, instruments and authorizations on their behalf, on such terms and conditions as the Manager, acting in its sole and absolute discretion, deems necessary or appropriate.  This power of attorney is deemed to be coupled with an interest.

(d) The Manager may enter into agreements with other parties, including its Affiliates, for the purpose of engaging one or more parties for and on behalf, and except as otherwise agreed or determined by the Manager, at the sole cost and expense, of the Company and the Subsidiaries, to provide credit analysis, risk management services, asset management and/or other services to the Company  and the Subsidiaries (including, without limitation Portfolio Management Services and Monitoring Services) pursuant to the agreement(s) with terms that are then customary for agreements regarding the provision of services to companies that have assets similar in type, quality and value to the assets of the Company and the Subsidiaries; provided that (i) any such agreements entered into with Affiliates of the Manager shall be (A) on terms no more favorable to such Affiliate than would be obtained from an independent third party on an arm’s length basis and (B) approved by a majority of the Independent Directors, (ii) any such agreements entered into with parties other than Affiliates of the Manager shall be approved by a majority of the Independent Directors, and (iii) the Manager shall remain liable for the performance of such Portfolio Management Services and Monitoring Services. 

(e) To the extent that the Manager deems necessary or advisable, the Manager may, from time to time, propose to retain one or more additional entities for the provision of sub-advisory services to the Manager in order to enable the Manager to provide the services to the Company and the Subsidiaries specified by this Agreement; provided that any such agreement (i) shall be on terms and conditions substantially identical to the terms and conditions of this Agreement or otherwise not adverse to the Company and the Subsidiaries, (ii) shall not result in an increased Base Management Fee or additional expenses payable hereunder, and (iii) shall be approved by a majority of the Independent Directors of the Company.

(f) The Manager may retain, for and on behalf and, at the sole cost and expense of the Company and the Subsidiaries (except such cost and expense as may be directly paid or reimbursed to the Manager by any unaffiliated third party), such services of accountants, legal counsel, consultants, data providers, appraisers, insurers, brokers, transfer agents, registrars, investment banks, financial advisors, due diligence firms, banks and other lenders and others as the Manager deems necessary or advisable in connection with the management and operations of the Company and the Subsidiaries.  Notwithstanding anything contained herein to the contrary, the Manager shall have the right to cause any such services to be rendered by its employees or Affiliates.  Except as otherwise provided herein and except to the extent directly paid or reimbursed to the Manager by any unaffiliated third party, the Company and the Subsidiaries shall pay or reimburse the Manager or its Affiliates performing such services for the cost thereof; provided that such costs and reimbursements are (A) no greater than those which would be payable to outside professional or consultants engaged to perform such services pursuant to agreements negotiated on an arm’s length basis and (B) approved by a majority of the Independent Directors.

(g) As frequently as the Manager may deem necessary or advisable, or at the direction of the Company’s Board of Directors, the Manager shall, at the sole cost and expense of the Company and the Subsidiaries, prepare, or cause to be prepared, with respect to any Investment, reports and other information reasonably requested by the Company.

(h) The Manager shall prepare, or cause to be prepared, at the sole cost and expense of the Company and the Subsidiaries, all reports, financial or otherwise, with respect to the Company and the Subsidiaries reasonably required by the Company’s Board of Directors in order for the Company or the Subsidiaries to comply with their Governing Instruments or any other materials required to be filed with any governmental body or agency, including but not limited to, the SEC, and shall prepare, or cause to be prepared, all materials and data necessary to complete such reports and other materials including, without limitation, an annual audit of the Company’s and the Subsidiaries’ books of account by a nationally recognized independent registered public accounting firm.

(i) The Manager shall prepare regular reports for the Board of Directors to enable the Board of Directors to review the Company’s and the Subsidiaries’ acquisitions, portfolio composition and characteristics, credit quality, performance and compliance with the Investment Guidelines and other policies approved by the Board of Directors.

(j) If requested by the Company or the Subsidiaries, the Manager shall provide such internal audit, compliance and control services as may be required for the Company and the Subsidiaries to comply with applicable law (including the Securities Act and the Exchange Act), regulation (including SEC regulations) and the rules and requirements of the NYSE or such other securities exchange on which the Common Stock may be listed and as otherwise reasonably requested by the Board of Directors from time to time.

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(k) The Manager shall establish an Investment Committee (the “Investment Committee”) that will oversee, advise and consult with respect to the Company’s investment strategy, acquisition of Investments, sourcing, financing and leveraging strategies and compliance with the Investment Guidelines.  The Investment Committee will meet periodically, as many times as necessary but no less than once every quarter, to discuss investment opportunities.  The Investment Committee will periodically review the Company’s investment portfolio and its compliance with the Investment Guidelines, and provide the Board of Directors an investment report at the end of each quarter in conjunction with its review of the quarterly results of the Company. 

(l) Notwithstanding anything contained in this Agreement to the contrary, except to the extent that the payment of additional money is proven by the Company to have been required as a direct result of the Manager’s acts or omissions which result in the right of the Company and the Subsidiaries to terminate the Agreement pursuant to Section 14 of this Agreement, the Manager shall not be required to expend money (“Excess Funds”) in connection with any expenses that are required to be paid for or reimbursed by the Company and the Subsidiaries pursuant to Section 10 in excess of that contained in any applicable Company Account or otherwise made available by the Company and the Subsidiaries to be expended by the Manager hereunder.  Failure of the Manager to spend Excess Funds out-of-pocket shall not give rise or be a contributing factor to the right of the Company under Section 13(a) of this Agreement to terminate this Agreement due to the Manager’s unsatisfactory performance.

(m) In performing its duties under this Section 2, the Manager shall be entitled to rely reasonably on qualified experts and professionals (including, without limitation, accountants, legal counsel and other service providers) hired by the Manager at the Company’s and the Subsidiaries’ sole cost and expense, unless otherwise determined at the Manager’s discretion.

Section 3.  Devotion of Time; Additional Activities.

(a) The Manager and its Affiliates will provide the Company and the Subsidiaries with a management team, including a chief executive officer and chief financial officer or similar positions, along with appropriate support personnel, to provide the management services to be provided by the Manager to the Company and the Subsidiaries hereunder, the members of which team shall devote such portion of their time to the management of the Company and the Subsidiaries as is necessary and appropriate to enable the Company and the Subsidiaries to operates its business, commensurate with the Company’s and the Subsidiaries’ level of activity. The Manager shall provide reasonable access to their respective investment professionals in order to support the day-to-day operations of the Company and the Subsidiaries.  Notwithstanding anything to the contrary herein, for so long as the Manager is managing the Company pursuant to this Agreement, neither it nor any of its Affiliates will sponsor or manage any other U.S. publicly traded REIT.

(b) Managers, partners, officers, employees, personnel and agents of the Manager or Affiliates of the Manager may serve as directors, officers, employees, partners, personnel, agents, nominees or signatories for the Company and the Subsidiaries to the extent permitted by their Governing Instruments or by any resolutions duly adopted by the Board of Directors pursuant to the Company’s Governing Instruments. When executing documents or otherwise acting in such capacities for the Company and the Subsidiaries, such persons shall use their respective titles in the Company and the Subsidiaries.

(c) Subject to Section 2(d), the Manager is authorized, for and on behalf, and at the sole cost and expense of the Company to employ securities dealers for the purchase and sale of Investments as the Manager deems necessary or appropriate, in its sole discretion.

(d) The Company (including the Board of Directors) agrees to take, or cause to be taken, all actions reasonably required to permit and enable the Manager to carry out its duties and obligations under this Agreement, including, without limitation, all steps reasonably necessary to allow the Manager to file any registration statement on behalf of the Company and the Subsidiaries in a timely manner or to deliver any financial statements or other reports with respect to the Company and the Subsidiaries.

Section 4.  Agency.  The Manager shall act as agent of the Company and the Subsidiaries in making, acquiring, financing and disposing of Investments, disbursing and collecting the funds of the Company and the Subsidiaries, paying the debts and fulfilling the obligations of the Company and the Subsidiaries, supervising the performance of professionals engaged by or on behalf of the Company and the Subsidiaries and handling, prosecuting and settling any claims of or against the Company and the Subsidiaries, the Board of Directors, holders of the Company’s and the Subsidiaries’ securities or representatives or assets of the Company and the Subsidiaries.

Section 5.  Bank Accounts.  At the direction of the Board of Directors, the Manager may establish and maintain as an agent on behalf of the Company of the Subsidiaries one or more bank accounts in the name of the Company or the Subsidiaries, the Operating Company or any subsidiary (any such account, a “Company Account”), and may collect and deposit funds into any such Company Account or Company Accounts, and disburse funds from any such Company Account, under such terms and conditions as the Board of Directors may approve and the Manager shall from time to time render appropriate accountings of such collections and payments to the Board of Directors and, upon request, to the auditors of the Company or any Subsidiaries.

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Section 6.  Records; Confidentiality. 

(a) The Manager shall maintain appropriate books of accounts and records relating to services performed under this Agreement, and such books of account and records shall be accessible for inspection by representatives of the Company and the Subsidiaries at any time during normal business hours.

(b) The Manager shall keep confidential any and all information obtained in connection with the services rendered under this Agreement and shall not disclose any such information (or use the same except in furtherance of its duties under this Agreement) to unaffiliated third parties, except: (i) with the prior written consent of the Board of Directors; (ii) to legal counsel, accountants and other professional advisors; (iii) to appraisers, financing sources and others in the ordinary course of the Company’s business; (iv) to governmental officials having jurisdiction over the Company or the Subsidiaries; (v) in connection with any governmental or regulatory filings of the Company or the Subsidiaries, or disclosure or presentations to Company investors; (vi) as required by law or legal process to which the Manager or any Person to whom disclosure is permitted hereunder is a party; or (vii) to the extent such information is otherwise publicly available through the actions of a Person other than the Manager not resulting from the Manager’s violation of this Section 6. The provisions of this Section 6(b) shall survive the expiration or earlier termination of this Agreement for a period of one year.

Section 7.  Obligations of Manager; Restrictions.

(a) The Manager shall require each seller or transferor of Investments to the Company and the Subsidiaries to make such representations and warranties regarding such assets as may, in the judgment of the Manager, be necessary and appropriate. In addition, the Manager shall take such other action as it deems necessary or appropriate with regard to the protection of the Investments.

(b) The Manager shall refrain from any action that, in its sole judgment made in good faith:

(i) is not in compliance with the Investment Guidelines;

(ii) would adversely and materially affect the qualification of the Company as a REIT under the Code;

(iii) would adversely and materially affect the Company’s or any Subsidiary’s status as an entity intended to be exempted or excluded from investment company status under the Investment Company Act; or

(iv) would violate any law, rule or regulation of any governmental body or agency having jurisdiction over the Company or any Subsidiary or that would otherwise not be permitted by the Company’s Governing Instruments, code of conduct, or other compliance or governance policies and procedures.

If the Manager is ordered to take any such action by the Board of Directors, the Manager shall promptly notify the Board of Directors of the Manager’s judgment that such action would adversely and materially affect such status or violate any such law, rule or regulation or the Company’s Governing Instruments. Notwithstanding the foregoing, the Manager and its officers, directors, members, managers and employees shall not be liable to the Company or any Subsidiary or to any director or stockholder of the Company or any Subsidiary for acts or omissions performed in accordance with and pursuant to this Agreement, except as provided in Section 12 of this Agreement.

(c) The Board of Directors shall periodically review the Investment Guidelines and the Company’s portfolio of Investments, but will not review each proposed investment, except as provided in the Investment Guidelines. If a majority of the Independent Directors determine in their periodic review of transactions that a particular transaction does not comply with the Investment Guidelines, then a majority of the Independent Directors will consider what corrective action, if any, can be taken. The Manager shall be permitted to rely upon the direction of the Secretary of the Company to evidence the approval of the Board of Directors or the Independent Directors with respect to a proposed investment.

(d) The Manager agrees to be bound by all policies and procedures, including the Company’s code of conduct and other compliance and governance policies and procedures, applicable to the Manager and its officers, directors, members, managers and employees that are adopted by the Board of Directors from time to time, including those required under the Exchange Act, the Securities Act, or by the NYSE, and to take, or cause to be taken, all actions reasonably required to cause its officers, directors, members, managers and employees, and any principals, officers or employees of its Affiliates who are involved in the business and affairs of the Company and the Subsidiaries, to be bound by such policies and procedures to the extent applicable to such persons.

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(e) The Manager shall at all times during the term of this Agreement maintain “errors and omissions” insurance coverage and other insurance coverage that is customarily carried by asset and investment managers performing functions similar to those of the Manager under this Agreement with respect to assets similar to the assets of the Company and the Subsidiaries, in an amount which is comparable to that customarily maintained by other managers or servicers of similar assets.

Section 8.  Base Management Fee.

(a) During the Initial Term and any Renewal Term, the Company shall pay the Manager the Base Management Fee quarterly in arrears, in cash.  The Base Management Fee is payable independent of the performance of the Company or the Investments.

(b) The Manager shall calculate each installment of the Base Management Fee within 30 days after the end of the fiscal quarter with respect to which such installment is payable. A copy of such calculation made by the Manager shall thereafter promptly be delivered to the Board of Directors and, upon such delivery, payment of such installment of the Base Management Fee shown therein shall, subject in any event to Section 13(a) of this Agreement, be due and payable in cash no later than the date which is five Business Days after the date of delivery to the Board of Directors of the written statement of the Manager setting forth the computation of the management fee for such quarter.

(c) The Base Management Fee is subject to adjustment pursuant to and in accordance with the provisions of Section 13(a) of this Agreement.

Section 9.  Incentive Fee.

The Incentive Fee shall be payable in arrears, in cash, with respect to each fiscal quarter. The Manager shall calculate each quarterly installment of the Incentive Fee within 45 days after the end of the fiscal quarter with respect to which such installment is payable and promptly deliver such calculation to the Board of Directorsand, upon such delivery, payment of such installment of the Incentive Fee shown therein shall, subject in any event to Section 13(a) of this Agreement, be due and payable no later than the date which is five Business Days after the date of delivery to the Board of Directors of such calculation.

Section 10.  Expenses of the Company.  

(a) The Company and the Subsidiaries shall pay all of the expenses of the Company and the Subsidiaries and shall reimburse the Manager for documented expenses of the Manager incurred on behalf of the Company and the Subsidiaries (collectively, the “Expenses”) excepting only those expenses that are specifically the responsibility of the Manager pursuant to Section 2 of this Agreement. Such costs and reimbursements shall not be in amounts greater than those which would be payable to outside professionals or consultants engaged to perform such services pursuant to agreements negotiated on an arm’s length basis. For the avoidance of doubt, in the event any Expense is paid directly by an unaffiliated third party or the Manager is reimbursed (whether or not out of funds provided by the Company or the Operating Company in connection with any Investment) by an unaffiliated third party for any Expense incurred by the Manager, the amount of Expenses to be reimbursed to the Manager by the Company and the Subsidiaries pursuant to this Section 10(a) shall be reduced dollar-for-dollar by the amount of any such payment or reimbursement. Subject to butwithout limiting the generality of the foregoing, except to the extent directly paid or reimbursed by an unaffiliated third party,it is specifically agreed that the following costs and expenses of the Company and the Subsidiaries shall be paid by the Company and the Subsidiaries and shall not be paid by the Manager or Affiliates of the Manager, unless the Manager elects not to seek such reimbursement pursuant to Section 10(b):

(i) expenses in connection with the issuance and transaction costs incident to the origination, acquisition, disposition and financing of Investments;

(ii) the costs of legal, financial, tax, accounting, servicing, due diligence consulting, auditing and other similar services rendered for the Company and the Subsidiaries by providers retained by the Manager;

(iii) the compensation and expenses of the Company’s directors;

(iv) the compensation expense for employees of the Manager, other than the Manager’s chief executive officer and chief financial officer and such other employees of the Manager with respect to which the Manager shall agree to assume such cost without reimbursement;

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(v) the cost of liability insurance to indemnify the Company’s directors and officers and the Company’s allocable portion of the fidelity bond, directors and officers/errors and omissions liability insurance, and any other insurance premium;

(vi) costs associated with the establishment and maintenance of any of the Company’s and the Subsidiaries’ secured funding facilities, other financing arrangements, or other indebtedness of the Company and the Subsidiaries (including commitment fees, accounting fees, legal fees, closing and other similar costs) or any of the Company’s or the Subsidiaries’ securities offerings;

(vii) expenses connected with communications to holders of the Company’s and the Subsidiaries’ securities and other bookkeeping and clerical work necessary in maintaining relations with holders of such securities and in complying with the continuous reporting and other requirements of governmental bodies or agencies, including all costs of preparing and filing required reports with the SEC, the costs payable by the Company and the Subsidiaries to any transfer agent and registrar in connection with the listing and/or trading of the Company’s or the Subsidiaries’ securities on any exchange, the fees payable by the Company and the Subsidiaries to any such exchange in connection with its listing, costs of preparing, printing and mailing the Company’s annual report to the Company stockholders and proxy materials with respect to any meeting of the Company’s stockholders;

(viii) costs associated with any computer software or hardware, electronic equipment or purchased information technology services from third-party vendors that is used for the Company;

(ix) expenses incurred by managers, officers, personnel and agents of the Manager for travel on the Company’s or any Subsidiary’s behalf and other out-of-pocket expenses incurred by managers, officers, personnel and agents of the Manager in connection with the purchase, financing, refinancing, sale or other disposition of an investment or establishment and maintenance of any of the Company’s or the Subsidiaries’ securitizations or any of the Company’s or the Subsidiaries’ securities offerings;

(x) costs and expenses incurred with respect to market information systems and publications, research publications and materials, and settlement, clearing and custodial fees and expenses;

(xi) compensation and expenses of the Company’s or any Subsidiaries’ custodian and transfer agent, if any;

(xii) the costs of maintaining compliance with all federal, state and local rules and regulations or any other regulatory agency;

(xiii) all federal, state and local taxes and license fees;

(xiv) all insurance costs incurred in connection with the operation of the Company’s  and the Subsidiaries’ business, except for the costs attributable to the insurance that the Manager elects to carry for itself or its personnel related to any business or other activity not involving the Company;

(xv) costs and expenses incurred in contracting with third parties for or on behalf of the Company;

(xvi) all other costs and expenses relating to the Company’s and the Subsidiaries’ business and investment operations, including the costs and expenses of originating, acquiring, owning, protecting, maintaining, developing and disposing of investments, including appraisal, reporting, audit and legal fees;

(xvii) expenses (including rent, telephone, printing, mailing, utilities, office furniture, equipment, machinery and other office, internal and overhead expenses) relating to any office(s) or office properties, including disaster backup recovery sites and properties, incurred by the Manager;

(xviii) expenses connected with the payments of interest, dividends or distributions in cash or any other form authorized or caused to be made by the Board of Directors to or on account of holders of the Company’s securities, including in connection with any dividend reinvestment plan;

(xix) any judgment or settlement of pending or threatened proceedings (whether civil, criminal or otherwise) against the Company or any Subsidiary, or against any trustee, director, partner, member or officer of the Company or any Subsidiary, or in his or her capacity as such for which the Company or any Subsidiary is required to indemnify such trustee, director, partner, member or officer by any court or governmental agency; and

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(xx) all other expenses actually incurred by the  Manager (except as described below) which are reasonably necessary for the performance by the Manager of its duties and functions under this Agreement.

(b) The Manager may, at its option, elect not to seek reimbursement for certain expenses during a given quarterly period, which determination shall not be deemed to construe a waiver of reimbursement for similar expenses in future periods.

Section 11. Calculations of Expenses.  The Manager shall prepare a statement documenting the Expenses during each fiscal quarter, and shall deliver such statement to the Company within 30 days after the end of each fiscal quarter. Expenses shall be reimbursed by the Company and the Subsidiaries to the Manager no later than the 15th Business Day immediately following the date of delivery of such statement; provided, however, that such reimbursements may be offset by the Manager against amounts due to the Company or the Subsidiaries. The provisions of this Section 11 shall survive the expiration or earlier termination of this Agreement.

Section 12.  Limits of the Manager’s Responsibility; Indemnification.

(a) The Manager assumes no responsibility under this Agreement other than to render the services called for under this Agreement in good faith and shall not be responsible for any action of the Board of Directors in following or declining to follow any advice or recommendations of the Manager, including as set forth in Section 7(b) of this Agreement. The Manager and its officers, employees, members and managers (each a “Covered Person”) will not be liable to the Company or any Subsidiary, the Board of Directors, or the Company’s or any Subsidiary’s stockholders or partners for any acts or omissions by any such Covered Person performed in accordance with and pursuant to this Agreement, except by reason of acts or omissions constituting bad faith, willful misconduct, gross negligence or reckless disregard of the Manager’s duties under this Agreement. The Manager will maintain reasonable and customary insurance coverages.

(b) The Company to the full extent permitted by law shall indemnify and hold harmless each Covered Person from and against with respect to all expenses, losses, damages, liabilities, demands, charges and claims in respect of or arising from any acts or omissions of the Manager and the officers, employees, members and managers of the Manager, performed in good faith under this Agreement and not constituting bad faith, willful misconduct, gross negligence, or reckless disregard of their respective duties under this Agreement.

(c) The Manager to the full extent permitted by law shall indemnify and hold harmless the Company and the Subsidiaries and each of the directors, officers and stockholders of the Company and the Subsidiaries with respect to all expenses, losses, damages, liabilities, demands, charges and claims in respect of or arising from any acts or omissions of the Manager constituting bad faith, willful misconduct, gross negligence or reckless disregard of its duties under this Agreement or any claims by the Manager’s employees relating to the terms and conditions of their employment by the Manager.

(d) The provisions of this Section 12 shall survive the expiration or earlier termination of this Agreement.

Section 13.  Term; Termination.

(a) Unless this Agreement is terminated earlier for cause in accordance with Section 14 below, this Agreement shall be in effect until March 31, 2020 (the “Initial Term”) and shall be automatically renewed for a one-year term each anniversary date thereafter (a “Renewal Term”) for a maximum of three one-year terms, unless previously terminated as provided below.  Following the Initial Term, this Agreement may be terminated annually upon the affirmative vote of at least two-thirds of the Independent Directors based on a determination that (i) there has been unsatisfactory performance by the Manager that is materially detrimental to the Company and the Subsidiaries taken as a whole or (ii) the compensation payable to the Manager is unfair to the Company and the Subsidiaries; provided that the Company shall not have the right to terminate this Agreement under clause (ii) above if the Manager agrees to continue to provide the services under this Agreement at a reduced fee that at least two-thirds of the Independent Directors determines to be fair pursuant to the procedure set forth below.  If the Company elects not to renew this Agreement at the expiration of the Initial Term or any Renewal Term as set forth above, the Company shall deliver to the Manager prior written notice (the “Termination Notice”) of the Company’s intention not to renew this Agreement based upon the terms set forth in this Section 13(a) not less than 180 days prior to the expiration of the then existing term. If the Company so elects not to renew this Agreement, the Company shall designate the date (the “Effective Termination Date”), not less than 180 days from the date of the notice, on which the Manager shall cease to provide services under this Agreement, and this Agreement shall terminate on such date; provided, however, that in the event that such Termination Notice is given in connection with a determination that the compensation payable to the Manager is unfair, the Manager shall have the right to renegotiate such compensation by delivering to the Company, no fewer than 45 days prior to the prospective Effective Termination Date, written notice (any such notice, a “Notice of Proposal to Negotiate”) of its intention to renegotiate its compensation under this Agreement. Thereupon, the Company (represented by the Independent Directors)

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and the Manager shall endeavor to negotiate in good faith the revised compensation payable to the Manager under this Agreement. Provided that the Manager and at least two-thirds of the Independent Directors agree to the terms of the revised compensation to be payable to the Manager within 45 days following the receipt of the Notice of Proposal to Negotiate, the Termination Notice shall be deemed of no force and effect and this Agreement shall continue in full force and effect on the terms stated in this Agreement, except that the compensation payable to the Manager hereunder shall be the revised compensation then agreed upon by the parties to this Agreement. The Company and the Manager agree to execute and deliver an amendment to this Agreement setting forth such revised compensation promptly upon reaching an agreement regarding same. In the event that the Company and the Manager are unable to agree to the terms of the revised compensation to be payable to the Manager during such 45-day period, this Agreement shall terminate, such termination to be effective on the date which is the later of (A) 10 days following the end of such 45-day period and (B) the Effective Termination Date originally set forth in the Termination Notice.  Notwithstanding anything in this paragraph (a) or this Agreement to the contrary, termination of this Agreement shall only occur for the reasons set forth in the second sentence of this paragraph (a) and in Section 14.  The parties agree that currently, and since the initial effective date of this Agreement, it is and has been the intention of the parties that if the Agreement is not terminated in the manner set forth in paragraph (a) above or Section 14, then the Company and the Manager (or the equity owners of the Manager) shall effect an Internalization Transaction pursuant to Section 17, whether at the end of the Initial Term or any Renewal Term.

(b) In recognition of the upfront effort required by the Manager to structure and acquire the assets of the Company and the Subsidiaries and the commitment of resources by the Manager, in the event that this Agreement is terminated in accordance with the provisions of  Section 13(a) or Section 14(b) of this Agreement, the Company shall pay to the Manager, on the date on which such termination is effective, a termination fee (the “Termination Fee”) equal to the greater of (i) three times the sum of the average annual Base Management Fee and Incentive Fee earned by the Manager during the 24-month period prior to such termination, calculated as of the end of the most recently completed fiscal quarter prior to the date of termination, or (ii) the Internalization Price (as defined in Section 17(e) below, without regard to clause (B) in the definition of Internalization Price set forth in Section 17(e)). Any Termination Fee will be payable by the Operating Companyin cash. The obligation of the Company to pay the Termination Fee shall survive the termination of this Agreement.

(c) No later than 180 days prior to the expiration of the Initial Term or Renewal Term, the Manager may deliver written notice to the Company informing it of the Manager’s intention to decline to renew this Agreement, whereupon this Agreement shall not be renewed and extended and this Agreement shall terminate effective on the anniversary date of this Agreement next following the delivery of such notice. The Company shall not be required to pay the Termination Fee to the Manager if the Manager terminates this Agreement pursuant to this Section 13(c).

Section 14.  Termination for Cause.

(a) The Company may terminate this Agreement at any time, including during the Initial Term, upon at least 30 days’ prior written notice of termination from the Board of Directors to the Manager, without payment of any Termination Fee, if:

(i) the Manager breaches this Agreement in any material respect and such breach shall continue for a period of 30 days after written notice thereof specifying such breach and requesting that the same be remedied in such 30-day period;

(ii) there is a commencement of any proceeding relating to the Bankruptcy or insolvency of the Manager, including an order for relief in an involuntary Bankruptcy case or the authorization or filing by the Manager of a voluntary Bankruptcy petition;

(iii) there is a Manager Change of Control and a majority of the Independent Directors reasonably determines that such Manager Change of Control is materially detrimental to the Company;

(iv) the Manager engages in any act of bad faith, willful misconduct, fraud, misappropriation of funds, or embezzlement against the Company or any Subsidiary;

(v) there is an act or omission that constitutes gross negligence on the part of the Manager in the performance of its duties under this Agreement;

(vi) there is a dissolution of the Manager;

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(vii) the Manager fails to provide adequate or appropriate personnel that are reasonably necessary for the Manager to identify investment opportunities for the Company and the Subsidiaries and to manage and develop the Company’s and the Subsidiaries’ investment portfolios, if such default continues uncured for a period of 60 days after written notice thereof, which notice must contain a request that the same be remedied;

(viii) the Manager is convicted (including a plea of nolo contendere) of a felony; or

(ix) Both Dean Jernigan and John Good are no longer senior executive officers of the Manager or the Company during the term of the Agreement or, in the event of an assignment of this Agreement to an Affiliate of the Manager pursuant to Section 16 of this Agreement, of the Affiliate, other than by reason of death or disability.For the avoidance of doubt, so long as one of Dean Jernigan or John Good remains as a senior executive officer of the Manager or the Company devoting full-time attention to the Manager or the Company during the term of the Agreement, or in the event of an assignment of this Agreement to an Affiliate of the Manager pursuant to Section 16 of this Agreement, of suchAffiliate, this Agreement will remain in full force and effect.

(b) The Manager may terminate this Agreement effective upon 60 days’ prior written notice of termination to the Company in the event that the Company shall default in the performance or observance of any material term, condition or covenant contained in this Agreement and such default shall continue for a period of 30 days after written notice thereof specifying such default and requesting that the same be remedied in such 30-day period (or 60 days after written notice of such breach if the Company takes steps to cure such breach within 30 days of the written notice).  The Company is required to pay to the Manager the Termination Fee if the termination of this Agreement is made pursuant to this Section 14(b).

(c) The Manager may terminate this Agreement in the event the Company becomes regulated as an “investment company” under the Investment Company Act, with such termination deemed to have occurred immediately prior to such event. If the Manager terminates this Agreement pursuant to this Section 14(c), the Company shall not be required to pay the Termination Fee.

Section 15.  Survival; Action Upon Termination.  From and after the effective date of termination of this Agreement, pursuant to Sections 13 or14 of this Agreement, the Manager shall not be entitled to compensation for further services under this Agreement, but shall be paid all compensation accruing to the date of termination and, if terminated pursuant to Section 13(a) or 14(b), the applicable Termination Fee. Upon such termination, the Manager shall forthwith:

(i) after deducting any accrued compensation and reimbursement for Expenses to which it is then entitled, pay over to the Company all money collected and held for the account of the Company pursuant to this Agreement;

(ii) deliver to the Board of Directors a full accounting, including a statement showing all payments collected by it and a statement of all money held by it, covering the period following the date of the last accounting furnished to the Board of Directors with respect to the Company; and

(iii) deliver to the Board of Directors all property and documents of the Company or any subsidiary then in the custody of the Manager.

Sections 6,  10,  11,  12,  13,  14,  15 and 25 shall survive the termination of this Agreement.

Section 16.  Assignment.  Subject to Section 14(a), the Manager may assign the agreement in its entirety or delegate certain of its duties under the Agreement to any of its Affiliates without the approval of the Independent Directors; provided that any such assignment or delegation does not require the approval of the Independent Directors under the Investment Company Act.  Any other assignment by the Manager must be consented to in writing by the Company with the approval of a majority of the Independent Directors.  Any permitted assignment shall bind the assignee under this Agreement in the same manner as the Manager is bound, and the Manager shall be liable to the Company for all errors or omissions of the assignee under any such assignment. In addition, the assignee shall execute and deliver to the Company a counterpart of this Agreement naming such assignee as Manager. This Agreement shall not be assigned by the Company without the prior written consent of the Manager, except in the case of assignment by the Company to another REIT or other organization which is a successor (by merger, consolidation, purchase of assets, or other transaction) to the Company, in which case such successor organization shall be bound under this Agreement and by the terms of such assignment in the same manner as the Company is bound under this Agreement.

15

Section 17. Internalization of the Manager. 

(a) No later than 180 days prior to the end of the Initial Term, the Manager shall provide the Company with an offer for an Internalization Transaction with the Operating Companyon such terms and conditions included in a written offer provided by the Manager.  The offer price will be based on the following financial framework:  the lesser of the two amounts determined pursuant to the Internalization Formulas.  Upon receipt of the Manager’s initial Internalization Transaction offer, a special committee consisting solely of the Company’s independent directors may accept the Manager’s proposal or submit a counter offer to the Manager.  If the Company and the Manager agree upon an Internalization Price pursuant to this Section 17(a), the Company shall seek satisfaction of the conditions set forth in Section 17(c).

(b) If an Internalization Transaction is not consummated pursuant to Section 17(a), the Manager will annually submit to the Company a new offer for an Internalization Transaction with the Operating Company, with an Internalization Price based on the financial framework set forth in Section 17(a), not later than 180 days prior to the end of any Renewal Term until termination of this Agreement. The special committee of the Company’s board of directors and the Manager will follow the same process set forth in Section 17(a) with respect to each Internalization Transaction offer by the Manager.  If the Company and the Manager agree upon an Internalization Price pursuant to this Section 17(b), the Company shall seek satisfaction of the conditions set forth in Section 17(c).  Notwithstanding the foregoing or any other provision in this Agreement to the contrary, if an Internalization Transaction has not been consummated in the manner set forth in this Section 17 prior to the end of the last Renewal Term of this Agreement, then on the last day of the last Renewal Term, the Manager and the Company shall consummate an Internalization Transaction effective as of the last day of the last Renewal Term.  In the event an Internalization Transaction is consummated, at the time of consummation of such Internalization Transaction, all assets of the Manager shall be conveyed to and acquired by the Company in exchange for the Internalization Price, computed in accordance with paragraph (e) below and payable pursuant to paragraph (d) below, all employees of the Manager shall become employees of the Company, the Company shall succeed to all customer and other relationships then possessed by the Manager and the Manager shall discontinue all business activities.  The parties expressly agree that an Internalization Transaction that is effected at the end of the last Renewal Term of this Agreement shall not be subject to the conditions of paragraph (c) below and shall be in lieu of any termination of this Agreement and the payment of any Termination Fee, it being the express intention of the parties that no Termination Fee shall be payable in the event of expiration of this Agreement at the end of its final Renewal Term and, instead, the Company shall acquire the business of the Manager at that time for the Internalization Price determined in accordance with Section 17(e) of this Agreement.  The parties mutually agree to execute such additional agreements, documents and instruments as may be reasonably required to effect the Internalization Transaction and convey the Manager’s assets (or the equity interests in the Manager) to the Company.

(c) Consummation of any Internalization Transaction agreed to between the Company and the Manager is conditioned upon the satisfaction of the following conditions:

(i) The Company’s receipt of a fairness opinion from a nationally-recognized investment banking firm to the effect that the consideration to be paid by the Company (or the Operating Company) for the assets and equity of the Manager is fair, from a financial point of view, to holders of the Common Stock who are not affiliated with the Manager or its Affiliates;

(ii) The approval of the acquisition by a special committee of the Company’s Board of Directors comprised solely of Independent Directors; and

(iii) The approval of Company stockholders holding a majority of the votes cast on such Internalization proposal at a meeting of stockholders duly called and at which a quorum is present.

(d) The Internalization Price paid to the Manager in any Internalization Transaction will be payable by the Operating Company in the number of OC Units equal to the agreed upon Internalization Price, divided by the volume-weighted average of the closing market price of the Common Stock for the ten consecutive trading days immediately preceding the date with respect to which value must be determined; provided, however, that if the Company’s Common Stock is not traded on a national securities exchange at the time of closing of any such Internalization Transaction, then the number of OC Units shall be determined by agreement between the Board of Directors and the Manager or, in the absence of such agreement, the Internalization Price shall be paid in cash.

16

(e) Upon any Internalization pursuant to this Section 17, the Manager shall not be entitled to the receipt of any Termination Fee.  The “Internalization Price” for purposes of Section 13(b), shall be determined as follows:  (A) if an Internalization Transaction occurs prior to the end of the last Renewal Term,the Internalization Price shall be the lesser of the prices determined pursuant to the Internalization Formulas, subject to the Board of Directors’ discretion; and (B) if an Internalization Transaction occurs automatically at the end of the last Renewal Termpursuant to Section 17(b), the Internalization Price shall be equal to the Termination Fee computed pursuant to Section 13(b), with no Board of Directors’ discretion to change such Internalization Price and no conditions being applicable to the payment thereof.

Section 18. Release of Money or Other Property Upon Written Request.  The Manager agrees that any money or other property of the Company or any Subsidiary held by the Manager under this Agreement shall be held by the Manager as custodian for the Company or such Subsidiary, and the Manager’s records shall be appropriately marked clearly to reflect the ownership of such money or other property by the Company or such Subsidiary. Upon the receipt by the Manager of a written request signed by a duly authorized officer of the Company or any Subsidiary requesting the Manager to release to the Company or such Subsidiary any money or other property then held by the Manager for the account of the Company or such Subsidiary under this Agreement, the Manager shall release such money or other property to the Company or such Subsidiary within a reasonable period of time, but in no event later than 30 days following such request. The Manager shall not be liable to the Company, any Subsidiary, the Independent Directors, or the Company’s or Subsidiary’s stockholders or partners for any acts performed or omissions to act by the Company or any Subsidiary in connection with the money or other property released to the Company or Subsidiary in accordance with the second sentence of this Section 18. The Company and any such Subsidiary shall indemnify the Manager and its officers, directors, personnel, managers, and officers against any and all expenses, losses, damages, liabilities, demands, charges and claims of any nature whatsoever, which arise in connection with the Manager’s release of such money or other property to the Company or Subsidiary in accordance with the terms of this Section 18. Indemnification pursuant to this provision shall be in addition to any right of the Manager to indemnification under Section 12 of this Agreement.

Section 19.  Representations and Warranties.

(a) The Company hereby makes the following representations and warranties to the Manager, all of which shall survive the execution and delivery of this Agreement:

(i) Each of the Company and the Operating Company is a corporation or limited liability company duly organized, validly existing and in good standing under the laws of the State of Maryland or the State of Delaware, as applicable, and each is qualified to do business and in good standing in Maryland or Delaware, as applicable. Each of the Company and the Operating Company has all power and authority required to execute and deliver this Agreement and to perform all its duties and obligations hereunder.

(ii) The execution, delivery, and performance of this Agreement by each of the Company and the Operating Company have been duly authorized by all necessary action on the part of the Company and the Operating Company, respectively.

(iii) This Agreement constitutes a legal, valid, and binding agreement of each of the Company and the Operating Company, enforceable against each of the Company and the Operating Company in accordance with its terms, except as limited by Bankruptcy, insolvency, receivership and similar laws from time to time in effect and general principles of equity, including, without limitation, those relating to the availability of specific performance.

(b) The Manager hereby makes the following representations and warranties to the Company and the Operating Company, all of which shall survive the execution and delivery of this Agreement:

(i) The Manager is a limited liability company duly formed, validly existing, and in good standing under the laws of the State of Florida and is qualified to do business and in good standing in Florida. The Manager has all power and authority required to execute and deliver this Agreement and to perform all its duties and obligations hereunder, subject only to its qualifying to do business and obtaining all requisite permits and licenses required as a result of or relating to the nature or location of any of the assets or properties of the Company (which it shall do promptly after being required to do so).

(ii) The execution, delivery, and performance of this Agreement by the Manager have been duly authorized by all necessary action on the part of the Manager.

17

(iii) This Agreement constitutes a legal, valid, and binding agreement of the Manager enforceable against the Manager in accordance with its terms, except as limited by Bankruptcy, insolvency, receivership and similar laws from time to time in effect and general principles of equity, including, without limitation, those relating to the availability of specific performance.

Section 20.  Notice.

(a) All notices, demands or requests provided for or permitted to be given pursuant to this Agreement must be in writing, to the following addresses:

If to the Company or the Operating Company:

Jernigan Capital, Inc.
6410 Poplar Avenue, Suite 650
Memphis, Tennessee 38119
Attention:  John A. Good

If to the Manager:

JCap Advisors, LLC
6410 Poplar Avenue, Suite 650
Memphis, Tennessee 38119
Attention:  Dean Jernigan

All notices, demands and requests to be sent to a party hereto pursuant to this Agreement shall be deemed to have been properly given or served if: (i) personally delivered, (ii) deposited for next day delivery by Federal Express, or other similar overnight courier services, addressed to such party, (iii) deposited in the United States mail, addressed to such party, prepaid and registered or certified with return receipt requested or (iv) transmitted via facsimile or other similar device to the attention of such party with appropriate evidence of receipt by or transmission to the recipient party.

(b) All notices, demands and requests so given shall be deemed received: (i) when personally delivered, (ii) twenty-four hours after being deposited for next day delivery with an overnight courier, (iii) forty-eight hours after being deposited in the United States mail, or (iv) three hours after being transmitted via facsimile or otherwise transmitted and receipt has been confirmed.

Section 21. Binding Nature of Agreement; Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and permitted assigns as provided in this Agreement.

Section 22. Entire Agreement.  This Agreement contains the entire agreement and understanding among the parties hereto with respect to the subject matter of this Agreement, and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter of this Agreement. The express terms of this Agreement control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms of this Agreement.

Section 23.  Amendments.  This Agreement may be amended or modified only by an agreement in writing signed by all parties hereto.

18

Section 24.  No Implied Waivers; Remedies.  No failure or delay on the part of any party in exercising any right, privilege, power, or remedy under this Agreement, and no course of dealing shall operate as a waiver of any such right, privilege, power or remedy; nor shall any single or partial exercise of any right, privilege, power or remedy under this Agreement preclude any other or further exercise of any such right, privilege, power or remedy or the exercise of any other right, privilege, power or remedy. No waiver shall be asserted against any party unless signed in writing by such party. The rights, privileges, powers and remedies available to the parties are cumulative and not exclusive of any other rights, privileges, powers or remedies provided by statute, at law, in equity or otherwise. Except as provided in this Agreement, no notice to or demand on any party in any case shall entitle such party to any other or further notice or demand in any similar or other circumstances or constitute a waiver of the right of the party giving such notice or making such demand to take any other or further action in any circumstances without notice or demand.

Section 25.  Governing Law.  THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. EACH OF THE PARTIES HEREBY IRREVOCABLY AGREES THAT THE COURTS OF THE STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION IN CONNECTION WITH ANY ACTIONS OR PROCEEDINGS ARISING BETWEEN THE PARTIES UNDER THIS AGREEMENT. EACH OF THE PARTIES HEREBY IRREVOCABLY CONSENTS AND SUBMITS TO THE JURISDICTION OF SAID COURTS FOR ANY SUCH ACTION OR PROCEEDING. EACH OF THE PARTIES HEREBY WAIVES THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING IN SAID COURTS.

Section 26.  Headings.  The headings contained in this Agreement are for convenience only and shall not affect the construction or interpretation of any provisions of this Agreement.

Section 27.  Severability.  If any provision of the Agreement shall be held to be invalid, the remainder of the Agreement shall not be affected thereby.

Section 28.  Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when one or more counterparts of this Agreement, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories.

[Signature Page Follows]

19

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

JERNIGAN CAPITAL, INC., a Maryland corporation
By:	/s/ John A. Good
	Name:  John A. Good
	Title: President
JERNIGAN CAPITAL OPERATING COMPANY, Llc, a Delaware limited liability company
By:  Jernigan Capital, Inc., its managing member
	By:	/s/ John A. Good
		Name: John A. Good
		Title:  President
JCAP ADVISORS, LLC a Florida limited liability company
By:	/s/ Dean Jernigan
	Name: Dean Jernigan
	Title:  Chief Executive Officer

20

Exhibit A

· No investment will be made that would cause the Company to fail to qualify as a REIT for U.S. federal income tax purposes.

· No investment will be made that would cause the Company to register as an investment company under the Investment Company Act.

· No more than 20% of the Company’s equity, determined as of the date of investment, will be invested in any single project and no more than 20% of the Company’s equity, determined as of the date of such investment, will be invested in projects controlled by a single borrower or group of affiliated borrowers that would form a consolidated group under GAAP; provided however, that this provision shall not apply to the initial portfolio set forth in the final prospectus for the Initial Public Offering).

· Over time the Company’s average leverage should be between 25% and 35% of the fair value of its assets, but the Company may borrow up to 100% of the principal value of certain First Mortgage Loans (as defined in the final prospectus for the Initial Public Offering). During periods where the Company’s portfolio consists largely of Whole Loans (as defined in the final prospectus for the Initial Public Offering), the Company may borrow up to 65% of the principal of such loans pending tranching of such loans and sale of First Mortgage Loans resulting from such tranching.

· The Company will maintain a portfolio of geographically diverse assets.

· The Manager must seek approval of a majority of the Company’s Independent Directors before engaging in any transaction that falls outside of these guidelines.

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT

TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Dean Jernigan, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Jernigan Capital, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  November7, 2017	/s/ DEAN JERNIGAN
	Dean Jernigan
	Chairman of the Board and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT

TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Kelly P. Luttrell, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Jernigan Capital, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))  for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 7, 2017	/s/ KELLY P. LUTTRELL
	Kelly P. Luttrell
	Senior Vice President, Chief Financial Officer and Treasurer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Jernigan Capital, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dean Jernigan, the Chairman and Chief Executive Officer of the Company, and I, Kelly P. Luttrell, the Senior Vice President, Chief Financial Officer and Treasurer of the Company, certify, to our knowledge, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  November 7, 2017	/s/ DEAN JERNIGAN
	Dean Jernigan
	Chairman of the Board and Chief Executive Officer

/s/ KELLY P. LUTTRELL

Kelly P. Luttrell

Senior Vice President, Chief Financial Officer, and Treasurer

XML

Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Nov. 06, 2017
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3
Entity Registrant Name	Jernigan Capital, Inc.
Entity Central Index Key	0001622353
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Trading Symbol	jcap
Entity Common Stock, Shares Outstanding		14,271,967

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Assets:
Cash and cash equivalents	$ 54,999	$ 67,373
Development property investments at fair value, of which $11.0 million and $33.3 million of funded principal is pledged as collateral against certain of the Company’s senior loan participations as of September 30, 2017 and December 31, 2016, respectively	188,540	95,102
Operating property loans at fair value, of which none and $2.8 million of funded principal is pledged as collateral against certain of the Company's senior loan participations as of September 30, 2017 and December 31, 2016, respectively	5,990	9,905
Investment in and advances to real estate venture	12,573	5,373
Self-storage real estate owned, net	15,594
Other loans, at cost	1,754	11,752
Deferred costs	3,813	2,207
Prepaid expenses and other assets	734	868
Fixed assets, net	196	199
Total assets	284,193	192,779
Liabilities:
Senior loan participations	668	18,582
Secured revolving credit facility
Due to Manager	1,438	1,008
Accounts payable, accrued expenses and other liabilities	1,035	697
Dividends payable	5,293	4,130
Total liabilities	8,434	24,417
Jernigan Capital, Inc. stockholders’ equity:
Cumulative preferred stock, $0.01 par value, 100,000,000 shares authorized, 10,000 issued and outstanding at September 30, 2017 and December 31, 2016, at liquidation preference of $10.0 million, net of allocated costs	9,445	9,448
Common stock, $0.01 par value, 500,000,000 shares authorized at September 30, 2017 and December 31, 2016; 14,235,848 and 8,956,354 issued and outstanding at September 30, 2017 and December 31, 2016, respectively	142	90
Additional paid-in capital	272,726	162,664
Accumulated deficit	(6,554)	(3,840)
Total equity	275,759	168,362
Total liabilities and equity	$ 284,193	$ 192,779

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Securities Held as Collateral, at Fair Value	$ 11,000,000	$ 33,300,000
Loans Pledged as Collateral	$ 0	$ 2,800,000
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred Stock, Shares Authorized	100,000,000	100,000,000
Preferred Stock, Shares Issued	10,000	10,000
Common Stock, Par Value (in dollars per share)	$ 0.01	$ 0.01
Common Stock, Shares Authorized	500,000,000	500,000,000
Common stock, shares issued	14,235,848	8,956,354
Common stock, shares outstanding	14,235,848	8,956,354
Cumulative Preferred Stock [Member]
Preferred Stock, Liquidation Preference, Value	$ 10,000,000	$ 10,000,000

XML

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Revenues:
Interest income from investments	$ 3,173	$ 1,698	$ 7,759	$ 4,374
Rental and other property-related income from real estate owned	160		328
Other revenues	28		174
Total revenues	3,361	1,698	8,261	4,374
Costs and expenses:
General and administrative expenses	1,386	1,463	4,336	4,102
Management fees to Manager	1,036	402	2,373	1,218
Property operating expenses of real estate owned	114		188
Depreciation and amortization of real estate owned	172		233
Transaction and other expenses		2		2,129
Restructuring costs				54
Deferred termination fee to Manager				239
Total costs and expenses	2,708	1,867	7,130	7,742
Operating income (loss)	653	(169)	1,131	(3,368)
Other income (expense):
Equity in earnings from unconsolidated real estate venture	730	436	1,747	854
Change in fair value of investments	3,384	4,867	9,066	14,185
Interest expense	(323)	(148)	(757)	(186)
Loss on modifications of debt	(232)		(232)
Other interest income	245	8	479	43
Total other income	3,804	5,163	10,303	14,896
Net income	4,457	4,994	11,434	11,528
Net income attributable to preferred stockholders	(310)		(1,033)
Net income attributable to common stockholders	$ 4,147	$ 4,994	$ 10,401	$ 11,528
Basic earnings per share attributable to common stockholders	$ 0.29	$ 0.84	$ 0.94	$ 1.90
Diluted earnings per share attributable to common stockholders	0.29	0.84	0.94	1.90
Dividends declared per share of common stock	$ 0.35	$ 0.35	$ 1.05	$ 1.05

XML

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - USD ($) $ in Thousands	Total Stockholders' Equity [Member]	Preferred Stock [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Deficit [Member]	Non-Controlling Interests [Member]	Total
Balance at Dec. 31, 2015	$ 101,300		$ 62	$ 110,634	$ (9,396)	$ 464	$ 101,764
Balance (in shares) at Dec. 31, 2015			6,162,500
Repurchase and retirement of shares related to vested restricted stock	(33)			(33)			(33)
Repurchase and retirement of shares related to vested restricted stock (in shares)			(2,052)
Repurchase of 213,078 shares of common stock	(3,152)		$ (2)	(3,150)			(3,152)
Repurchase of 213,078 shares of common stock (in shares)			(213,078)
Issuances of stock-based awards (in shares)			14,340
Stock-based compensation	828			828			828
Deferred termination fee to Manager						239	239
Effect of Management Agreement Amendment	703			703		$ (703)
Dividends declared on common stock	(6,331)				(6,331)		(6,331)
Net income	11,528				11,528		11,528
Balance at Sep. 30, 2016	104,843		$ 60	108,982	(4,199)		104,843
Balance (in shares) at Sep. 30, 2016			5,961,710
Balance at Dec. 31, 2016	168,362	$ 9,448	$ 90	162,664	(3,840)		168,362
Balance (in shares) at Dec. 31, 2016		10,000	8,956,354
Equity offering costs related to issuance of preferred stock	(3)	$ (3)					(3)
Stock dividend paid on preferred stock	1,194		$ 1	1,193			1,194
Stock dividend paid on preferred stock (in Shares)			57,850
Proceeds from issuance of common stock, net of offering costs	83,927		$ 40	83,887			83,927
Issuance of shares, net of offering costs (in shares)			4,025,000
At-the-market issuance of common stock, net of offering costs	24,156		$ 10	24,146			24,156
At-the-market issuance of common stock, net of offering costs (in shares)			1,093,202
Repurchase and retirement of shares related to vested restricted stock	(177)			(177)			(177)
Repurchase and retirement of shares related to vested restricted stock (in shares)			(7,972)
Issuances of stock-based awards	(9)		$ 1	(10)			(9)
Issuances of stock-based awards (in shares)			111,414
Stock-based compensation	1,023			1,023			1,023
Dividends declared on preferred stock	(1,033)				(1,033)		(1,033)
Dividends declared on common stock	(13,115)				(13,115)		(13,115)
Net income	11,434				11,434		11,434
Balance at Sep. 30, 2017	$ 275,759	$ 9,445	$ 142	$ 272,726	$ (6,554)		$ 275,759
Balance (in shares) at Sep. 30, 2017		10,000	14,235,848

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Cash flows from operating activities
Net income	$ 11,434	$ 11,528
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Interest capitalized on outstanding loans	(5,522)	(2,635)
Change in fair market value of investments	(9,066)	(14,185)
Stock-based compensation	1,023	828
Equity in earnings from unconsolidated real estate venture	(1,739)	(824)
Return on investment from unconsolidated joint venture	512
Deferred termination fee to Manager		239
Depreciation	278	74
Amortization of deferred financing costs	175	3
Loss on modification of debt	232
Accretion of origination fees	(462)	(468)
Origination fees received in cash	3,097	205
Changes in operating assets and liabilities:
Prepaid expenses and other assets	41	(268)
Due to Manager	430	(151)
Accounts payable, accrued expenses, and other liabilities	126	(12)
Net cash provided by (used in) operating activities	559	(5,666)
Cash flows from investing activities
Purchase of fixed assets	(43)	(11)
Purchase of self-storage real estate owned	(2,856)
Capital contributions to real estate venture	(4,766)	(1,348)
Return of capital from real estate venture		7,291
Advances to real estate venture	(40,825)	(11,761)
Repayment of advances to real estate venture	39,618	11,761
Capitalized real estate venture costs		(226)
Funding of investment portfolio: Development property investments	(111,609)	(36,257)
Funding of investment portfolio: Operating property loans		(246)
Funding of other loans	(10,147)	(9,197)
Repayments of investment portfolio investments	22,746	5,500
Repayments of other loans	18,673	4,135
Net cash used in investing activities	(89,209)	(30,359)
Cash flows from financing activities
Senior loan participations	1,755	17,550
Repurchase of senior loan participation	(1,854)
Cash received upon closing of the credit facility	403
Paydown of the credit facility	(20,000)
Deferred financing costs	(118)
Deferred costs	(13)	(2,822)
Stock repurchase	(177)	(3,152)
Net proceeds from issuance of common stock	108,074
Costs related to the future issuance of preferred stock	(3)
Dividends paid on preferred stock	(525)
Dividends paid on common stock	(11,266)	(6,401)
Net cash provided by financing activities	76,276	5,175
Net change in cash and cash equivalents	(12,374)	(30,850)
Cash and cash equivalents at the beginning of the period	67,373	43,859
Cash and cash equivalents at the end of the period	$ 54,999	$ 13,009

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ORGANIZATION AND FORMATION OF THE COMPANY

9 Months Ended

Sep. 30, 2017

ORGANIZATION AND FORMATION OF THE COMPANY [Abstract]

ORGANIZATION AND FORMATION OF THE COMPANY

1. ORGANIZATION AND FORMATION OF THE COMPANY

Jernigan Capital, Inc. (together with its consolidated subsidiaries, the “Company”) makes debt and equity investments in newly-constructed and existing self-storage facilities. The Company is a Maryland corporation that was organized on October 1, 2014. The Company closed its initial public offering of its common stock (the “IPO”) on April 1, 2015, and has used proceeds of the IPO and other capital sources primarily to fund real estate loans to private developers, owners and operators of self-storage facilities. The Company is structured as an Umbrella Partnership REIT (“UPREIT”) and conducts its investment activities through its operating company, Jernigan Capital Operating Company, LLC (the “Operating Company”). The Company is externally managed by JCAP Advisors, LLC (the “Manager”).

The Company has elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”). As a REIT, the Company generally will not be subject to U.S. federal income taxes on REIT taxable income, determined without regard to the deduction for dividends paid and excluded capital gains, to the extent that it annually distributes all of its REIT taxable income to stockholders and complies with various other requirements for qualification as a REIT set forth in the Code.

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SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2017

SIGNIFICANT ACCOUNTING POLICIES [Abstract]

SIGNIFICANT ACCOUNTING POLICIES

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying interim consolidated financial statements include all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods included therein. Substantially all operations are conducted through the Operating Company, and all significant intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates.

Variable Interest Entities

The Company invests in entities that may qualify as variable interest entities (“VIEs”). A VIE is a legal entity that lacks one or more of the characteristics of a voting interest entity. A VIE is defined as an entity in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The determination of whether an entity is a VIE includes both a qualitative and quantitative analysis. Management bases the qualitative analysis on its review of the design of the entity, its organizational structure including allocation of decision-making authority and relevant financial agreements and the quantitative analysis on the forecasted cash flow of the entity. Management reassesses the initial evaluation of an entity as a VIE upon the occurrence of certain reconsideration events.

A VIE must be consolidated only by its primary beneficiary, which is defined as the party that, along with its affiliates and agents, has both the: (i) power to direct the activities that most significantly impact the VIE’s economic performance and (ii) obligation to absorb the losses of the VIE or the right to receive the benefits from the VIE, which could be significant to the VIE. Management determines whether the Company is the primary beneficiary of a VIE by considering qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of its investment; the obligation or likelihood for the Company or other interests to provide financial support; consideration of the VIE’s purpose and design, including the risks the VIE was designed to create and pass through to its variable interest holders and the similarity with and significance to the Company’s business activities and the other interests. Management reassesses the determination of whether the Company is the primary beneficiary of a VIE each reporting period.

Equity Investments

Investments in real estate ventures and entities over which the Company exercises significant influence but not control are accounted for using the equity method. In accordance with Accounting Standards Codification (“ASC”) 825, Financial Instruments (“ASC 825-10”), issued by the Financial Accounting Standards Board (“FASB”), the Company has elected the fair value option of accounting for its development property investments, which would otherwise be required to be accounted for under the equity method. The Company also holds an investment in a real estate venture that is accounted for under the equity method of accounting.

Loan Investments and Election of Fair Value Option of Accounting for Certain Loan Investments

The Company has elected the fair value option of accounting for all of its investment portfolio loan investments, including those that are required under GAAP to be accounted for under the equity method, in order to provide stockholders and others who rely on the Company’s financial statements with a more complete and accurate understanding of the Company’s economic performance including its revenues and value inherent in the Company’s equity participation in development projects. Changes in the fair value of these investments are recorded in change in fair value of investments within other income. All direct loan costs are charged to expense as incurred.

Each loan investment, including those recorded at cost and presented on the Consolidated Balance Sheets as other loans, is evaluated for impairment on a periodic basis. For loans carried at fair value, indicators of impairment are reflected in measurement of the loan. For loans that are carried at cost, the Company estimates an allowance for loan loss at each reporting date. In evaluating loan impairment, the Company also periodically evaluates the extent and impact of any credit deterioration associated with the performance and/or value of the underlying collateral property as well as the financial and operating capability of the borrower on a loan by loan basis. The Company also evaluates the financial wherewithal of any loan guarantors as well as the borrower’s competency in managing and operating the property. In addition, the Company considers the overall economic environment, real estate sector and geographic sub-market in which the borrower operates. A loan will be considered impaired when, based on current information and events, it is probable that the loan will not be collected according to the contractual terms of the loan agreement. Factors to be considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. At September 30, 2017 and December 31, 2016, there were no loans that were deemed to be impaired loans. Additionally, for loans recorded at cost, the Company determined that no allowance for loan loss was necessary at September 30, 2017 and December 31, 2016.

For investments carried at fair value, fees and costs are expensed as incurred.

Fair Value Measurement

The Company carries certain financial instruments at fair value because it has elected to apply the fair value option on an instrument by instrument basis under ASC 825-10. The Company’s financial instruments consist of cash, development property investments (which are typically structured as first mortgages and a 49.9% profits interest in the development project), operating property loans (loans secured by operating properties), the investment in real estate venture, other loans, receivables, the secured revolving credit facility, senior loan participations, and payables.

The following table presents the financial instruments measured at fair value on a recurring basis at September 30, 2017:

	Fair Value Measurements Using
	Total		Level 1		Level 2		Level 3
Development property investments	$	188,540	$	-	$	-	$	188,540
Operating property loans		5,990		-		-		5,990
Total investments	$	194,530	$	-	$	-	$	194,530

The following table presents the financial instruments measured at fair value on a recurring basis at December 31, 2016:

	Fair Value Measurements Using
	Total		Level 1		Level 2		Level 3
Development property investments	$	95,102	$	-	$	-	$	95,102
Operating property loans		9,905		-		-		9,905
Total investments	$	105,007	$	-	$	-	$	105,007

Estimating fair value requires the use of judgment. The types of judgments involved depend upon the availability of observable market information. Management’s judgments include determining the appropriate valuation model to use, estimating unobservable inputs and applying valuation adjustments. See Note 4, Fair Value of Financial Instruments, for additional disclosure on the valuation methodology and significant assumptions, as well as the election of the fair value option for certain financial instruments.

Self-Storage Real Estate Owned

Land is carried at historical cost. Building and improvements are carried at historical cost less accumulated depreciation and impairment losses. The cost primarily reflects the funded principal balance of the loan to the Company, net of unamortized origination fees, unrealized appreciation recognized as of the acquisition date, and the cash consideration paid to the developer to acquire his portion of profits interest. Ordinary repairs and maintenance are expensed as incurred; major replacements and betterments, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives. The costs of building and improvements are generally depreciated using the straight-line method based on a useful life of 40 years.

The Company expects that the majority of future self-storage facility acquisitions will be considered asset acquisitions, however the Company will evaluate each acquisition using Accounting Standards Update (“ASU”) 2017-01 - Business Combinations (Topic 805): Clarifying the Definition of a Business to determine whether accounting for a business combination or asset acquisition applies.

When facilities are acquired, the cost is allocated to the tangible and intangible assets acquired and liabilities assumed based on relative fair values. Allocations to the individual assets and liabilities are based upon their relative fair values as estimated by management.

In allocating the purchase price for an acquisition, the Company determines whether the acquisition includes intangible assets or liabilities. The Company allocates a portion of the cost to an intangible asset attributable to the value of in-place leases. This intangible asset is amortized to expense over the expected remaining term of the respective leases, which is generally one year. Substantially all of the leases in place at acquired facilities are at market rates, as the majority of the leases are month-to-month contracts. Accordingly, to date, no portion of the basis for an acquired property has been allocated to above- or below-market lease intangibles. To date, no intangible asset has been recorded for the value of customer relationships, because the Company does not have any concentrations of significant customers and the average customer turnover is fairly frequent.

The Company evaluates long-lived assets for impairment when events and circumstances, such as declines in occupancy and operating results, indicate that there may be an impairment. The carrying value of these long-lived assets is compared to the undiscounted future net operating cash flows, plus a terminal value, attributable to the assets to determine if the facility’s basis is recoverable. If an asset’s basis is not considered recoverable, an impairment loss is recorded to the extent the net carrying value of the asset exceeds the fair value. The impairment loss recognized equals the excess of net carrying value over the related fair value of the asset.

Cash and Cash Equivalents

Cash, investments in money market accounts, and certificates of deposit with original maturities of three months or less are considered to be cash equivalents. The Company places its cash and cash equivalents primarily with three financial institutions, and the balance at each financial institution exceeds the Federal Deposit Insurance Corporation insurance limit of $250,000 per institution.

Other Loans

The Company’s other loans balance primarily includes principal balances for certain revolving loan agreements and short-term mortgage loans made by the Company in situations where it was determined that making such loans would benefit the Company’s primary business. These loans are accounted for under the cost method.

Fixed Assets

Fixed assets are recorded at cost and consist of furniture, office and computer equipment, and software. Depreciation is computed on a straight-line basis over the estimated useful lives of the related assets, which range from three to seven years. Fixed assets are generally purchased by the Manager and the cost reimbursed by the Company. Maintenance and repair costs are charged to expense as incurred. Upon sale or retirement, the asset cost and related accumulated depreciation are eliminated from the respective accounts and any resulting gain or loss is included in income.

Revenue Recognition

Interest income is recognized as earned on a simple interest basis and is reported in interest income from investments in the Consolidated Statements of Operations. Accrual of interest will be discontinued on a loan when management believes, after considering economic and business conditions and collection efforts that the borrower’s financial condition is such that collection of interest is doubtful. The Company will recognize income on impaired loans when they are placed into non-accrual status on a cash basis when the loans are both current and the collateral on the loan is sufficient to cover the outstanding obligation to the Company. If these factors do not exist, the Company will not recognize income on such loans. Accrued interest generally is reversed when a loan is placed on non-accrual status.

The Company’s loan origination fees are accreted into interest income over the term of the investment using the effective yield method.

The operations of the self-storage real estate owned are managed by a third-party self-storage management company. All rental leases are operating leases, and rental income is recognized in accordance with the terms of the leases, which generally are month to month.

Debt Issuance Costs

Costs related to the issuance of a debt instrument are deferred and amortized as interest expense over the estimated life of the related debt instrument using the straight-line method, which approximates the effective interest method. If a debt instrument is repurchased prior to its original maturity date, the Company evaluates both the unamortized balance of debt issuance costs as well as any new debt issuance costs, including third party fees, to determine if the costs should be written off to interest expense or, if significant, included in “loss on modification or extinguishment of debt” in the Consolidated Statements of Operations. Debt issuance costs related to the sale of senior participations are presented in the Consolidated Balance Sheets as a deduction from the carrying amount of the principal balance. Debt issuance costs related to the revolving credit facility are presented in the Consolidated Balance Sheets as Deferred Costs.

Transaction and other expenses

Transaction and other expenses consist of non-capitalizable advisory fees and other unreimbursed expenses incurred in connection with various financing and investment transactions and are expensed as incurred. There were no transaction and other expenses for the three or nine months ended September 30, 2017. During the three and nine months ended September 30, 2016, the Company incurred $2,000and $2.1 million, respectively, in transaction and other expenses. 

Offering and Registration Costs

Offering and registration costs represent underwriting discounts and commissions, professional fees, fees paid to various regulatory agencies, and other costs incurred in connection with the registration and sale of the Company’s securities. Offering and registration costs incurred in connection with the Company’s common stock offerings are reflected as a reduction of additional paid-in capital.

On July 27, 2016, the Company entered into a Purchase Agreement (as defined below) (see Note 10, Stockholders’ Equity) which requires the Company to issue and sell a minimum of $50.0 million of Series A Preferred Stock by July 27, 2018. The Company incurred $2.8 million of preferred stock offering costs in connection with the execution of the Purchase Agreement. Such costs are presented as deferred costs on the Consolidated Balance Sheets until such time as Series A Preferred Stock is issued. A pro rata portion of such deferred costs, based upon the ratio of the amount issued to the $50.0 million minimum issuance of Series A Preferred Stock, is reclassified to cumulative preferred stock upon each issuance of the Series A Preferred Stock. Of the $2.8 million of offering costs incurred, $2.2 million is in deferred costs on the Consolidated Balance Sheet at September 30, 2017, and $0.6 million has reduced the cumulative preferred stock balance on the Consolidated Balance Sheet at September 30, 2017.

Income Taxes

The Company has elected to be taxed as a REIT and to comply with the related provisions of the Code. Accordingly, the Company will generally not be subject to U.S. federal income tax to the extent of its distributions to stockholders and as long as certain asset, income and share ownership tests are met. To qualify as a REIT, the Company must annually distribute at least 90% of its REIT taxable income to its stockholders and meet certain other requirements.

Earnings per Share (“EPS”)

Basic EPS includes only the weighted average number of common shares outstanding during the period. Diluted EPS includes the weighted average number of common shares and the dilutive effect of restricted stock, accrued stock dividends, and redeemable Operating Company units when such instruments are dilutive.

All outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends are treated as participating in undistributed earnings with common shareholders. Awards of this nature are considered participating securities and the two-class method of computing basic and diluted EPS must be applied.

Comprehensive Income

For the three and nine months ended September 30, 2017 and 2016, comprehensive income equaled net income; therefore, separate Consolidated Statements of Comprehensive Income are not included in the accompanying consolidated financial statements.

Segment Reporting

The Company does not evaluate performance on a relationship specific or transactional basis and does not distinguish its principal business or group its operations on a geographical basis for purposes of measuring performance. Accordingly, the Company believes it has a single operating segment for reporting purposes in accordance with GAAP.

Recent Accounting Pronouncements

In January 2017, the FASB issued ASU 2017-01 which provides guidance on whether transactions should be accounted for as acquisitions or disposals of assets or businesses. Specifically, when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or group of similar identifiable assets, the set of assets is not a business. Additionally, ASU 2017-01 also provides other guidance providing a more robust framework to use in determining whether a set of assets and activities is a business. Upon adoption of the new guidance, the Company expects that the majority of future self-storage facility acquisitions will now be considered asset acquisitions. This guidance is effective for annual periods beginning after December 15, 2017. Early adoption is permitted. The Company adopted ASU 2017-01 for new acquisitions beginning on July 1, 2017. The costs related to the acquisitions of self-storage facilities that qualify as asset acquisitions will be capitalized as part of the purchase.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This ASU provides guidance on the classification of certain cash receipts and payments in the statement of cash flows, including distributions received from equity method investees. This guidance is effective for public business entities for fiscal years and for interim periods within those fiscal years, beginning after December 15, 2017, with early adoption being allowed. The Company is currently assessing the impact this new accounting guidance will have on its consolidated financial statements; however, the Company does not expect the new accounting guidance to have a material impact on its consolidated financial statements as the Company is currently presenting distributions received from equity method investees consistent with the presentation required under ASU 2016-05.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. This guidance is effective for public business entities for fiscal years and for interim periods within those fiscal years, beginning after December 15, 2019, with early adoption being allowed as of the fiscal years beginning after December 15, 2018. The Company is currently assessing the impact this new accounting guidance will have on its consolidated financial statements; however, the Company does not expect the new accounting guidance to have a material impact on its consolidated financial statements. 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which is the final standard on accounting for leases. The most significant change for lessees is the requirement under the new guidance to recognize right-of-use assets and lease liabilities for all leases not considered short-term leases. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. The amendments in ASU 2016-02 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. The Company is currently assessing the impact this new accounting guidance will have on its consolidated financial statements. 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2017. This ASU outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry specific guidance. Several ASUs expanding and clarifying the initial guidance issued in ASU 2014-09 have been released since May 2014. The Company will adopt the ASU effective January 1, 2018 and does not expect the adoption to have a material effect on its consolidated financial statements as the new guidance does not apply to revenue associated with loans or derived from lease contracts; however, the Company is still in the process of evaluating the impact these standards will have on its consolidated financial statements.

Consolidated Statements of Cash Flows - Supplemental Disclosures

The following table provides supplemental disclosures related to the Consolidated Statements of Cash Flows:

	Nine months ended September 30,
	2017		2016
Supplemental disclosure of cash flow information:
Interest paid	$	705	$	141
Supplemental disclosure of non-cash investing and financing activities:
Stock dividend paid on preferred stock	$	1,194	$	-
Dividends declared, but not paid, on preferred stock		310		-
Dividends declared, but not paid, on common stock		4,983		2,087
Contribution of assets to real estate venture		-		7,693
Reclassification of self-storage real estate owned		12,919		-
Other loans paid off with issuance of development property investments		1,587		-

Upon the closing of the credit facility, the Company received cash of $0.4 million as presented within “Cash received upon closing of the credit facility” in the Consolidated Statement of Cash Flows for the nine months ended September 30, 2017. The amount received was comprised of a $20.0 million draw on the credit facility offset by $17.8 million from the repurchase of senior loan participations and $1.8 million of costs incurred upon closing of the credit facility.

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INVESTMENTS

9 Months Ended

Sep. 30, 2017

INVESTMENTS [Abstract]

INVESTMENTS

3. INVESTMENTS

In addition to the self-storage real estate owned as described in Note 7, Self-Storage Real Estate Owned, the Company’s self-storage investments at September 30, 2017 consisted of the following:

 Development Property Investments - The Company had 36 investments totaling an aggregate committed principal amount of approximately $397.5 million to finance the ground-up construction of or conversion of existing buildings into self-storage facilities. Each development property investment is funded as the developer constructs the project, is secured by a first mortgage on the development project and generally includes a 49.9% interest in the positive cash flows (including the sale and refinancing proceeds after debt repayment) of the project. Loans comprising development property investments are non-recourse with customary carve-outs and subject to completion guaranties, are interest-only with a fixed interest rate of typically 6.9% per annum and typically have a term of 72 months. 

The Company also had one construction loan investment with a committed principal amount of approximately $17.7 million, which had an initial term of 18 months that was extended during the first quarter of 2017. This construction loan is interest-only at a fixed interest rate of 6.9% per annum, has no equity participation and is secured by a first priority mortgage on the project. It is also subject to a purchase and sale agreement between the developer and a third-party purchaser pursuant to which the financed project is anticipated to be sold and the loan repaid on or about the time a certificate of occupancy is issued for the financed self-storage facility.

 Operating property loans - The Company had two term loans totaling $6.0 million of aggregate committed principal amount, the proceeds of which were used by borrowers to finance the acquisition of, refinance existing indebtedness on, or recapitalize operating self-storage facilities. These loans are secured by first mortgages on the projects financed, are interest-only with fixed interest rates ranging from 5.85% to 6.9% per annum, and generally have a term of 72 months.

The Company’s development property investments and operating property loans are collectively referred to herein as the Company’s investment portfolio. 

As of September 30, 2017, the aggregate committed principal amount of the Company’s investment portfolio was approximately $421.2 million and outstanding principal was $173.7 million, as described in more detail in the table below:

	Metropolitan					Remaining
	Statistical Area	Total Investment		Funded		Unfunded
Closing Date	("MSA")	Commitment		Investment (1)		Commitment		Fair Value
Development property investments:
Loan investments with a profits interest:
6/10/2015	Atlanta 1 (2)	$	8,132	$	8,010	$	122	$	10,507
6/19/2015	Tampa 1 (2)		5,369		5,285		84		6,058
6/26/2015	Atlanta 2 (2)		6,050		5,754		296		8,519
6/29/2015	Charlotte 1 (2)		7,624		7,126		498		10,551
7/2/2015	Milwaukee (2)		7,650		7,377		273		8,762
7/31/2015	New Haven (2)		6,930		6,412		518		8,399
8/10/2015	Pittsburgh (2)		5,266		4,574		692		6,591
8/14/2015	Raleigh (3)		8,792		4,277		4,515		4,260
9/30/2015	Jacksonville 1 (2)		6,445		5,988		457		8,830
10/27/2015	Austin (2)		8,658		7,000		1,658		8,779
9/20/2016	Charlotte 2 (3)		12,888		4,517		8,371		4,360
11/17/2016	Jacksonville 2 (3)		7,530		3,899		3,631		4,453
1/4/2017	New York City 1 (2)		16,117		13,165		2,952		16,712
1/18/2017	Atlanta 3		14,115		3,471		10,644		3,314
1/31/2017	Atlanta 4		13,678		5,698		7,980		5,667
2/24/2017	Orlando 3		8,056		1,468		6,588		1,409
2/24/2017	New Orleans		12,549		-		12,549		-
2/27/2017	Atlanta 5		17,492		3,910		13,582		3,790
3/1/2017	Fort Lauderdale		9,952		1,945		8,007		1,875
3/1/2017	Houston		13,630		3,382		10,248		3,283
4/14/2017	Louisville 1		8,523		1,471		7,052		1,394
4/20/2017	Denver 1		9,806		1,906		7,900		1,822
4/20/2017	Denver 2		11,164		2,877		8,287		2,790
5/2/2017	Atlanta 6		12,543		3,117		9,426		3,017
5/2/2017	Tampa 2		8,091		890		7,201		813
5/19/2017	Tampa 3		9,224		729		8,495		639
6/12/2017	Tampa 4		10,266		1,364		8,902		1,266
6/19/2017	Baltimore (4)		10,775		2,672		8,103		2,484
6/28/2017	Knoxville		9,115		1,656		7,459		1,573
6/29/2017	Boston		14,103		2,031		12,072		1,898
6/30/2017	New York City 2 (4)		26,482		16,712		9,770		16,333
7/27/2017	Jacksonville 3		8,096		888		7,208		810
8/30/2017	Orlando 4		9,037		1,790		7,247		1,698
9/14/2017	Los Angeles		28,750		7,382		21,368		7,284
9/14/2017	Miami		14,657		5,761		8,896		5,644
9/28/2017	Louisville 2		9,940		2,230		7,710		2,139
		$	397,495	$	156,734	$	240,761	$	177,723
Construction loans:
12/23/2015	Miami		17,733		10,999		6,734		10,817
		$	17,733	$	10,999	$	6,734	$	10,817
	Subtotal	$	415,228	$	167,733	$	247,495	$	188,540
Operating property loans:
7/7/2015	Newark		3,480		3,480		-		3,477
12/22/2015	Chicago		2,502		2,500		2		2,513
	Subtotal	$	5,982	$	5,980	$	2	$	5,990
	Total investments	$	421,210	$	173,713	$	247,497	$	194,530

(1)	Represents principal balance of loan gross of origination fees.
(2)	Facility had received certificate of occupancy as of September 30, 2017. See Note 4, Fair Value of Financial Instruments, for information regarding recognition of entrepreneurial profit.
(3)	Facility had achieved at least 40% construction completion but had not received certificate of occupancy as of September 30, 2017. See Note 4, Fair Value of Financial Instruments, for information regarding recognition of entrepreneurial profit.
(4)	These investments contain a higher loan-to-cost ratio and a higher interest rate, some of which interest is payment-in-kind ("PIK") interest. The PIK interest, computed at the contractual rate specified in each debt agreement, is periodically added to the principal balance of the debt and is recorded as interest income. Thus, the actual collection of this interest may be deferred until the time of debt principal repayment.

The following table provides a reconciliation of the funded principal to the fair market value of investments at September 30, 2017:

Funded principal	$	173,713
Adjustments:
Unamortized origination fees		(3,627)
Change in fair value of investments		24,528
Other		(84)
Fair value of investments	$	194,530

As of December 31, 2016, the aggregate committed principal amount of the Company’s investment portfolio was approximately $141.9 million and outstanding principal was $86.9 million, as described in more detail in the table below:

	Metropolitan					Remaining
	Statistical Area	Total Investment		Funded		Unfunded
Closing Date	("MSA")	Commitment		Investment (1)		Commitment		Fair Value
Development property investments:
Loan investments with a profits interest:
4/21/2015	Orlando 1 (2) (5)	$	5,372	$	5,308	$	64	$	7,302
6/10/2015	Atlanta 1 (2)		8,132		7,694		438		10,404
6/19/2015	Tampa (2)		5,369		5,285		84		6,279
6/26/2015	Atlanta 2 (2)		6,050		5,620		430		8,900
6/29/2015	Charlotte 1 (2)		7,624		6,842		782		9,853
7/2/2015	Milwaukee (2)		7,650		5,608		2,042		7,008
7/31/2015	New Haven (2)		6,930		5,257		1,673		6,730
8/10/2015	Pittsburgh (3)		5,266		3,497		1,769		4,551
8/14/2015	Raleigh		8,792		1,460		7,332		1,396
9/30/2015	Jacksonville 1 (2)		6,445		5,852		593		7,962
10/27/2015	Austin (3)		8,658		4,366		4,292		5,192
9/20/2016	Charlotte 2		12,888		1,446		11,442		1,298
11/17/2016	Orlando 2 (5)		5,134		1,342		3,792		1,237
11/17/2016	Jacksonville 2		7,530		624		6,906		551
		$	101,840	$	60,201	$	41,639	$	78,663
Construction loans:
8/5/2015	West Palm Beach (4)		7,500		6,712		788		6,702
8/5/2015	Sarasota (4)		4,792		3,485		1,307		3,473
12/23/2015	Miami		17,733		6,517		11,216		6,264
		$	30,025	$	16,714	$	13,311	$	16,439
	Subtotal	$	131,865	$	76,915	$	54,950	$	95,102
Operating property loans:
6/19/2015	New Orleans (4)		2,800		2,800		-		2,768
7/7/2015	Newark		3,480		3,480		-		3,441
10/30/2015	Nashville (4)		1,210		1,210		-		1,204
12/22/2015	Chicago		2,502		2,500		2		2,492
	Subtotal	$	9,992	$	9,990	$	2	$	9,905
	Total investments	$	141,857	$	86,905	$	54,952	$	105,007

(1)	Represents principal balance of loan gross of origination fees.
(2)	Facility had received certificate of occupancy as of December 31, 2016. See Note 4, Fair Value of Financial Instruments, for information regarding recognition of entrepreneurial profit.
(3)	Facility had achieved at least 40% construction completion but had not received certificate of occupancy as of December 31, 2016. See Note 4, Fair Value of Financial Instruments, for information regarding recognition of entrepreneurial profit.
(4)	These investments were fully repaid during the nine months ended September 30, 2017.
(5)	In the nine months ended September 30, 2017, the Company purchased the economic rights of the Class A membership units of the limited liability companies which own these development property investments. As such, these investments are presented as self-storage real estate owned in the September 30, 2017 Consolidated Balance Sheet. See Note 7, Self-Storage Real Estate Owned, for additional discussion.

The following table provides a reconciliation of the funded principal to the fair market value of investments at December 31, 2016:

Funded principal	$	86,905
Adjustments:
Unamortized origination fees		(1,056)
Change in fair value of investments		19,242
Other		(84)
Fair value of investments	$	105,007

The Company has elected the fair value option of accounting for all of its investment portfolio investments in order to provide stockholders and others who rely on the Company’s financial statements with a more complete and accurate understanding of the Company’s economic performance, including its revenues and value inherent in its equity participation in development projects. See Note 4, Fair Value of Financial Instruments, for additional disclosure on the valuation methodology and significant assumptions.

No loans were in non-accrual status as of September 30, 2017 and December 31, 2016.

All of the Company’s development property investments with a profits interest would have been accounted for under the equity method had the Company not elected the fair value option. For these development property investments with a profits interest, the assets and liabilities of the equity method investees totaled approximately $188.2 million and $156.7 million, respectively, at September 30, 2017 and totaled approximately $71.0 million and $60.2 million, respectively, at December 31, 2016. These investees had revenues of approximately $2.2 million and a net operating income, excluding depreciation and interest expense, of approximately $0.2for thenine months ended September 30, 2017. These investees had revenues of approximately $0.3 million and a net operating loss, excluding depreciation and interest expense, of approximately $0.6million for the nine months ended September 30, 2016. For the nine months ended September 30, 2017, the total income (interest income and change in fair value) from one development property investment with a profits interest exceeded 20% of the Company’s net income. The Company recorded total income for the nine months ended September 30, 2017 of $4.1 million from the New York City 1 MSA development property investment with a profits interest.

For 11 of the Company’s development property investments with a profits interest, an investor has an option to put its interest to the Company upon the event of default of the underlying property loans. The put, if exercised, requires the Company to purchase the member’s interest at the original purchase price plus a yield of 4.5% on such purchase price. The Company concluded that the likelihood of loss is remote and assigned no value to these put provisions as of September 30, 2017.

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FAIR VALUE OF FINANCIAL INSTRUMENTS

9 Months Ended

Sep. 30, 2017

FAIR VALUE OF FINANCIAL INSTRUMENTS [Abstract]

FAIR VALUE OF FINANCIAL INSTRUMENTS

4. FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value option under ASC 825-10 allows companies to elect to report selected financial assets and liabilities at fair value. The Company has elected the fair value option of accounting for its development property investments and operating property loan investments in order to provide stockholders and others who rely on the Company’s financial statements with a more complete and accurate understanding of the Company’s economic performance, including its revenues and value inherent in its equity participation in self-storage development projects.

The Company applies ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), which defines fair value, establishes a framework for measuring fair value in accordance with GAAP and expands disclosure of fair value measurements. ASC 820 defines fair value as the price that would be received for an investment in a current sale, which assumes an orderly transaction between market participants on the measurement date. ASC 820 requires the Company to assume that the investment is sold in its principal market to market participants or, in the absence of a principal market, the most advantageous market, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact. In accordance with ASC 820, the Company considers its principal market as the market for the purchase and sale of self-storage properties, which the Company believes would be the most likely market for the Company’s loan investments given the nature of the collateral securing such loans and the types of borrowers. ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. In accordance with ASC 820, these inputs are summarized in the three broad levels listed below:

Level 1 - Quoted prices for identical assets or liabilities in an active market.

Level 2 - Financial assets and liabilities whose values are based on the following: (i) Quoted prices for similar assets or liabilities in active markets; (ii) Quoted prices for identical or similar assets or liabilities in non-active markets; (iii) Pricing models whose inputs are derived principally from or corroborated by observable market data for substantially the full term of the asset or liability.

Level 3 - Prices or valuation techniques based on inputs that are both unobservable and significant to the overall fair value measurement.

The carrying values of cash, other loans, receivables, senior loan participations and payables approximate their fair values due to their short-term nature or due to a variable interest rate. Cash, receivables, and payables are categorized as Level 1 instruments in the measurement of fair value. Other loans and senior loan participations are categorized as Level 2 instruments in the measurement of fair value as the fair values of these investments are determined using a discounted cash flow model with inputs from third-party pricing sources and similar instruments. The table below summarizes the valuation techniques and inputs used to measure the fair value of items categorized in Level 3 of the fair value hierarchy.

Instrument	Valuation technique and assumptions	Hierarchy classification
Development property investments	Valuations are determined using an Income Approach analysis, using the discounted cash flow method model, capturing the prepayment penalty / call price schedule as applicable. The valuation models are calibrated to the total investment net drawn amount as of the issuance date.	Level 3
Development property investments with a profits interest  (a)	Valuations are determined using an Income Approach analysis, using the discounted cash flow method model, capturing the prepayment penalty / call price schedule as applicable. The valuation models are calibrated to the total investment net drawn amount as of the issuance date factoring in the value of the profits interests.	Level 3
	An option-pricing method (OPM) framework is utilized to calculate the value of the profits interests.
Operating property loans	Valuations are determined using an Income Approach analysis, using the discounted cash flow method model, capturing the prepayment penalty / call price schedule as applicable.	Level 3

(a) Certain of the Company's development property investments include profits interests.

The Company’s development property investments and operating property loan investments are valued using two different valuation techniques. The first valuation technique is an income approach analysis of the debt instrument components of the Company’s investments. The second valuation technique is an option pricing model that is used to determine the fair value of any profits interests associated with an investment. The valuation models are calibrated to the total investment net drawn amount as of the issuance date factoring in the value of the profits interests. At the issuance date of each development property investment, generally the value of the property underlying such investment approximates the sum of the net investment drawn amount plus the developer’s equity investment.

For development property investments with a profits interest, at a certain stage of construction, the option pricing method incorporates an adjustment to measure entrepreneurial profit. Entrepreneurial profit is a monetary return above total construction costs that provides compensation for the risk of a development project. Under this method, the value of each property is estimated based on the cost incurred to date, plus an estimated earned entrepreneurial profit. Total entrepreneurial profit is estimated as the difference between the projected value of a property at stabilization and the total development costs, including land, building improvements, and lease-up costs. Utilizing information obtained from the market coupled with the Company’s own experience, the Company has estimated that in most cases, approximately one-third of the entrepreneurial profit is earned during the construction period beginning when construction is approximately 40% complete and ending when construction is 100% complete, and approximately two-thirds of the entrepreneurial profit is earned from construction completion through stabilization. For the three propertiesbetween 40% and 100% complete at September 30, 2017, the Company has estimated the entrepreneurial profit adjustment to the enterprise value input used in the option pricing model to be equal to one-third of the estimated entrepreneurial profit, allocated on a straight-line basis. Ten properties had reached construction completion at September 30, 2017. For the Company’s development property investments at or around completion of construction, a discounted cash flow model, based on periodically updated estimates of rental rates, occupancy and operating expenses, is the primary method for projecting value of a project. The Company also will consider inputs such as appraisals that differ from the developer’s equity investment, bona fide third-party offers to purchase development projects, sales of development projects, or sales of comparable properties in its markets.

Level 3 Fair Value Measurements

The following tables summarize the significant unobservable inputs the Company used to value its investments categorized within Level 3 as of September 30, 2017 and December 31, 2016. These tables are not intended to be all-inclusive, but instead to capture the significant unobservable inputs relevant to the Company’s determination of fair values.

As of September 30, 2017
		Unobservable Inputs
	Primary Valuation			Weighted
Asset Category	Techniques	Input	Estimated Range	Average
Development property investments (a)	Income approach analysis	Market yields/discount rate	7.72 - 10.37%	8.72%
		Exit date	0.33 - 6.96 years	2.87 years
Development property investments with a profits interest (b)	Option pricing model	Volatility	63.82 - 93.54%	73.85%
		Exit date	0.67 - 6.96 years	3.02 years
		Capitalization rate (c)	5.35 - 6.00%	5.50%
		Discount rate	8.35 - 9.00%	8.50%
Operating property loans	Income approach analysis	Market yields/discount rate	5.86 - 6.76%	6.24%
		Exit date (d)	4.23 - 4.91 years	4.62 years

(a)	The valuation technique for the development property investments with a profits interest does not differ from the development property investments without a profits interest. Therefore, this line item focuses on all development property investments, including those with a profits interest.
(b)	The valuation technique for the development property investments with a profits interest does not differ from the development property investments without a profits interest. The development property investments with a profits interest only require incremental valuation techniques to determine the value of the profits interest. Therefore this line only focuses on the profits interest valuation.
(c)	Thirteen properties were 40% - 100% complete, thus requiring a capitalization rate to derive entrepreneurial profit. Capitalization rates are estimated based on current data derived from independent sources in the markets in which the Company holds investments.
(d)	The exit dates for the operating property loans are the contractual maturity dates.

As of December 31, 2016
		Unobservable Inputs
	Primary Valuation			Weighted
Asset Category	Techniques	Input	Estimated Range	Average
Development property investments (a)	Income approach analysis	Market yields/discount rate	7.23 - 9.28%	8.34%
		Exit date	0.17 - 3.88 years	1.81 years
Development property investments with a profits interest (b)	Option pricing model	Volatility	68.72 - 73.46%	73.17%
		Exit date	1.42 - 3.88 years	2.12 years
		Capitalization rate (c)	5.25 - 5.50%	5.47%
		Discount rate	8.25 - 8.50%	8.47%
Operating property loans	Income approach analysis	Market yields/discount rate	6.09 - 7.20%	6.73%
		Exit date (d)	4.50 - 5.66 years	5.07 years

(a)	The valuation technique for the development property investments with a profits interest does not differ from the development property investments without a profits interest. Therefore, this line item focuses on all development property investments, including those with a profits interest.
(b)	The valuation technique for the development property investments with a profits interest does not differ from the development property investments without a profits interest. The development property investments with a profits interest only require incremental valuation techniques to determine the value of the profits interest. Therefore this line only focuses on the profits interest valuation.
(c)	Ten properties were 40% - 100% complete, thus requiring a capitalization rate to derive entrepreneurial profit. Capitalization rates are estimated based on current data derived from independent sources in the markets in which the Company holds investments.
(d)	The exit dates for the operating property loans are the contractual maturity dates.

The fair value measurements are sensitive to changes in unobservable inputs. A change in those inputs to a different amount might result in a significantly higher or lower fair value measurement. The following provides a discussion of the impact of changes in each of the unobservable inputs on the fair value measurement.

Market yields - changes in market yields and discount rates, each in isolation, may change the fair value of certain of the Company’s investments. Generally, an increase in market yields or discount rates may result in a decrease in the fair value of certain of the Company’s investments. The following fluctuations in the market yields/discount rates would have had the following impact on the fair value of our investments:

	Increase (decrease) in fair value of investments
Change in market yields/discount rates (in millions)	September 30, 2017		December 31, 2016
Up 25 basis points	$	(0.9)	$	(0.3)
Down 25 basis points, subject to a minimum yield/rate of 10 basis points		1.0		0.3

Capitalization rate - changes in capitalization rate, in isolation and all else equal, may change the fair value of certain of the Company’s development investments containing profits interests. Generally an increase in the capitalization rate assumption may result in a decrease in the fair value of the Company’s investments. The following fluctuations in the capitalization rates would have had the following impact on the fair value of our investments:

	Increase (decrease) in fair value of investments
Change in capitalization rates (in millions)	September 30, 2017		December 31, 2016
Up 25 basis points	$	(2.5)	$	(2.1)
Down 25 basis points		2.7		2.3
Up 50 basis points		(4.8)		(3.8)
Down 50 basis points		5.8		4.6

Exit date - changes in exit date, in isolation and all else equal, may change the fair value of certain of the Company’s investments that have profits interests. Generally, an acceleration in the exit date assumption may result in an increase in the fair value of the profits interests in certain of the Company’s investments.

Volatility - changes in volatility, in isolation and all else equal, may change the fair value of certain of the Company’s investments that have profits interests. Generally, an increase in volatility may result in an increase in the fair value of the profits interests in certain of the Company’s investments.

Operating cash flow projections - changes in the operating cash flow projections of the underlying self-storage facilities, in isolation and all else equal, may change the fair value of certain of the Company’s investments that have profits interests. Generally, an increase in operating cash flow projections may result in an increase in the fair value of the profits interests in certain of the Company’s investments.

The Company also evaluates the impact of changes in instrument-specific credit risk in determining the fair value of investments. There were no gains or losses attributable to changes in instrument-specific credit risk in the three and nine months ended September 30, 2017 and 2016.

Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may fluctuate from period to period. Additionally, the fair value of the Company’s investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that the Company may ultimately realize. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If the Company was required to liquidate an investment in a forced or liquidation sale, it could realize significantly less than the value at which the Company has recorded it. In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected in the valuations currently assigned. 

The following table presents changes in investments that use Level 3 inputs for the nine month period ended September 30, 2017:

Balance at December 31, 2016	$	105,007
Net realized gains		-
Net unrealized gains		9,066
Fundings of principal and change in unamortized origination fees		110,600
Repayments of loans		(22,746)
Payment-in-kind interest		5,522
Reclassification of self-storage real estate owned		(12,919)
Net transfers in or out of Level 3		-
Balance at September 30, 2017	$	194,530

As of September 30, 2017 and December 31, 2016, the total net unrealized appreciation on the investments that use Level 3 inputs was $24.5 million and $19.2 million, respectively.

For the three and nine months ended September 30, 2017 and 2016, substantially all of the change in fair value of investments in the Company’s Consolidated Statements of Operations was attributable to unrealized gains relating to the Company’s Level 3 assets still held as of the respective balance sheet date.

Transfers between levels, if any, are recognized at the beginning of the quarter in which the transfers occur.

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INVESTMENT IN REAL ESTATE VENTURE

9 Months Ended

Sep. 30, 2017

INVESTMENT IN REAL ESTATE VENTURE [Abstract]

INVESTMENT IN REAL ESTATE VENTURE

5. INVESTMENT IN REAL ESTATE VENTURE

On March 7, 2016, the Company, through its Operating Company, entered into the Limited Liability Company Agreement (the “JV Agreement”) of Storage Lenders LLC, a Delaware limited liability company, to form a real estate venture (the “SL1 Venture”) with HVP III Storage Lenders Investor, LLC (“HVP III”), an investment vehicle managed by Heitman Capital Management LLC (“Heitman”). The SL1 Venture was formed for the purpose of providing capital to developers of self-storage facilities identified and underwritten by the Company. Upon formation, HVP III committed $110.0 million for a 90% interest in the SL1 Venture, and the Company committed $12.2 million for a 10% interest.

On March 31, 2016, the Company contributed to the SL1 Venture three of its existing development property investments with a profits interest located in Miami and Fort Lauderdale, Florida that were not yet under construction. These investments had an aggregate committed principal amount of approximately $41.9 million and an aggregate drawn balance of $8.1 million. In exchange, the Company’s initial funding commitment of $12.2 million was reduced by $8.1 million, representing the Company’s initial “Net Invested Capital” balance as defined in the JV Agreement. The Company accounted for this contribution in accordance with ASC 845, Nonmonetary Transactions, and recorded an investment in the SL1 Venture based on the fair value of the contributed development property investments, which is the same as carryover basis. The fair value of the contributed development property investments as of March 31, 2016 was $7.7 million. Pursuant to the JV Agreement, Heitman, in fulfilling its initial $110.0 million commitment, provides capital to the SL1 Venture as cash is required, including funding draws on the three contributed development property investments. During the year ended December 31, 2016, HVP III and the Company agreed to true up the balances in the respective members’ capital accounts to be in accordance with the 90% commitment and 10% commitment made by HVP III and the Company, respectively. Accordingly, during the year ended December 31, 2016, HVP III contributed cash of $7.3 million to the SL1 Venture, and the Company received a $7.3 million cash distribution as a return of its capital.

As of September 30, 2017, the SL1 Venture had closed on eight new development property investments with a profits interest with an aggregate commitment amount of approximately $81.4 million, bringing the total aggregate commitment of the SL1 Venture’s investments to $123.3 million as of September 30, 2017. Accordingly, HVP III’s total commitment for a 90% interest in the SL1 Venture is $111.0 million, and the Company’s total commitment for a 10% interest in the SL1 Venture is $12.3 million.

Under the JV Agreement, the Company receives a priority distribution (after debt service and any reserve but before any other distributions) out of operating cash flow and residual distributions based upon 1% of the committed principal amount of loans made by the SL1 Venture, exclusive of the loans contributed to the SL1 Venture by the Company. Operating cash flow of the SL1 Venture (after debt service, reserves and the foregoing priority distributions) is distributed in accordance with capital commitments. Residual cash flow from capital and other events (after debt service, reserves and priority distributions) will be distributed (i) pro rata in accordance with capital commitments (its “Percentage Interest”) until each member has received a return of all capital contributed; (ii) pro rata in accordance with each member’s Percentage Interest until Heitman has achieved a 14% internal rate of return; (iii) to Heitman in an amount equal to its Percentage Interest less 10% and to the Company in an amount equal to the Company’s Percentage Interest plus 10% until Heitman has achieved a 17% internal rate of return; (iv) to Heitman in an amount equal to its Percentage Interest less 20% and to the Company in an amount equal to the Company’s Percentage Interest plus 20% until Heitman has achieved a 20% internal rate of return; and (v) any excess to Heitman in an amount equal to its Percentage Interest less 30% and to the Company in an amount equal to the Company’s Percentage Interest plus 30%. However, the Company will not be entitled to any such promoted interest prior to the earlier to occur of the third anniversary of the JV Agreement and Heitman receiving distributions to the extent necessary to provide Heitman with a 1.48 multiple on its contributed capital.

Since the allocation of cash distributions and liquidating distributions are determined as described in the preceding paragraph, the Company has applied the hypothetical-liquidation-at-book-value (“HLBV”) method to allocate the earnings of the SL1 Venture. Under the HLBV approach, the Company’s share of the investee’s earnings or loss is calculated by:

 The Company’s capital account at the end of the period assuming that the investee was liquidated or sold at book value, plus

 Cash distributions received by the Company during the period, minus

 Cash contributions made by the Company during the period, minus

 The Company’s capital account at the beginning of the period assuming that the investee were liquidated or sold at book value.

The SL1 Venture has elected the fair value option of accounting for its development property investments with a profits interest, which are equity method investments of the SL1 Venture. The assumptions used to value the SL1 Venture’s investments are materially consistent with those used to value the Company’s investments. As of September 30, 2017,  the SL1 Venture had eleven development property investments with a profits interest as described in more detail in the table below:

	Metropolitan					Remaining
	Statistical Area	Total Investment		Funded		Unfunded
Closing Date	("MSA")	Commitment		Investment (1)		Commitment		Fair Value
5/14/2015	Miami 1 (2) (3)	$	13,867	$	9,455	$	4,412	$	10,929
5/14/2015	Miami 2 (2) (3)		14,849		8,486		6,363		8,947
9/25/2015	Fort Lauderdale (2) (3)		13,230		7,298		5,932		7,796
4/15/2016	Washington DC (4)		17,269		14,346		2,923		15,937
4/29/2016	Atlanta 1 (3)		10,223		5,140		5,083		5,459
7/19/2016	Jacksonville (4)		8,127		6,989		1,138		10,541
7/21/2016	New Jersey		7,828		1,621		6,207		1,561
8/15/2016	Atlanta 2 (4)		8,772		6,535		2,237		7,423
8/25/2016	Denver (3)		11,032		7,605		3,427		8,678
9/28/2016	Columbia (4)		9,199		7,651		1,548		8,525
12/22/2016	Raleigh		8,877		2,431		6,446		2,398
	Total	$	123,273	$	77,557	$	45,716	$	88,194

(1)	Represents principal balance of loan gross of origination fees.
(2)	These development property investments (having approximately $8.1 million of outstanding principal at contribution) were contributed to the SL1 Venture on March 31, 2016 by the Company.
(3)	Facility had achieved at least 40% construction completion but had not received certificate of occupancy as of September 30, 2017. See Note 4, Fair Value of Financial Instruments, for information regarding recognition of entrepreneurial profit.
(4)	Facility had received certificate of occupancy as of September 30, 2017. See Note 4, Fair Value of Financial Instruments, for information regarding recognition of entrepreneurial profit.

As of September 30, 2017, the SL1 Venture had total assets of $88.8 million and total liabilities of $3.6 million. During the three and nine months ended September 30, 2017, the SL1 Venture had net income of $6.6 million and $14.1 million, of which $0.7 million and $1.7 million was allocated to the Company and $5.8 million and $12.4 million was allocated to HVP III, respectively, under the HLBV method. At September 30, 2017,  $0.2 million of transaction expenses were included in the carrying amount of the Company’s investment in the SL1 Venture. Additionally, the Company may from time to time make advances to the SL1 Venture. At September 30, 2017 and December 31, 2016, the Company had $3.5 million and $2.3 million, respectively, in advances to the SL1 Venture, and the related interest on these advances are classified in equity in earnings from unconsolidated real estate venture in the Consolidated Statements of Operations.

In accordance with the JV Agreement, for each development property investment, the borrower must deliver to the SL1 Venture a completion guarantee whereby the borrower agrees to cover all costs in excess of the agreed-upon budget amount. Additionally, the Company is required to deliver to the SL1 Venture a backstop completion guarantee for each development property investment to guarantee completion in the event the borrower does not satisfy its obligations. The Company concluded that the likelihood of loss is remote and assigned no value to these guarantees as of September 30, 2017.

Under the JV Agreement, Heitman and the Company seek to obtain and, if obtained, share joint rights of first refusal to acquire self-storage facilities that are the subject of development property investments made by the SL1 Venture. Additionally, so long as the Company, through its operating subsidiary, is a member of the SL1 Venture and the SL1 Venture holds any assets, the Company will not make any investment of debt or equity or otherwise, directly or indirectly, in one or more new joint ventures or similar programs for the purposes of funding or providing development loans or financing, directly or indirectly, for the development, construction or conversion of self-storage facilities, in each case without first offering such opportunity to Heitman to participate on substantially the same terms as those set forth in the JV Agreement, either through the SL1 Venture or a newly formed real estate venture.

The JV Agreement permits Heitman to cause the Company to repurchase from Heitman its Developer Equity Interests (as defined in the JV Agreement) in certain limited circumstances. Under the JV Agreement, if a developer causes to be refinanced a self-storage facility with respect to which the SL1 Venture has made a development property investment and such refinancing does not coincide with a sale of the underlying self-storage facility, then at any time after the fourth anniversary of the commencement of the SL1 Venture, Heitman may either put to the Company its share of the Developer Equity Interests in respect of each such development property investment, or sell Heitman’s Developer Equity Interests to a third party. The Company concluded that the likelihood of loss is remote and assigned no value to these puts as of September 30, 2017.

The Company is the managing member of the SL1 Venture and manages and administers (i) the day-to-day business and affairs of the SL1 Venture and any of its acquired properties and (ii) loan servicing and other administration of the approved development property investments. The Company will be paid a monthly expense reimbursement amount by the SL1 Venture in connection with its role as managing member, as set forth in the JV Agreement. Heitman may remove the Company as the managing member of the SL1 Venture if it commits an event of default (as defined in the JV Agreement), if it undergoes a change of control (as defined in the JV Agreement), or if it becomes insolvent.

Heitman approves all “Major Decisions” of the SL1 Venture, as defined in the JV Agreement, including, but not limited to, each investment of capital, the incurrence of any indebtedness, the sale or other disposition of assets of the SL1 Venture, the replacement of the managing member, the acceptance of new members into the SL1 Venture and the liquidation of the SL1 Venture.

For four of the SL1 Venture development property investments with a profits interest, an investor has an option to put its interest to the Company upon the event of default of the underlying property loans. The put options, if exercised, require the Company to purchase the member’s interest at the original purchase price plus a yield of 4.5% on such purchase price. The Company concluded that the likelihood of loss is remote and assigned no value to these put options at September 30, 2017.

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VARIABLE INTEREST ENTITIES

9 Months Ended

Sep. 30, 2017

VARIABLE INTEREST ENTITIES [Abstract]

VARIABLE INTEREST ENTITIES

6. VARIABLE INTEREST ENTITIES

Development Property Investments

The Company holds variable interests in its development property investments. The Company has determined that these investees qualify as VIEs because the entities do not have enough equity to finance their activities without additional subordinated financial support. In determining whether the Company is the primary beneficiary of the development property VIEs, the Company identified the activities that most significantly impact thedevelopment property VIEs’ economic performance. Such activities are (1) managing the construction and operations of the project, (2) selecting the property manager, (3) making financing decisions, (4) authorizing capital expenditures and (5) disposing of the property. Although the Company has certain participating and protective rights, it does not have the power to direct the activities that most significantly impact thedevelopment property VIEs’ economic performance and is not the primary beneficiary; therefore, the Company does not consolidate thedevelopment property VIEs.

The Company has recorded assets of $188.5 million and $95.1 million at September 30, 2017 and December 31, 2016, respectively, for its variable interest in the development property VIEs which is included in the development property investments at fair value line item in the Consolidated Balance Sheets. The Company’s maximum exposure to loss as a result of its involvement with the development property VIEs is as follows:

	September 30, 2017		December 31, 2016
Assets recorded related to VIEs	$	188,540	$	95,102
Unfunded loan commitments to VIEs		247,495		54,950
Maximum exposure to loss	$	436,035	$	150,052

The Company has a construction completion guaranty from the managing members of the development property VIEs or individual affiliates/owners of such managing members.

Investment in Real Estate Venture

The Company determined that the SL1 Venture qualifies as a VIE because it does not have enough equity to finance its activities without additional subordinated financial support. In determining whether the Company is the primary beneficiary of the entity, the Company identified the activities that most significantly impact the entity’s economic performance. Such activities are (1) approving self-storage development investments and acquiring self-storage properties, (2) managing directly-owned properties, (3) obtaining debt financing, and (4) disposing of investments. Although the Company has certain rights, it does not have the power to direct the activities that most significantly impact the entity’s economic performance and thus is not the primary beneficiary. As such, the Company does not consolidate the entity and accounts for its unconsolidated interest in the SL1 Venture using the equity method of accounting. The Company’s investment in the SL1 Venture is included in the investment in and advances to real estate venture balance in the Consolidated Balance Sheets, and earnings from the SL1 Venture are included in equity in earnings from unconsolidated real estate venture in the Company’s Consolidated Statements of Operations. The Company’s maximum contribution to the SL1 Venture is $12.3 million, and as of September 30, 2017 and December 31, 2016, the Company’s remaining unfunded commitment to the SL1 Venture is $4.5 million and $9.4 million, respectively.

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SELF-STORAGE REAL ESTATE OWNED

9 Months Ended

Sep. 30, 2017

INVESTMENT IN REAL ESTATE VENTURE [Abstract]

SELF-STORAGE REAL ESTATE OWNED

7. SELF-STORAGE REAL ESTATE OWNED

On February 3, 2017, the Company purchased 50% of the economic rights of the Class A membership units of a limited liability company that owns the Orlando 1 development property investment with a profits interest for $1.3 million and increased its profits interest on this development property investment from 49.9% to 74.9%. The Class A member retained all management and voting rights in the limited liability company. Previously, the Company accounted for this investment as an equity method investment. Because the Company was entitled to greater than 50% of the residual profits from the investment, the Company accounted for this investment as a real estate investment in its consolidated financial statements in accordance with ASC 310.

On August 9, 2017, the Company purchased the remaining 50% of the economic rights of the Class A membership units of a limited liability company that owns the Orlando 1 development property investment with a profits interest and 100% of the economic rights of the Class A membership units of a limited liability company that owns the Orlando 2 development property investment with a profits interest for $1.6 million and increased its profits interest on these development property investment from 74.9% to 100% and 49.9% to 100%, respectively. The Orlando 2 investment is an additional phase to the Orlando 1 investment that is being operated as one self-storage facility. The Company now owns all management and voting rights in the limited liability companies. Previously, the Company accounted for the Orlando 1 investment as a real estate investment and the Orlando 2 investment as an equity method investment. Because the Company is now entitled to greater than 50% of the residual profits from the Orlando 2 investment, the Company will account for this investment as a real estate investment in its consolidated financial statements. The Company will continue to account for the Orlando 1 investment as a real estate investment. Accordingly, as of August 9, 2017, the Company wholly owns and fully consolidates these investments in the accompanying consolidated financial statements.

The Company evaluated this purchase under ASU 2017-01 and concluded that the transaction consisted of a single identifiable asset that represents substantially all of the fair value of the gross assets acquired. Therefore, this transaction does not constitute the purchase of a business and has been treated as an asset acquisition.

In accordance with ASU 2017-01, as of August 9, 2017, the Company’s basis in the self-storage real estate owned is recorded at cost (equal to the cash consideration paid and the funded loan balance, net of unamortized origination fees), plus unrealized gains recorded at the date of acquisition, which was February 3, 2017 for the Orlando 1 development property investment and August 9, 2017 for the Orlando 2 development property investment. The allocation to the basis of the assets acquired is based on their relative fair values.

The following table shows the Company’s basis in this facility as of August 9, 2017:

Funded principal balance, net of unamortized origination fees	$	9,139
Unrealized appreciation on investments		3,780
Cash consideration paid		2,856
Net property working capital acquired		52
Total cost basis	$	15,827

The following table shows the impact of this real estate investment on the Company’s Consolidated Balance Sheet as of September 30, 2017:

	September 30, 2017
Cash and cash equivalents	$	60
Prepaid expenses and other assets		2
Land		1,505
Building and improvements		13,720
In-place leases		602
Accumulated depreciation and amortization		(233)
Self-storage real estate owned	$	15,594
Accounts payable, accrued expenses and other liabilities	$	125

The following table shows the impact of this real estate investment on the Company’s Consolidated Statement of Operations for the three and nine months ended September 30, 2017:

	Three months ended		Nine months ended
	September 30, 2017		September 30, 2017
Rental revenues	$	160	$	328
Property operating expenses of real estate owned		(114)		(188)
Depreciation and amortization expense		(172)		(233)
Total expenses of real estate owned	$	(286)	$	(421)

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OTHER LOANS, AT COST

9 Months Ended

Sep. 30, 2017

OTHER LOANS, AT COST [Abstract]

OTHER LOANS, AT COST

8. OTHER LOANS, AT COST

As of September 30, 2017, the Company had no outstanding bridge loans. During the nine months ended September 30, 2017, the Company received repayments of $17.4 million related to seven bridge loans and entered into two new bridge loans with an aggregate commitment and funded amount of $7.3 million, which are included in the seven bridge loans repaid during the year. At December 31, 2016, the Company had executed five bridge loans with a balance of $10.1 million extended to four limited liability companies that are under common control with borrowers in certain of the Company’s development property investments. These bridge loans were accounted for under the cost method, and fair value approximates cost at December 31, 2016. None of these bridge loans were in non-accrual status as of December 31, 2016. The Company determined that no allowance for loan loss was necessary at December 31, 2016.

The Company also had executed eight revolving loan agreements with an aggregate outstanding principal amount of $1.4 million at September 30, 2017. Seven of the agreements are with individuals who are owners of limited liability companies, one is with a limited liability company, and all are personally guaranteed. Seven of these borrowers are either directly or indirectly owners of certain of the Company’s development property investments and one is a prospective developer. Four of the agreements provide for borrowings of up to $0.5 million, one provides for borrowings of up to $0.1 million, one provides for borrowings of up to $0.4 million, one provides for borrowings of up to $0.7 million, and one agreement provides for borrowings of up to $1.0 million (total of $4.2 million) to fund expenses for pursuit costs to contract for and perform diligence on additional self-storage sites. The revolving loans are typically unsecured but cross-defaulted against development loans. One of the revolving loans is guaranteed by a part owner of one of the Company’s development loan investments, and this guaranty is secured by a pledge of the owner’s membership interest in one of the Company’s development loan investments. The loans bear interest at 6.9 - 7.0% per annum and are due in full in three years. During the nine months ended September 30, 2017, the Company received repayments on these revolving loan agreements of $2.9 million and draws of $2.6 million. At December 31, 2016, the Company had executed six revolving loan agreements with an aggregate outstanding principal amount of $1.7 million. These loans are accounted for under the cost method, and fair value approximates cost at September 30, 2017 and December 31, 2016. None of these loans are in non-accrual status as of September 30, 2017 and December 31, 2016. The Company determined that no allowance for loan loss was necessary at September 30, 2017 and December 31, 2016.

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DEBT

9 Months Ended

Sep. 30, 2017

DEBT [Abstract]

DEBT

9. DEBT

Credit Facility

On July 25, 2017, the Operating Company entered into a  $100 million senior secured revolving credit facility with KeyBank National Association, as administrative agent, KeyBanc Capital Markets Inc., as lead arranger, and the other lenders party thereto (the “Credit Facility”). Pursuant to an accordion feature, the Operating Company may from time to time increase the commitments up to an aggregate amount of $200 million, subject to, among other things, an absence of default under the Credit Facility, as well as receiving commitments from lenders for the additional amounts. At closing, the Operating Company borrowed $20.0 million of the $33.3 million then available under the Credit Facility. The Company used the proceeds to repurchase senior participation interests outstanding on five of the Company’s development investments from the commercial banks who held such senior participation interests, each of whom agreed to participate as lenders in the Credit Facility, and to pay fees and expenses of procuring the Credit Facility. On July 26, 2017, the Operating Company used proceeds from the Company’s recently completed offering of its common stock to fully repay the $20.0 million borrowed at closing, leaving $33.3 million available under the credit facility for future draws. The Operating Company intends to use future borrowings under the Credit Facility to fund its investments, to make secured or unsecured loans to borrowers in connection with its investments and for general corporate purposes.

On July 25, 2017, the Company and certain wholly-owned subsidiaries of the Operating Company entered into an Unconditional Guaranty of Payment and Performance whereby they have agreed to unconditionally guarantee the obligations of the Operating Company under the Credit Facility. The Credit Facility is secured by substantially all of the Company’s development investments, and other subsidiaries of the Operating Company may be added as guarantors from time to time during the term of the Credit Facility. The Credit Facility has a scheduled maturity date on July 24, 2020. Borrowings under the Credit Facility are secured by two different pools of collateral: one consisting of the Company’s mortgage loans extended to developers and the other consisting of self-storage properties owned by the Company.

The amount available to borrow under the Credit Facility is limited according to a borrowing base valuation of the assets available as collateral. For loans secured by Company mortgage loans, the borrowing base availability is the lesser of (i) 60% of the value of the Company mortgage loans, (ii) the maximum principal amount which would not cause the outstanding loans under the Credit Facility secured by the Company mortgage loans to be greater than 50% of the underlying real estate asset fair value securing the Company mortgage loans and (iii) for any Company mortgage loan that has been included in the borrowing base for greater than 18 months, the maximum principal amount which would not cause the ratio of (a) adjusted net operating income for the underlying real estate asset securing such Company mortgage loan divided by (b) an implied debt service amount to be less than 1.30 to 1.00. For loans secured by self-storage properties, the borrowing base availability is the lesser of (i) the maximum principal amount that would not cause the outstanding loans under the Credit Facility secured by self-storage properties to be greater than 65% of the value of such self-storage properties and (ii) the maximum principal amount that would not cause the ratio of (i) aggregate adjusted net operating income from all self-storage properties included in the borrowing base divided by (ii) an implied debt service coverage amount to be less than 1.30 to 1.00.

The Credit Facility includes certain requirements that may limit the borrowing capacity available to the Company from time to time. Under the terms of the Credit Facility, the outstanding principal balance of the revolving credit loans, swing loans and letter of credit liabilities under the Credit Facility may not exceed the borrowing base availability.

Each loan made under the Credit Facility will bear interest at either, at the Operating Company’s election, a base rate plus a margin of either 1.75% or 2.75% or LIBOR plus a margin of either 2.75% or 3.75%, in each case depending on the borrowing base available for such loan. In addition, the Operating Company is required to pay a fee of a per diem rate of 0.35% per annum, times the excess of the sum of the commitments of the lenders, as in effect from time to time, over the outstanding principal amount of revolving credit loans under the Credit Facility.

The Credit Facility contains certain customary representations and warranties and financial and other affirmative and negative covenants. The Operating Company’s ability to borrow under the Credit Facility is subject to ongoing compliance by the Company and the Operating Company with various customary restrictive covenants, including but not limited to limitations on its incurrence of indebtedness, investments, dividends, asset sales, acquisitions, mergers and consolidations and liens and encumbrances. In addition, the Credit Facility contains certain financial covenants including the following:

	total consolidated indebtedness not exceeding 50% of gross asset value;
	a minimum fixed charge coverage ratio (defined as the ratio of consolidated adjusted earnings before interest, taxes, depreciation and amortization to consolidated fixed charges) of 0.75 to 1.00 during the period between July 25, 2017 and June 30, 2018, 0.90 to 1 during the period between July 1, 2018 and December 31, 2018 and 1.20 to 1 during the period between January 1, 2019 through the maturity of the Credit Facility;
	a minimum consolidated tangible net worth (defined as gross asset value less total consolidated indebtedness) of $183.3 million plus 75% of the sum of any additional net offering proceeds;
	when aggregate loan commitments under the Credit Facility exceed $50 million, unhedged variable rate debt cannot exceed 25% of consolidated total indebtedness;
	liquidity of no less than $50 million for the period between July 25, 2017 and December 31, 2018 or on and after December 31, 2018, liquidity of no less than the sum of (i) total unfunded loan commitments of the Company and its subsidiaries plus (ii) $25 million; and
	a debt service coverage ratio (defined as the ratio of consolidated adjusted earnings before interest, taxes, depreciation and amortization to the Company’s consolidated interest expense and debt principal payments for any given period) of 2 to 1.

The Credit Facility provides for standard events of default, including nonpayment of principal and other amounts when due, non-performance of covenants, breach of representations and warranties, certain bankruptcy or insolvency events, and changes in control. If an event of default occurs and is continuing under the Credit Facility, the lenders may, among other things, terminate their commitments under the Credit Facility and require the immediate payment of all amounts owed thereunder.

As of September 30, 2017, no borrowings were outstanding under the Credit Facility and $33.3 million was available for borrowing under the Credit Facility.

As of September 30, 2017, the Company was in compliance with all of its financial covenants and it anticipates being in compliance with all of its financial covenants throughout the term of the Credit Facility.

Senior Participations

On April 29, 2016, the Company sold senior participations (the “Operating Property A Notes”) in two separate operating property loans in the Nashville, Tennessee and New Orleans, Louisiana MSAs, having an aggregate outstanding principal balance of $7.8 million, to a regional commercial bank in exchange for cash consideration of $5.0 million. The sale of Operating Property A Notes was effected pursuant to participation agreements between the bank and the Company (the “Participation Agreements”). On December 14, 2016, the Company received proceeds of $5.2 million for an early payoff on the operating property loan in the Nashville, Tennessee MSA, and the Company repurchased the senior participation on this loan that was included in Operating Property A Notes. The Company paid the regional commercial bank a total of $3.4 million in connection with the repurchase, which included a $0.1 million prepayment penalty that is recorded in interest expense in the Consolidated Statements of Operations. The Company paid to the bank interest on the outstanding balance of the Operating Property A Note at the rate of 30-day LIBOR plus 3.85% for the three and nine months ended September 30, 2017. On July 20, 2017, the Company received proceeds of $2.8 million for an early payoff on the remaining Operating Property A Note in the New Orleans, Louisiana MSA, and the Company repurchased the senior participation on this loan. The Company paid the regional commercial bank a total of $1.8 million in conjunction with the repurchase, which included an $18,000 prepayment penalty. As such, there was no outstanding balance for the Operating Property A Note at September 30, 2017.

On May 27, 2016, the Company sold a third senior participation in a construction loan on a facility in the Miami, Florida MSA (“the Miami A Note”), having a commitment amount of $17.7 million, to the same commercial bank that purchased the Operating Property A Notes in exchange for a commitment by the bank to provide net proceeds of $10.0 million to fund construction draws under the construction loan (the “Miami A Note Sale”) once the total outstanding principal balance exceeds $7.7 million. The Miami A Note Sale was effected pursuant to a participation agreement between the bank and the Company (the “Miami Participation Agreement”). Under the Miami Participation Agreement, the Company will continue to service the underlying loan as long as it is not in default under the Miami Participation Agreement. The bank has the option to “put” the senior participation to the Company in the event the underlying borrower defaults on the underlying loan or if the Company defaults under the Miami Participation Agreement. As part of the Participation Agreement, the Company will maintain a minimum aggregate balance of $0.5 million in depository or money market accounts at the bank, and if such balance is not maintained, the interest rate will increase. The Company will pay to the bank interest on the outstanding balance of the Miami A Note at the rate of 30-day LIBOR plus 3.10%, or 4.33% at September 30, 2017.  The Company also paid a loan fee of 100 basis points, or $0.1 million upon closing of the loan. The Miami A Note initially had a maturity date of July 1, 2017. During the nine months ended September 30, 2017, the maturity date was extended to January 31, 2018, at which time the Company is obligated to repurchase the Miami A Note at the then outstanding principal balance thereof. The outstanding balance for the Miami A Note as of September 30, 2017 was $0.7 million.

On July 26, 2016, the Company sold to a national commercial bank operating in the Company’s markets senior participations in the construction loans of four separate development property investments with a profits interest (the “July 2016 A Notes”) (one in the Orlando, Florida MSA, two in the Atlanta, Georgia MSA, and one in the Tampa, Florida MSA) having an aggregate committed principal balance of approximately $21.8 million and earning interest at a rate of 6.9% per annum, in exchange for a commitment by the bank to provide net proceeds of $14.2 million (the “July 2016 A Note Sales”). Construction has been completed and certificates of occupancy have been issued for these properties. At closing, the bank paid to the Company approximately $12.5 million for senior participations in the construction loans and will fund up to a total of $14.2 million as future draws are made on the construction loans. The Company paid interest to the bank on its senior participations at the annual rate of 30-day LIBOR plus 3.50%,  for the three and nine months endedSeptember 30, 2017. On July 25, 2017, the Company entered into the Credit Facility and subsequently repurchased the July 2016 A Notes. As such, there is no outstanding balance as of September 30, 2017.

On October 18, 2016, the Company sold to a local Memphis, Tennessee-based community bank a senior participation in the construction loan of one of the Company’s development property investments with a profits interest (the “October 2016 A Note”) in Charlotte, North Carolina having a committed principal balance of approximately $6.8 million and earning interest at a rate of 6.9% per annum, in exchange for a commitment by the bank to provide net proceeds of $4.4 million (the “October 2016 A Note Sale”). Construction has been completed and a certificate of occupancy has been issued for this property. At closing, the bank paid to the Company approximately $3.4 million for the senior participation in the construction loan and will fund up to a total of $4.4 million as future draws are made on the construction loans. The Company paid interest to the bank on the senior participation at the annual rate of 30-day LIBOR plus 3.50%,  for the three and nine months endedSeptember 30, 2017. On July 25, 2017, the Company entered into the Credit Facility and subsequently repurchased the October 2016 A Note. As such, there is no outstanding balance as of September 30, 2017.

In connection with the repurchase of the July 2016 A Notes and the October 2016 A Notes and entering into the Credit Facility, the Company recorded a loss on modification of debt of $0.2 million for the three and nine months ended September 30, 2017.

The table below details the bank commitment and outstanding balance of our senior participation at September 30, 2017:

	Commitment by Bank		Amount Borrowed		Remaining Funds		Interest Rate	Effective Interest Rate at  September 30, 2017		Maturity Date
Miami A Note	$	10,001	$	732	$	9,269	30-day LIBOR + 3.10%	4.33	%	January 31, 2018
Unamortized fees				(64)
Net balance			$	668

 The table below details the bank commitments and outstanding balances of our senior participations at December 31, 2016:

	Commitment by Bank		Amount Borrowed		Remaining Funds		Interest Rate	Effective Interest Rate at  December 31, 2016		Maturity Date
Operating Property A Note	$	1,820	$	1,820	$	-	30-day LIBOR + 3.85%	4.47	%	April 1, 2019
Miami A Note		10,001		-		10,001	30-day LIBOR + 3.10%	3.72	%	July 1, 2017
July 2016 A Notes		14,185		13,420		765	30-day LIBOR + 3.50%	4.12	%	August 1, 2019
October 2016 A Note		4,405		3,375		1,030	30-day LIBOR + 3.50%	4.12	%	September 1, 2021
Total	$	30,411		18,615	$	11,796
Unamortized fees				(33)
Net balance			$	18,582

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STOCKHOLDERS' EQUITY

9 Months Ended

Sep. 30, 2017

Stockholders' Equity [Abstract]

Stockholders' Equity

10. STOCKHOLDERS’ EQUITY

The Company had 14,235,848 and 8,956,354 shares of common stock issued and outstanding, which included 185,002 and 120,001 of nonvested restricted stock, as of September 30, 2017 and December 31, 2016, respectively. The Company had 10,000 shares of Series A Preferred Stock issued and outstanding as of September 30, 2017 and December 31, 2016.

Common Stock Offerings

On December 13, 2016, the Company received $53.5 million in proceeds, net of underwriter’s discount and offering costs, related to the issuance of 2,996,311 shares of common stock.

On April 5, 2017, the Company entered into an at-the-market continuous equity offering program (“ATM Program”) with an aggregate offering price of up to $50.0 million. As of September 30, 2017, the Company has issued and sold an aggregate of 1,093,202 shares of common stock at a weighted average price of $22.69 per share under the ATM Program, receiving net proceeds after commissions of $24.2 million.

On June 27, 2017, the Company received $83.9 million in proceeds, net of underwriter’s discount and offering costs, related to the public offering of 4,025,000 shares of common stock.

Stock Repurchase Plan

On May 20, 2016, the Company’s Board of Directors authorized a share repurchase program for the repurchase of up to $10.0 million of the outstanding shares of common stock of the Company. As of September 30, 2017, the Company had repurchased and retired a total of 213,078 shares of its common stock at an aggregate cost of approximately $3.2 million. As of September 30, 2017, the Company has $6.8 million remaining under the Board’s authorization to repurchase shares of its common stock.

Equity Incentive Plan

In connection with the IPO, the Company established the 2015 Equity Incentive Plan for the purpose of attracting and retaining directors, executive officers, investment professionals and other key personnel and service providers, including officers and employees of the Manager and other affiliates, and to stimulate their efforts toward the Company’s continued success, long-term growth and profitability. The 2015 Equity Incentive Plan provides for the grant of stock options, share awards (including restricted common stock and restricted stock units), stock appreciation rights, dividend equivalent rights, performance awards, annual incentive cash awards and other equity-based awards, including Long-Term Incentive Plan (“LTIP”) units, which are convertible on a one-for-one basis into Operating Company Units (“OC Units”).  A total of 200,000 shares of common stock were reserved for issuance pursuant to the 2015 Equity Incentive Plan, subject to certain adjustments set forth in the plan. On April 1, 2015, each non-employee director of the Company received an award of 2,500 shares of restricted common stock (total of 10,000 shares) which vest ratably over a three-year period. On June 15, 2015, in connection with the appointment of the Company’s President and Chief Operating Officer (an employee of the Manager), 100,000 shares of restricted common stock were granted, which shares vest ratably over a five-year period. During the year ended December 31, 2015, the Company granted 52,500 shares of restricted common stock to an executive officer (an employee of the Manager) and key employees of the Manager, which shares vest ratably over a three-year period. The Manager provides services to the Company. On May 20, 2016, each non-employee director of the Company received an award of 3,585 shares of common stock (total of 14,340 shares) which immediately vested on the grant date. On May 3, 2017, the Company’s stockholders approved, and the Company adopted, the Amended and Restated 2015 Stock Incentive Plan increasing the number of shares of common stock reserved for issuance under the Plan by 170,000 shares from 200,000 shares to 370,000 shares and extending the term of the Plan until May 2, 2027. On May 3, 2017, three non-employee directors of the Company were each granted an award of 2,138 shares of common stock (total of 6,414 shares), which immediately vested on the grant date. In addition, certain of the Company’s officers and certain employees of the Manager were granted a cumulative total of 105,000 shares of restricted common stock, which vest ratably over a three-year period.

Restricted Stock Awards

The Amended and Restated 2015 Equity Incentive Plan permits the issuance of restricted shares of the Company’s common stock to employees of the Manager (as the Company has no employees) and the Company’s non-employee directors. As of September 30, 2017 and December 31, 2016,288,254 and 176,840shares of restricted stock, respectively, had been granted, of which 55,172 vested in 2016,  46,413 vested during the nine months ended September 30, 2017,  75,003 will vest in 2018, 55,001 will vest in 2019 and 54,998 will vest in 2020. Additionally, 1,667 were forfeited during the year ended December 31, 2016. Non-vested shares are earned over the respective vesting period based on a service condition only. Expenses related to restricted stock awards are charged to compensation expense and are recognized over the respective vesting period (primarily three to five years) of the awards. For restricted stock issued to non-employee directors of the Company, compensation expense is based on the market value of the shares at the grant date. For restricted stock awards issued to employees of the Manager, compensation expense is re-measured at each reporting date until service is complete and the restricted shares become vested based on the then current value of the Company’s common stock.

The Company recognized approximately $0.3 million of stock-based compensation expense for the three months ended September 30, 2017 and 2016, and $1.0 million and $0.8 million of stock-based compensation expense for the nine months ended September 30, 2017 and 2016, respectively. As of September 30, 2017 and December 31, 2016, the total unrecognized compensation cost related to the Company’s restricted shares was approximately $3.3 million and $2.0 million, respectively, based on the grant date market value for awards issued to non-employee directors of the Company and based on the measurement of awards using the Company’s stock price of $20.55 and $21.05 as of September 30, 2017 and December 31, 2016, respectively, for awards issued to employees of the Manager. This cost is expected to be recognized over the remaining weighted average period of 2.5 years. The Company presents stock-based compensation expense in general and administrative expenses in the Consolidated Statements of Operations.

A summary of changes in the Company’s restricted shares of common stock for the three and nine months ended September 30, 2017 and 2016 is as follows:

	Three months ended				Three months ended
	September 30, 2017				September 30, 2016
			Weighted				Weighted
			average grant				average grant
	Shares		date fair value		Shares		date fair value
Nonvested at June 30,		202,502	$	21.33		139,168	$	19.91
Granted		-		-		-		-
Vested		(17,500)		18.64		(17,500)		18.64
Forfeited		-		-		-		-
Nonvested at September 30,		185,002	$	21.58		121,668	$	20.10

	Nine months ended				Nine months ended
	September 30, 2017				September 30, 2016
			Weighted				Weighted
			average grant				average grant
	Shares		date fair value		Shares		date fair value
Nonvested at December 31,		120,001	$	20.10		162,500	$	20.08
Granted		111,414		22.59		14,340		13.95
Vested		(46,413)		20.28		(55,172)		18.27
Forfeited		-		-		-		-
Nonvested at September 30,		185,002	$	21.58		121,668	$	20.10

Nonvested restricted shares of common stock receive dividends which are nonforfeitable.

Series A Preferred Stock Private Placement

On July 27, 2016 (the “Effective Date”), the Company entered into a Stock Purchase Agreement (the “Purchase Agreement”) with accounts managed by NexPoint Advisors, L.P., an affiliate of Highland Capital Management, L.P. (collectively, the “Buyers”) relating to the issuance and sale, from time to time until the second anniversary of the Effective Date (such period, the “Commitment Period”), of up to $100 million in shares of the Company’s Series A Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”), at a price of $1,000 per share (the “Liquidation Value”) (subject to a minimum amount of $50 million of Series A Preferred Stock to be issued and sold by the Company on or prior to the expiration of the Commitment Period), which may be increased at the request of the Company up to $125 million. The sale of shares of Series A Preferred Stock pursuant to the Purchase Agreement may occur from time to time, in minimum monthly increments of $5 million, maximum monthly increments of $15 million and maximum increments of $35 million over any rolling three month period, all to be completed during the Commitment Period.

The Series A Preferred Stock ranks senior to the shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”), with respect to distribution rights and rights upon liquidation, winding up and dissolution of the Company, on parity with any class or series of capital stock of the Company expressly designated as ranking on parity with the Series A Preferred Stock with respect to distribution rights and rights upon liquidation, winding up and dissolution of the Company, junior to any class or series of capital stock of the Company expressly designated as ranking senior to the Series A Preferred Stock with respect to distribution rights and rights upon liquidation, winding up and dissolution of the Company and junior in right of payment to the Company’s existing and future indebtedness.

Holders of Series A Preferred Stock are entitled to a cumulative cash distribution (“Cash Distribution”) equal to (A) 7.0% per annum on the Liquidation Value for the period beginning on the respective date of issuance until the sixth anniversary of the Effective Date, payable quarterly in arrears, (B) 8.5% per annum on the Liquidation Value for the period beginning the day after the sixth anniversary of the Effective Date and for each year thereafter as long as the Series A Preferred Stock remains issued and outstanding, payable quarterly in arrears, and (C) an amount in addition to the amounts in (A) and (B) equal to 5.0% per annum on the Liquidation Value upon the occurrence of certain triggering events (a “Cash Premium”). In addition, the holders of the Series A Preferred Stock will be entitled to a cumulative dividend payable in-kind in shares of Common Stock or additional shares of Series A Preferred Stock, at the election of the holders (the “Stock Dividend”), equal in the aggregate to the lesser of (Y) 25% of the incremental increase in the Company’s book value (as adjusted for equity capital issuances, share repurchases and certain non-cash expenses) plus, to the extent the Company owns equity interests in income-producing real property, the incremental increase in net asset value (provided, however, that no interest in the same real estate asset will be double counted) and (Z) an amount that would, together with the Cash Distribution, result in a 14.0% internal rate of return for the holders of the Series A Preferred Stock from the date of issuance of the Series A Preferred Stock, as set forth in the Articles Supplementary classifying the Series A Preferred Stock (the “Articles Supplementary”). Triggering events that will trigger the payment of a Cash Premium with respect to a Cash Distribution include: (i) the occurrence of certain change of control events affecting the Company after the third anniversary of the Effective Date, (ii) the Company’s ceasing to be subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act, (iii) the Company’s failure to remain qualified as a real estate investment trust, (iv) an event of default under the Purchase Agreement, (v) the failure by the Company to register for resale shares of Common Stock pursuant to the Registration Rights Agreement (a “Registration Default”), (vi) the Company’s failure to redeem the Series A Preferred Stock as required by the Purchase Agreement, or (vii) the filing of a complaint, a settlement with, or a judgment entered by the Securities and Exchange Commission against the Company or any of its subsidiaries or a director or executive officer of the Company relating to the violation of the securities laws, rules or regulations with respect to the business of the Company. Accrued but unpaid Cash Distributions and Stock Dividends on the Series A Preferred Stock will accumulate and will earn additional Cash Distributions and Stock Dividends as calculated above, compounded quarterly.

The holders of Series A Preferred Stock have the right to purchase their pro rata share of any qualified offering of Common Stock, which consists of any offering by the Company of Common Stock except any shares of Common Stock issued (i) in connection with a merger, consolidation, acquisition or similar business combination, (ii) in connection with a joint venture, strategic alliance or similar corporate partnering arrangement, (iii) in connection with any acquisition of assets by the Company, (iv) at market prices pursuant to a registered at-the-market program and/or (v) as part of a compensatory or employment arrangement.

As long as shares of Series A Preferred Stock remain outstanding, the Company is required to maintain a ratio of debt to total tangible assets determined under U.S. generally accepted accounting principles of no more than 0.4:1, measured as of the last day of each fiscal quarter. The Company has complied with this covenant as of September 30, 2017.

The Series A Preferred Stock may be redeemed at the Company’s option (i) after five years from the Effective Date at a price equal to 105% of the Liquidation Value per share plus the value of all accumulated and unpaid Cash Distributions and Stock Dividends, and (ii) after six years from the Effective Date at a price equal to 100% of the Liquidation Value per share plus the value of all accumulated and unpaid Cash Distributions and Stock Dividends. In the event of certain change of control events affecting the Company prior to the third anniversary of the Effective Date, the Company must redeem all shares of Series A Preferred Stock for a price equal to (a) the Liquidation Value, plus (b) accumulated and unpaid Cash Distributions and Stock Dividends, plus (c) a make-whole premium designed to provide the holders of the Series A Preferred Stock with a return on the redeemed shares equal to a 14.0% internal rate of return through the third anniversary of the Effective Date.

Holders of Series A Preferred Stock will be entitled to a separate class vote with respect to (i) any amendments to the Company’s Amended and Restated Articles of Incorporation (the “Charter”), as supplemented by the Articles Supplementary, or bylaws that would alter or change the rights, preferences, privileges or restrictions of the Series A Preferred Stock so as to materially and adversely affect such Series A Preferred Stock and (ii) reclassification or otherwise, any issuances by the Company of securities that are senior to, or equal in priority with, the Series A Preferred Stock.

In the event of any liquidation, dissolution or winding up of the Company, the holders of the Series A Preferred Stock shall be entitled to receive an amount equal to the greater of (i) the Liquidation Value, plus all accumulated but unpaid Cash Distributions and Stock Dividends thereon to, but not including, the date of any liquidation, but excluding any Cash Premium and (ii) the amount that would be paid on such date in the event of a redemption following a change of control.

Pursuant to the Purchase Agreement and the Articles Supplementary, the Company increased the size of its Board by one director and elected James Dondero, as representative of the Buyers, to the Board for a term expiring at the Company’s 2017 annual meeting of stockholders (Mr. Dondero has subsequently been reelected to the Board for a term expiring at the Company’s 2018 annual meeting of stockholders). Thereafter, so long as any shares of the Series A Preferred Stock are outstanding, the holders of the Series A Preferred Stock, voting as a single class, are entitled to nominate and elect one individual to serve on our Board of Directors. If the Company has not paid the full amount of the Cash Distribution or the Stock Dividend on the shares of the Series A Preferred Stock for six or more quarterly dividend periods (whether or not consecutive), the Company will increase the size of the Board by two directors and the holders of the our Series A Preferred Stock are entitled to elect two additional directors to serve on our Board of Directors until the Company pays in full all accumulated and unpaid Cash Distributions and Stock Dividends.

Further, at any time that the Series A Preferred Stock remains outstanding, if Dean Jernigan, the Company’s current Chief Executive Officer and Chairman of the Board, voluntarily leaves the position of Chief Executive Officer, and is not serving as the Executive Chairman of the Board (a “Key Man Event”), the holders of the Series A Preferred Stock shall have the right to accept or reject the service of any person as Chief Executive Officer (or such person serving as the principal executive officer) of the Company.

The Purchase Agreement requires that the Company and its subsidiaries conduct their business in the ordinary course of business consistent with past practice and use reasonable best efforts to (i) preserve substantially intact the business organization and (ii) avoid becoming subject to the requirements of the Investment Company Act of 1940, as amended (the “1940 Act”). Additionally, the Company and its subsidiaries may not change or alter materially its method of accounting or the manner in which it keeps its accounting books and records unless required by the Securities and Exchange Commission to reflect changes in U.S. generally accepted accounting principles or, in the business judgment of the Board, such change would be in the best interests of the Company or stockholders.

Future issuances of shares of Series A Preferred Stock at any one or more closings after the Effective Date are contingent upon the satisfaction of certain conditions at the time of such proposed purchase, including that (i) the representations and warranties of the Purchase Agreement remain true and correct in all material respects and the Company has complied with all covenants and conditions under the Purchase Agreement, the Articles Supplementary, the Registration Rights Agreement and the documents related thereto, (ii) no material adverse effect (as such term is defined in the Purchase Agreement) has occurred, (iii) there is no suspension of trading of the Common Stock on the New York Stock Exchange or such other market or exchange on which the Common Stock is then listed or traded (the “Principal Market”), (iv) a Key Man Event shall not have occurred, as described above, and (v) the Company has delivered certain customary closing deliverables.

An event of default under the Purchase Agreement terminates the obligation of the Buyers to acquire shares of Series A Preferred Stock from the Company and also triggers the Cash Premium described above. Such events of default under the Purchase Agreement include (i) a Registration Default, (ii) the suspension of trading or delisting of the Common Stock on the Principal Market, (iii) the failure by the transfer agent of the Company to issue shares of the Series A Preferred Stock to the Buyers (subject to an applicable cure period), (iv) the Company’s breach of a representation or warranty, covenant or other term or condition under the Purchase Agreement, Articles Supplementary, the Registration Rights Agreement or the documents related thereto that has a material adverse effect (subject to an applicable cure period), (v) the failure of the Company to sell $50 million of shares of Series A Preferred Stock on or prior to the tenth business day after the expiration of the Commitment Period, (vi) an event of default under any secured indebtedness of the Company, or (vii) certain bankruptcy proceedings.

The holders of the Series A Preferred Stock will have certain customary registration rights with respect to the Common Stock issued as Stock Dividends pursuant to the terms of a Registration Rights Agreement.

The issuance and sale of the Series A Preferred Stock, and the issuance of shares of common stock and/or additional shares of Series A Preferred Stock issuable as Stock Dividends, will be exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”) pursuant to Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D thereunder. The Buyers represented to the Company that they are “accredited investors” as defined in Rule 501 of the Securities Act and that the Series A Preferred Stock is being acquired for investment purposes and not with a view to, or for sale in connection with, any distribution thereof, and appropriate legends will be affixed to any certificates evidencing the shares of Series A Preferred Stock or Common Stock issuable pursuant to the Purchase Agreement.

As of September 30, 2017, the Company had issued 10,000 restricted shares of the Series A Preferred Stock to the Buyers and received $10.0 million in proceeds pursuant to the terms of the Purchase Agreement. On October 26, 2017, the Company issued an additional 10,000 restricted shares of the Series A Preferred Stock and received an additional $10.0 million in proceeds pursuant to the terms of the Purchase Agreement.

On March 7, 2017, the Company declared a (i) cash distribution of $17.50 per share of Series A Preferred Stock, payable on April 14, 2017, to holders of Series A Preferred Stock of record on the close of business on April 1, 2017, and (ii) distributions payable in kind in a number of shares of common stock as determined in accordance with the terms of the designation of the Series A Preferred Stock, payable on April 17, 2017, to holders of Series A Preferred Stock of record on the close of business on April 1, 2017.

On May 3, 2017, the Company declared a cash distribution of $17.69 per share of Series A Preferred Stock, payable on July 14, 2017, to holders of Series A Preferred Stock of record on the close of business on July 1, 2017. No distributions in kind were payable in connection with the July distribution.

On August 1, 2017, the Company declared a cash distribution of $17.89 per share of Series A Preferred Stock, payable on October 13, 2017, to holders of Series A Preferred Stock of record on the close of business on October 1, 2017, and (ii) distributions payable in kind in a number of shares of common stock as determined in accordance with the terms of the designation of the Series A Preferred Stock, payable on October 13, 2017, to holders of Series A Preferred Stock of record on the close of business on October 2, 2017.

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EARNINGS PER SHARE

9 Months Ended

Sep. 30, 2017

EARNINGS PER SHARE [Abstract]

EARNINGS PER SHARE

11. EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income by the weighted average number of shares outstanding during the period.  All outstanding unvested restricted share awards contain rights to non-forfeitable dividends and participate in undistributed earnings with common shareholders and, accordingly, are considered participating securities that are included in the two-class method of computing basic earnings per share. Both the unvested restricted shares and the assumed share-settlement of the stock dividend to holders of the Series A Preferred Stock, and the related impacts to earnings, are considered when calculating earnings per share on a diluted basis with our diluted earnings per share being the more dilutive of the treasury stock or two-class methods. For the three and nine months ended September 30, 2017 and 2016, the Company’s basic earnings per share is computed using the two-class method, and our diluted earnings per share is computed using the more dilutive of the treasury stock method or two-class method:

	Three months ended September 30,				Nine months ended September 30,
	2017		2016		2017		2016
Shares outstanding
Weighted average common shares - basic		14,042,350		5,831,135		10,935,776		5,926,215
Effect of dilutive securities		201,995		131,958		172,764		149,971
Weighted average common shares, all classes		14,244,345		5,963,093		11,108,540		6,076,186
Calculation of Earnings per Share - basic
Net income	$	4,457	$	4,994	$	11,434	$	11,528
Less:
Net income allocated to preferred stockholders		310		n/a		1,033		n/a
Net income allocated to unvested restricted shares		57		111		156		285
Net income attributable to common shareholders - two-class method	$	4,090	$	4,883	$	10,245	$	11,243
Weighted average common shares - basic		14,042,350		5,831,135		10,935,776		5,926,215
Earnings per share - basic	$	0.29	$	0.84	$	0.94	$	1.90
Calculation of Earnings per Share - diluted
Net income	$	4,457	$	4,994	$	11,434	$	11,528
Less:
Net income allocated to preferred stockholders		310		n/a		1,033		n/a
Net income attributable to common shareholders - two-class method	$	4,147	$	4,994	$	10,401	$	11,528
Weighted average common shares - diluted		14,244,345		5,963,093		11,108,540		6,076,186
Earnings per share - diluted	$	0.29	$	0.84	$	0.94	$	1.90

(1) Unvested restricted shares of common stock participate in dividends with unrestricted shares of common stock on a 1:1 basis and thus are considered participating securities under the two-class method for the three and nine months ended September 30, 2017 and 2016.

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RELATED PARTY TRANSACTIONS

9 Months Ended

Sep. 30, 2017

Related Party Transactions [Abstract]

Related Party Transactions

12. RELATED PARTY TRANSACTIONS

Equity Method Investments

Certain of the Company’s development property investments are equity method investments for which the Company has elected the fair value option of accounting. The fair value of these equity method investments as of September 30, 2017 and December 31, 2016  was$177.7 million and $78.7 million, respectively. The interest income realized and the change in fair value from these equity method investments was $4.8 million and $5.7 million for the three months ended September 30, 2017 and 2016, respectively, and $13.0 million and $15.7 million for the nine months ended September 30, 2017 and 2016, respectively.

The Company’s investment in the real estate venture, the SL1 Venture, has a carrying amount of $12.6 million and $5.4 million at September 30, 2017 and December 31, 2016, respectively, and the earnings from this venture were $0.7 million and $1.7 million for the three and nine months ended September 30, 2017. The earnings from this venture were $0.4 million and $0.9 million for the three and nine months ended September 30, 2016.

Management Agreement

On April 1, 2015, the Company entered into a management agreement with its Manager (as subsequently amended, the “Management Agreement”). Pursuant to the terms of the Management Agreement, the Manager is responsible for (a) the Company’s day-to-day operations, (b) determining investment criteria and strategy in conjunction with the Company’s Board of Directors, (c) sourcing, analyzing, originating, underwriting, structuring, and acquiring the Company’s portfolio investments, and (d) performing portfolio management duties. The Manager has an Investment Committee that approves investments in accordance with the Company’s investment guidelines, investment strategy, and financing strategy.

On May 23, 2016, the Company entered into an Amended and Restated Management Agreement (the “Amended and Restated Management Agreement”) by and among the Company, the Operating Company and the Manager that amends and restates the original Management Agreement dated April 1, 2015. The Amended and Restated Management Agreement was approved on behalf of the Company and the Operating Company by a unanimous vote of the Nominating and Corporate Governance Committee of the Company’s Board of Directors, which consists solely of independent directors.

The Amended and Restated Management Agreement modified certain procedures with respect to the future internalization of the Manager (as described in the Amended and Restated Management Agreement, an “Internalization Transaction”). Prior to entry into the Amended and Restated Management Agreement, if no Internalization Transaction had occurred prior to the end of the last renewal term, the Manager would have been entitled to the Termination Fee (as defined in the Amended and Restated Management Agreement) and the Company would not have acquired the assets of the Manager. The Amended and Restated Management Agreement, however, requires an Internalization Transaction at the end of the last renewal term (if an Internalization Transaction or termination of the Amended and Restated Management Agreement has not occurred prior to that date). The Internalization Price in such event would equal the Termination Fee amount and the Company would receive the Manager’s assets.  Accordingly, the amount the Manager would receive has not changed, but the Company now would receive the assets of the Manager, which it would not have received prior to the Amended and Restated Management Agreement.

Under the Amended and Restated Management Agreement, if an Internalization Transaction has not occurred prior to March 31, 2023, the last day of the last renewal term, then the Manager and the Company shall consummate an Internalization Transaction to be effective as of that date and all assets of the Manager (or, alternatively, all of the equity interests in the Manager) shall be conveyed to and acquired by the Operating Company in exchange for the Internalization Price (as described herein). At such time, all employees of the Manager shall become employees of the Operating Company and the Manager shall discontinue all business activities. Unlike an Internalization Transaction that occurs prior to the end of the final renewal term of the Amended and Restated Management Agreement, an Internalization Transaction that occurs at the end of the final renewal term shall not require a fairness opinion, the approval of a special committee of the Company’s Board of Directors or the approval of the Company’s stockholders.

The “Internalization Price” payable in the event of an Internalization Transaction at the end of the last renewal term shall be equal to the Termination Fee and the Board of Directors of the Company has no discretion to change such Internalization Price or the conditions applicable to its payment.

The Internalization Price paid to the Manager in any Internalization Transaction will be payable by the Operating Company in the number of units of limited liability company interests (“OC Units”) of the Operating Company equal to the Internalization Price, divided by the volume-weighted average of the closing market price of the common stock of the Company for the ten consecutive trading days immediately preceding the date with respect to which value must be determined. However, if the common stock of the Company is not traded on a national securities exchange at the time of closing of any Internalization Transaction, then the number of OC Units shall be determined by agreement between the Board of Directors of the Company and the Manager or, in the absence of such agreement, the Internalization Price shall be paid in cash.

Prior to entry into the Amended and Restated Management Agreement, any Termination Fee would have been payable by the Operating Company in OC Units equal to the Termination Fee divided by the average of the daily market price of the Common Stock for the ten consecutive trading days immediately preceding the date of termination within 90 days after occurrence of the event requiring the payment of the Termination Fee. In accordance with ASC 505-50, Equity - Equity-based Payments to Non-Employees, since the number of OC Units to be issued was dependent upon different possible outcomes, the Company recognized the lowest aggregate amount within the range of outcomes. Accordingly, the Company estimated the deferred termination fee payable and accrued the expense over the term of the Management Agreement. Upon entry into the Amended and Restated Management Agreement, the Company ceased recognizing the deferred termination fee expense and reclassified the Non-Controlling Interests to Additional Paid-In-Capital since the Termination Fee is no longer certain of being paid other than in exchange for either the assets or equity of the Manager. Accordingly, the Company recorded no expense for the deferred termination fee in the three and nine months ended September 30, 2017, and it recorded no expense and $0.2 million of expense for the three and nine months ended September 30, 2016, respectively.

On April 1, 2017, the Company, the Operating Company and the Manager entered into a Second Amended and Restated Management Agreement to modify the manner in which certain expenses incurred by the Manager are accounted for and paid by the Company. Under the Amended and Restated Management Agreement, the Manager may engage independent contractors that provide investment banking, securities brokerage, mortgage brokerage and other financial, legal and account services as may be required for the Company’s investments, and the Company agrees to reimburse the Manager for costs and expenses incurred in connection with these services. The Second Amended and Restated Management Agreement now provides that expenses incurred by the Manager are reimbursable to the Manager by the Company only to the extent such expenses are not otherwise directly reimbursed by an unaffiliated third party. The amount of expenses to be reimbursed to the Manager by the Company will be reduced dollar-for-dollar by the amount of any such payment or reimbursement.

The initial term of the Management Agreement will expire on March 31, 2020, with up to a maximum of three, one-year extensions that end on March 31, 2023. The Company’s independent directors review the Manager’s performance annually. Following the initial term, the Management Agreement may be terminated annually upon the affirmative vote of at least two-thirds of the Company’s independent directors based upon: (a) the Manager’s unsatisfactory performance that is materially detrimental to the Company; or (b) the Company’s determination that the management fees payable to the Manager are not fair, subject to the Manager’s right to prevent termination based on unfair fees by accepting a reduction of management fees agreed to by at least two-thirds of the independent directors. The Company is required to provide its Manager with 180 days’ prior notice of such a termination. Upon such a termination, the Company will pay the Manager a Termination Fee except as provided below.

No later than 180 days prior to the end of the initial term of the Management Agreement, the Manager will offer to contribute to the Company’s Operating Company at the end of the initial term all of the assets or equity interests in the Manager at the internalization price and on such terms and conditions included in a written offer provided by the Manager.

Upon receipt of the Manager’s initial internalization offer, a special committee consisting solely of the Company’s independent directors may accept the Manager’s proposal or submit a counter offer to the Manager. If the Manager and the special committee are unable to agree, the Manager and the special committee will repeat this process annually during the term of any extension of the Management Agreement. Acquisition of the Manager pursuant to this process requires a fairness opinion from a nationally recognized investment banking firm and stockholder approval, in addition to approval by the special committee. As described above, if an Internalization Transaction has not occurred prior to March 31, 2023, the last day of the last renewal term, then the Manager and the Company shall consummate an Internalization Transaction to be effective as of that date, and such Internalization Transaction shall not require a fairness opinion, the approval of a special committee of the Company’s Board of Directors or the approval of the Company’s stockholders.

If the Management Agreement terminates other than for Cause (as defined below), voluntary non-renewal by the Manager or the Company being required to register as an investment company under the 1940 Act, then the Company shall pay to the Manager, on the date on which such termination is effective, a Termination Fee equal to the greater of (i) three times the sum of the average annual Base Management Fee and Incentive Fee earned by the Manager during the 24-month period prior to such termination, calculated as of the end of the most recently completed fiscal quarter prior to the date of termination, or (ii) the offer price, which will be based on the lesser of (a) the Manager’s earnings before interest, taxes, depreciation and amortization (adjusted for unusual, extraordinary and non-recurring charges and expenses), or “EBITDA” annualized based on the most recent quarter ended, multiplied by a specific multiple, or EBITDA Multiple, depending on the Company’s achieved total annual return, and (b) the Company’s equity market capitalization multiplied by a specific percentage, or Capitalization Percentage, depending on the Company’s achieved total return (the Internalization Price). Any Termination Fee will be payable by the Operating Company in cash.

The Company also may terminate the Management Agreement at any time, including during the initial term, without the payment of any Termination Fee, with 30 days’ prior written notice from the Board of Directors, for cause. “Cause” is defined as: (i) the Manager’s continued breach of any material provision of the Management Agreement following a prescribed period; (ii) the occurrence of certain events with respect to the bankruptcy or insolvency of the Manager; (iii) a change of control of the Manager that a majority of the Company’s independent directors determines is materially detrimental to the Company; (iv) the Manager committing fraud against the Company, misappropriating or embezzling the Company’s funds, or acting grossly negligent in the performance of its duties under the Management Agreement; (v) the dissolution of the Manager; (vi) the Manager fails to provide adequate or appropriate personnel that are reasonably necessary for the Manager to identify investment opportunities for the Company and to manage and develop the Company’s investment portfolio if such default continues uncured for a period of 60 days after written notice thereof, which notice must contain a request that the same be remedied; (vii) the Manager is convicted (including a plea of nolo contendere) of a felony; or (viii) both the current Chief Executive Officer and the current President and Chief Operating Officer are no longer senior executive officers of the Manager or the Company during the term of the Management Agreement other than by reason of death or disability.

The Manager may terminate the Management Agreement if the Company becomes required to register as an investment company under the 1940 Act, with such termination deemed to occur immediately before such event, in which case the Company would not be required to pay the Manager a Termination Fee. The Manager may also decline to renew the Management Agreement by providing the Company with 180 days’ written notice, in which case the Company would not be required to pay a Termination Fee.

The Management Agreement provides for the Manager to earn a base management fee and an incentive fee, both of which are described further below. In addition, the Company will reimburse certain expenses of the Manager, excluding the salaries and cash bonuses of the Manager’s chief executive officer and chief financial officer, a portion of the salary of the president and chief operating officer, and certain other costs as determined by the Manager in accordance with the Management Agreement. Certain prepaid expenses and fixed assets are also purchased through the Manager and reimbursed by the Company. In the event that the Company terminates the Management Agreement pursuant to its terms, other than for Cause or the Company being required to register as an investment company under the 1940 Act, there will be a Termination Fee due to the Manager. Amounts reimbursable to the Manager for expenses are included in general and administrative expenses in the Consolidated Statements of Operations and totaled $0.8 million for both the three months ended September 30, 2017 and 2016 and $2.3 million and $2.4 million for the nine months ended September 30, 2017 and 2016, respectively.

On November 1, 2017, the Company, the Operating Company and the Manager entered into a Third Amended and Restated Management Agreement, which is described below in Note 13, Subsequent Events.

Management Fees

As of September 30, 2017, the Company did not have any personnel. As a result, the Company is relying on the properties, resources and personnel of the Manager to conduct operations. Pursuant to the Management Agreement, the Company pays the Manager a base management fee in an amount equal to 0.375% of the Company’s stockholders’ equity (a 1.5% annual rate) calculated and payable quarterly in arrears in cash. For purposes of calculating the base management fee, the Company’s stockholder’s equity means: (a) the sum of (i) the net proceeds from all issuances of the Company’s equity securities since inception (allocated on a pro rata daily basis for such issuances during the fiscal quarter of any such issuance), plus (ii) the Company’s retained earnings at the end of the most recently completed fiscal quarter (without taking into account any non-cash equity compensation expense incurred in current or prior periods); less (b) any amount that the Company pays to repurchase the Company’s common stock since inception, provided that if the Company’s retained earnings are in a net deficit position (following any required adjustments set forth below), then retained earnings shall not be included in stockholders’ equity. It also excludes (x) any unrealized gains and losses and other non-cash items that have impacted stockholders’ equity as reported in the Company’s financial statements prepared in accordance with accounting principles generally accepted in the United States, or GAAP, and (y) one-time events pursuant to changes in GAAP (such as a cumulative change to the Company’s operating results as a result of a codification change pursuant to GAAP), and certain non-cash items not otherwise described above (such as depreciation and amortization), in each case after discussions between the Company’s Manager and the Company’s independent directors and approval by a majority of the Company’s independent directors. As a result, the Company’s stockholders’ equity, for purposes of calculating the base management fee, could be greater or less than the amount of stockholders’ equity shown on the Company’s financial statements. The base management fee is payable independent of the performance of the Company’s portfolio. The Manager computes the base management fee within 30 days after the end of the fiscal quarter with respect to which such installment is payable and promptly delivers such calculation to the Company’s Board of Directors. The amount of the installment shown in the calculation is due and payable no later than the date which is five business days after the date of delivery of such computation to the Board of Directors. The calculation generally will be reviewed by the Board of Directors at their regularly scheduled quarterly board meeting. The base management fee was $1.0 million and $0.4 million for the three months ended September 30, 2017 and 2016, respectively, and $2.4 million and $1.2 million for the nine months ended September 30, 2017 and 2016, respectively. At September 30, 2017 and December 31, 2016, the Company had outstanding fees due to Manager of $1.4 million and $1.0 million consisting of the management fees payable and certain general and administrative reimbursements payable.

Incentive Fee

The Manager is entitled to an incentive fee with respect to each fiscal quarter (or part thereof that the Management Agreement is in effect) in arrears in cash. The incentive fee is an amount, not less than zero, determined pursuant to the following formula:

IF = .20 times (A minus (B times .08)) minus C

In the foregoing formula:

 A equals the Company’s Core Earnings (as defined below) for the previous 12-month period;

 B equals (i) the weighted average of the issue price per share of the Company’s common stock of all of its public offerings of common stock, multiplied by (ii) the weighted average number of all shares of common stock outstanding (including (i) any restricted stock units and any restricted shares of common stock in the previous 12-month period and (ii) shares of common stock issuable upon conversion of outstanding OC Units); and

 C equals the sum of any incentive fees earned by the Manager with respect to the first three fiscal quarters of such previous 12-month period.

Notwithstanding application of the incentive fee formula, no incentive fee shall be paid with respect to any fiscal quarter unless cumulative annual stockholder total return for the four most recently completed fiscal quarters is greater than 8%. Any computed incentive fee earned but not paid because of the foregoing hurdle will accrue until such 8% cumulative annual stockholder total return is achieved. The total return is calculated by adding stock price appreciation (based on the volume-weighted average of the closing price of the Company’s common stock on the New York Stock Exchange (or other applicable trading market) for the last ten consecutive trading days of the applicable computation period minus the volume-weighted average of the closing market price of the Company’s common stock for the last ten consecutive trading days of the period immediately preceding the applicable computation period) plus dividends per share paid during such computation period, divided by the volume-weighted average of the closing market price of the Company’s common stock for the last ten consecutive trading days of the period immediately preceding the applicable computation period. For purposes of computing the Incentive Fee, “Core Earnings” is defined as net income (loss) determined under GAAP, plus non-cash equity compensation expense, the incentive fee, depreciation and amortization (to the extent that the Company forecloses on any facilities underlying the Company’s target investments), any unrealized losses or other non-cash expense items reflected in GAAP net income (loss), less any unrealized gains reflected in GAAP net income. The amount will be adjusted to exclude one-time events pursuant to changes in GAAP and certain other non-cash charges after discussions between the Manager and the Company’s independent directors and after approval by a majority of the independent directors. Going forward, “Core Earnings” will be calculated based on the new formulation set forth in the Third Amended and Restated Management Agreement, which the Company, the Operating Company and the Manager entered into on November 1, 2017 and is described further below in Note 13, Subsequent Events.

The Manager computes each quarterly installment of the incentive fee within 45 days after the end of the fiscal quarter with respect to which such installment is payable and promptly delivers such calculation to the Company’s Board of Directors. The amount of the installment shown in the calculation is due and payable no later than the date which is five business days after the date of delivery of such computation to the Board of Directors. The calculation generally will be reviewed by the Board of Directors at their regularly scheduled quarterly board meeting. The Manager has not earned an incentive fee for the three and nine months ended September 30, 2017 and 2016.

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SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2017

SUBSEQUENT EVENTS [Abstract]

SUBSEQUENT EVENTS

13. SUBSEQUENT EVENTS

The Company’s management has evaluated subsequent events through the date of issuance of the consolidated financial statements included herein. Other than those disclosed below, there have been no subsequent events that occurred during such period that require disclosure or recognition in the accompanying consolidated financial statements.

Investment Activity

Subsequent to September 30, 2017, the Company closed on the following development property investment with a profits interest:

		Total Investment
Closing Date	MSA	Commitment
10/12/2017	Miami 2	$	9,459
10/30/2017	New Jersey		14,701
	Total	$	24,160

At-the-Market Offering Program

On October 6, 2017, the Company issued and sold 29,416 shares of common stock at a weighted average price of $20.50 per share under the ATM Program, receiving net proceeds after commissions of $0.6 million.

Series A Preferred Stock

On October 26, 2017, the Company issued 10,000 restricted shares of the Series A Preferred Stock to the Buyers and received $10.0 million in proceeds pursuant to the terms of the Purchase Agreement.

Dividend Declarations

On November 1, 2017, the Company’s Board of Directors declared a cash dividend to the holders of the Series A Preferred Stock and a distribution payable in kind, if applicable, in a number of shares of common stock or Series A Preferred Stock as determined in accordance with the election of the holders of the Series A Preferred Stock for the quarter ending December 31, 2017. The dividends are payable on January 15, 2018 (or if not a business day, on the next business day) to holders of Series A Preferred Stock of record on January 1, 2018.

On November 1, 2017, the Company’s Board of Directors also declared a cash dividend of $0.35 per share of common stock for the quarter ending December 31, 2017. The dividend is payable on January 12, 2018 to stockholders of record on January 2, 2018.

Third Amended and Restated Management Agreement

On November 1, 2017, the Company, the Operating Company and the Manager entered into the Third Amended and Restated Management Agreement in order to clarify the original intent of the parties with respect to the definition of Core Earnings and to make other minor changes necessary to reflect the current and anticipated business model from and after this time. The Third Amended and Restated Management Agreement is otherwise substantially consistent with the Second Amended and Restated Management Agreement.

Under the Third Amended and Restated Management Agreement, “Core Earnings” is defined as (1) net income (loss) determined under GAAP, plus (2) non-cash equity compensation expense, the incentive fee, depreciation and amortization, plus (3) any unrealized losses or other non-cash expense items reflected in GAAP net income (loss), less (4) any unrealized gains reflected in GAAP net income (including any unrealized appreciation with respect to self-storage facilities that the Company has not yet acquired). The Third Amended and Restated Management Agreement clarifies that in addition to certain previously agreed upon adjustments, with respect to any self-storage facility acquired by the Company with respect to which the Company had an outstanding loan as of the time of such acquisition, the amount of Core Earnings determined pursuant to the formula above in the period of such acquisition shall also be increased by the difference between (A) the appraised value, as determined by a nationally recognized, independent third-party appraiser mutually agreed to by the Company and the Manager who has significant expertise in valuing self-storage properties, and (B) (i) the outstanding principal amount of any Company loan secured by such acquired self-storage facility at the time of such acquisition plus (ii) any other consideration given to the former owner upon such acquisition. This addition is intended to include in Core Earnings the amount of the Company’s unrealized gain on account of the Company’s acquisition of a self-storage facility without such facility being sold to a third party buyer in the open market.

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SIGNIFICANT ACCOUNTING POLICIES (Policy)

9 Months Ended

Sep. 30, 2017

SIGNIFICANT ACCOUNTING POLICIES [Abstract]

Basis of Presentation

Basis of Presentation

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying interim consolidated financial statements include all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods included therein. Substantially all operations are conducted through the Operating Company, and all significant intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates.

Variable Interest Entities

Variable Interest Entities

The Company invests in entities that may qualify as variable interest entities (“VIEs”). A VIE is a legal entity that lacks one or more of the characteristics of a voting interest entity. A VIE is defined as an entity in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The determination of whether an entity is a VIE includes both a qualitative and quantitative analysis. Management bases the qualitative analysis on its review of the design of the entity, its organizational structure including allocation of decision-making authority and relevant financial agreements and the quantitative analysis on the forecasted cash flow of the entity. Management reassesses the initial evaluation of an entity as a VIE upon the occurrence of certain reconsideration events.

A VIE must be consolidated only by its primary beneficiary, which is defined as the party that, along with its affiliates and agents, has both the: (i) power to direct the activities that most significantly impact the VIE’s economic performance and (ii) obligation to absorb the losses of the VIE or the right to receive the benefits from the VIE, which could be significant to the VIE. Management determines whether the Company is the primary beneficiary of a VIE by considering qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of its investment; the obligation or likelihood for the Company or other interests to provide financial support; consideration of the VIE’s purpose and design, including the risks the VIE was designed to create and pass through to its variable interest holders and the similarity with and significance to the Company’s business activities and the other interests. Management reassesses the determination of whether the Company is the primary beneficiary of a VIE each reporting period.

Equity Investments

Equity Investments

Investments in real estate ventures and entities over which the Company exercises significant influence but not control are accounted for using the equity method. In accordance with Accounting Standards Codification (“ASC”) 825, Financial Instruments (“ASC 825-10”), issued by the Financial Accounting Standards Board (“FASB”), the Company has elected the fair value option of accounting for its development property investments, which would otherwise be required to be accounted for under the equity method. The Company also holds an investment in a real estate venture that is accounted for under the equity method of accounting.

Loan Investments and Election of Fair Value Option of Accounting for Certain Loan Investments

Loan Investments and Election of Fair Value Option of Accounting for Certain Loan Investments

The Company has elected the fair value option of accounting for all of its investment portfolio loan investments, including those that are required under GAAP to be accounted for under the equity method, in order to provide stockholders and others who rely on the Company’s financial statements with a more complete and accurate understanding of the Company’s economic performance including its revenues and value inherent in the Company’s equity participation in development projects. Changes in the fair value of these investments are recorded in change in fair value of investments within other income. All direct loan costs are charged to expense as incurred.

Each loan investment, including those recorded at cost and presented on the Consolidated Balance Sheets as other loans, is evaluated for impairment on a periodic basis. For loans carried at fair value, indicators of impairment are reflected in measurement of the loan. For loans that are carried at cost, the Company estimates an allowance for loan loss at each reporting date. In evaluating loan impairment, the Company also periodically evaluates the extent and impact of any credit deterioration associated with the performance and/or value of the underlying collateral property as well as the financial and operating capability of the borrower on a loan by loan basis. The Company also evaluates the financial wherewithal of any loan guarantors as well as the borrower’s competency in managing and operating the property. In addition, the Company considers the overall economic environment, real estate sector and geographic sub-market in which the borrower operates. A loan will be considered impaired when, based on current information and events, it is probable that the loan will not be collected according to the contractual terms of the loan agreement. Factors to be considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. At September 30, 2017 and December 31, 2016, there were no loans that were deemed to be impaired loans. Additionally, for loans recorded at cost, the Company determined that no allowance for loan loss was necessary at September 30, 2017 and December 31, 2016.

For investments carried at fair value, fees and costs are expensed as incurred.

Fair Value Measurement

Fair Value Measurement

The Company carries certain financial instruments at fair value because it has elected to apply the fair value option on an instrument by instrument basis under ASC 825-10. The Company’s financial instruments consist of cash, development property investments (which are typically structured as first mortgages and a 49.9% profits interest in the development project), operating property loans (loans secured by operating properties), the investment in real estate venture, other loans, receivables, the secured revolving credit facility, senior loan participations, and payables.

The following table presents the financial instruments measured at fair value on a recurring basis at September 30, 2017:

	Fair Value Measurements Using
	Total		Level 1		Level 2		Level 3
Development property investments	$	188,540	$	-	$	-	$	188,540
Operating property loans		5,990		-		-		5,990
Total investments	$	194,530	$	-	$	-	$	194,530

The following table presents the financial instruments measured at fair value on a recurring basis at December 31, 2016:

	Fair Value Measurements Using
	Total		Level 1		Level 2		Level 3
Development property investments	$	95,102	$	-	$	-	$	95,102
Operating property loans		9,905		-		-		9,905
Total investments	$	105,007	$	-	$	-	$	105,007

Estimating fair value requires the use of judgment. The types of judgments involved depend upon the availability of observable market information. Management’s judgments include determining the appropriate valuation model to use, estimating unobservable inputs and applying valuation adjustments. See Note 4, Fair Value of Financial Instruments, for additional disclosure on the valuation methodology and significant assumptions, as well as the election of the fair value option for certain financial instruments.

Self-Storage Real Estate Owned

Self-Storage Real Estate Owned

Land is carried at historical cost. Building and improvements are carried at historical cost less accumulated depreciation and impairment losses. The cost primarily reflects the funded principal balance of the loan to the Company, net of unamortized origination fees, unrealized appreciation recognized as of the acquisition date, and the cash consideration paid to the developer to acquire his portion of profits interest. Ordinary repairs and maintenance are expensed as incurred; major replacements and betterments, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives. The costs of building and improvements are generally depreciated using the straight-line method based on a useful life of 40 years.

The Company expects that the majority of future self-storage facility acquisitions will be considered asset acquisitions, however the Company will evaluate each acquisition using Accounting Standards Update (“ASU”) 2017-01 - Business Combinations (Topic 805): Clarifying the Definition of a Business to determine whether accounting for a business combination or asset acquisition applies.

When facilities are acquired, the cost is allocated to the tangible and intangible assets acquired and liabilities assumed based on relative fair values. Allocations to the individual assets and liabilities are based upon their relative fair values as estimated by management.

In allocating the purchase price for an acquisition, the Company determines whether the acquisition includes intangible assets or liabilities. The Company allocates a portion of the cost to an intangible asset attributable to the value of in-place leases. This intangible asset is amortized to expense over the expected remaining term of the respective leases, which is generally one year. Substantially all of the leases in place at acquired facilities are at market rates, as the majority of the leases are month-to-month contracts. Accordingly, to date, no portion of the basis for an acquired property has been allocated to above- or below-market lease intangibles. To date, no intangible asset has been recorded for the value of customer relationships, because the Company does not have any concentrations of significant customers and the average customer turnover is fairly frequent.

The Company evaluates long-lived assets for impairment when events and circumstances, such as declines in occupancy and operating results, indicate that there may be an impairment. The carrying value of these long-lived assets is compared to the undiscounted future net operating cash flows, plus a terminal value, attributable to the assets to determine if the facility’s basis is recoverable. If an asset’s basis is not considered recoverable, an impairment loss is recorded to the extent the net carrying value of the asset exceeds the fair value. The impairment loss recognized equals the excess of net carrying value over the related fair value of the asset.

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash, investments in money market accounts, and certificates of deposit with original maturities of three months or less are considered to be cash equivalents. The Company places its cash and cash equivalents primarily with three financial institutions, and the balance at each financial institution exceeds the Federal Deposit Insurance Corporation insurance limit of $250,000 per institution.

Other Loans

Other Loans

The Company’s other loans balance primarily includes principal balances for certain revolving loan agreements and short-term mortgage loans made by the Company in situations where it was determined that making such loans would benefit the Company’s primary business. These loans are accounted for under the cost method.

Fixed Assets

Fixed Assets

Fixed assets are recorded at cost and consist of furniture, office and computer equipment, and software. Depreciation is computed on a straight-line basis over the estimated useful lives of the related assets, which range from three to seven years. Fixed assets are generally purchased by the Manager and the cost reimbursed by the Company. Maintenance and repair costs are charged to expense as incurred. Upon sale or retirement, the asset cost and related accumulated depreciation are eliminated from the respective accounts and any resulting gain or loss is included in income.

Revenue Recognition

Revenue Recognition

Interest income is recognized as earned on a simple interest basis and is reported in interest income from investments in the Consolidated Statements of Operations. Accrual of interest will be discontinued on a loan when management believes, after considering economic and business conditions and collection efforts that the borrower’s financial condition is such that collection of interest is doubtful. The Company will recognize income on impaired loans when they are placed into non-accrual status on a cash basis when the loans are both current and the collateral on the loan is sufficient to cover the outstanding obligation to the Company. If these factors do not exist, the Company will not recognize income on such loans. Accrued interest generally is reversed when a loan is placed on non-accrual status.

The Company’s loan origination fees are accreted into interest income over the term of the investment using the effective yield method.

The operations of the self-storage real estate owned are managed by a third-party self-storage management company. All rental leases are operating leases, and rental income is recognized in accordance with the terms of the leases, which generally are month to month.

Debt Issuance Costs

Debt Issuance Costs

Costs related to the issuance of a debt instrument are deferred and amortized as interest expense over the estimated life of the related debt instrument using the straight-line method, which approximates the effective interest method. If a debt instrument is repurchased prior to its original maturity date, the Company evaluates both the unamortized balance of debt issuance costs as well as any new debt issuance costs, including third party fees, to determine if the costs should be written off to interest expense or, if significant, included in “loss on modification or extinguishment of debt” in the Consolidated Statements of Operations. Debt issuance costs related to the sale of senior participations are presented in the Consolidated Balance Sheets as a deduction from the carrying amount of the principal balance. Debt issuance costs related to the revolving credit facility are presented in the Consolidated Balance Sheets as Deferred Costs.

Transaction and Other Expenses

Transaction and other expenses

Transaction and other expenses consist of non-capitalizable advisory fees and other unreimbursed expenses incurred in connection with various financing and investment transactions and are expensed as incurred. There were no transaction and other expenses for the three or nine months ended September 30, 2017. During the three and nine months ended September 30, 2016, the Company incurred $2,000and $2.1 million, respectively, in transaction and other expenses. 

Offering and Registration Costs

Offering and Registration Costs

Offering and registration costs represent underwriting discounts and commissions, professional fees, fees paid to various regulatory agencies, and other costs incurred in connection with the registration and sale of the Company’s securities. Offering and registration costs incurred in connection with the Company’s common stock offerings are reflected as a reduction of additional paid-in capital.

On July 27, 2016, the Company entered into a Purchase Agreement (as defined below) (see Note 10, Stockholders’ Equity) which requires the Company to issue and sell a minimum of $50.0 million of Series A Preferred Stock by July 27, 2018. The Company incurred $2.8 million of preferred stock offering costs in connection with the execution of the Purchase Agreement. Such costs are presented as deferred costs on the Consolidated Balance Sheets until such time as Series A Preferred Stock is issued. A pro rata portion of such deferred costs, based upon the ratio of the amount issued to the $50.0 million minimum issuance of Series A Preferred Stock, is reclassified to cumulative preferred stock upon each issuance of the Series A Preferred Stock. Of the $2.8 million of offering costs incurred, $2.2 million is in deferred costs on the Consolidated Balance Sheet at September 30, 2017, and $0.6 million has reduced the cumulative preferred stock balance on the Consolidated Balance Sheet at September 30, 2017.

Income Taxes

Income Taxes

The Company has elected to be taxed as a REIT and to comply with the related provisions of the Code. Accordingly, the Company will generally not be subject to U.S. federal income tax to the extent of its distributions to stockholders and as long as certain asset, income and share ownership tests are met. To qualify as a REIT, the Company must annually distribute at least 90% of its REIT taxable income to its stockholders and meet certain other requirements.

Earnings per Share (“EPS”)

Earnings per Share (“EPS”)

Basic EPS includes only the weighted average number of common shares outstanding during the period. Diluted EPS includes the weighted average number of common shares and the dilutive effect of restricted stock, accrued stock dividends, and redeemable Operating Company units when such instruments are dilutive.

All outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends are treated as participating in undistributed earnings with common shareholders. Awards of this nature are considered participating securities and the two-class method of computing basic and diluted EPS must be applied.

Comprehensive Income

Comprehensive Income

For the three and nine months ended September 30, 2017 and 2016, comprehensive income equaled net income; therefore, separate Consolidated Statements of Comprehensive Income are not included in the accompanying consolidated financial statements.

Segment Reporting

Segment Reporting

The Company does not evaluate performance on a relationship specific or transactional basis and does not distinguish its principal business or group its operations on a geographical basis for purposes of measuring performance. Accordingly, the Company believes it has a single operating segment for reporting purposes in accordance with GAAP.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In January 2017, the FASB issued ASU 2017-01 which provides guidance on whether transactions should be accounted for as acquisitions or disposals of assets or businesses. Specifically, when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or group of similar identifiable assets, the set of assets is not a business. Additionally, ASU 2017-01 also provides other guidance providing a more robust framework to use in determining whether a set of assets and activities is a business. Upon adoption of the new guidance, the Company expects that the majority of future self-storage facility acquisitions will now be considered asset acquisitions. This guidance is effective for annual periods beginning after December 15, 2017. Early adoption is permitted. The Company adopted ASU 2017-01 for new acquisitions beginning on July 1, 2017. The costs related to the acquisitions of self-storage facilities that qualify as asset acquisitions will be capitalized as part of the purchase.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This ASU provides guidance on the classification of certain cash receipts and payments in the statement of cash flows, including distributions received from equity method investees. This guidance is effective for public business entities for fiscal years and for interim periods within those fiscal years, beginning after December 15, 2017, with early adoption being allowed. The Company is currently assessing the impact this new accounting guidance will have on its consolidated financial statements; however, the Company does not expect the new accounting guidance to have a material impact on its consolidated financial statements as the Company is currently presenting distributions received from equity method investees consistent with the presentation required under ASU 2016-05.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. This guidance is effective for public business entities for fiscal years and for interim periods within those fiscal years, beginning after December 15, 2019, with early adoption being allowed as of the fiscal years beginning after December 15, 2018. The Company is currently assessing the impact this new accounting guidance will have on its consolidated financial statements; however, the Company does not expect the new accounting guidance to have a material impact on its consolidated financial statements. 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which is the final standard on accounting for leases. The most significant change for lessees is the requirement under the new guidance to recognize right-of-use assets and lease liabilities for all leases not considered short-term leases. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. The amendments in ASU 2016-02 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. The Company is currently assessing the impact this new accounting guidance will have on its consolidated financial statements. 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2017. This ASU outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry specific guidance. Several ASUs expanding and clarifying the initial guidance issued in ASU 2014-09 have been released since May 2014. The Company will adopt the ASU effective January 1, 2018 and does not expect the adoption to have a material effect on its consolidated financial statements as the new guidance does not apply to revenue associated with loans or derived from lease contracts; however, the Company is still in the process of evaluating the impact these standards will have on its consolidated financial statements.

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SIGNIFICANT ACCOUNTING POLICIES (Tables)

9 Months Ended

Sep. 30, 2017

SIGNIFICANT ACCOUNTING POLICIES [Abstract]

Financial Instruments Measured at Fair Value on a Recurring Basis

The following table presents the financial instruments measured at fair value on a recurring basis at September 30, 2017:

	Fair Value Measurements Using
	Total		Level 1		Level 2		Level 3
Development property investments	$	188,540	$	-	$	-	$	188,540
Operating property loans		5,990		-		-		5,990
Total investments	$	194,530	$	-	$	-	$	194,530

The following table presents the financial instruments measured at fair value on a recurring basis at December 31, 2016:

	Fair Value Measurements Using
	Total		Level 1		Level 2		Level 3
Development property investments	$	95,102	$	-	$	-	$	95,102
Operating property loans		9,905		-		-		9,905
Total investments	$	105,007	$	-	$	-	$	105,007

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INVESTMENTS (Tables)

9 Months Ended

Sep. 30, 2017

INVESTMENTS [Abstract]

Schedule of Investments

As of September 30, 2017, the aggregate committed principal amount of the Company’s investment portfolio was approximately $421.2 million and outstanding principal was $173.7 million, as described in more detail in the table below:

	Metropolitan					Remaining
	Statistical Area	Total Investment		Funded		Unfunded
Closing Date	("MSA")	Commitment		Investment (1)		Commitment		Fair Value
Development property investments:
Loan investments with a profits interest:
6/10/2015	Atlanta 1 (2)	$	8,132	$	8,010	$	122	$	10,507
6/19/2015	Tampa 1 (2)		5,369		5,285		84		6,058
6/26/2015	Atlanta 2 (2)		6,050		5,754		296		8,519
6/29/2015	Charlotte 1 (2)		7,624		7,126		498		10,551
7/2/2015	Milwaukee (2)		7,650		7,377		273		8,762
7/31/2015	New Haven (2)		6,930		6,412		518		8,399
8/10/2015	Pittsburgh (2)		5,266		4,574		692		6,591
8/14/2015	Raleigh (3)		8,792		4,277		4,515		4,260
9/30/2015	Jacksonville 1 (2)		6,445		5,988		457		8,830
10/27/2015	Austin (2)		8,658		7,000		1,658		8,779
9/20/2016	Charlotte 2 (3)		12,888		4,517		8,371		4,360
11/17/2016	Jacksonville 2 (3)		7,530		3,899		3,631		4,453
1/4/2017	New York City 1 (2)		16,117		13,165		2,952		16,712
1/18/2017	Atlanta 3		14,115		3,471		10,644		3,314
1/31/2017	Atlanta 4		13,678		5,698		7,980		5,667
2/24/2017	Orlando 3		8,056		1,468		6,588		1,409
2/24/2017	New Orleans		12,549		-		12,549		-
2/27/2017	Atlanta 5		17,492		3,910		13,582		3,790
3/1/2017	Fort Lauderdale		9,952		1,945		8,007		1,875
3/1/2017	Houston		13,630		3,382		10,248		3,283
4/14/2017	Louisville 1		8,523		1,471		7,052		1,394
4/20/2017	Denver 1		9,806		1,906		7,900		1,822
4/20/2017	Denver 2		11,164		2,877		8,287		2,790
5/2/2017	Atlanta 6		12,543		3,117		9,426		3,017
5/2/2017	Tampa 2		8,091		890		7,201		813
5/19/2017	Tampa 3		9,224		729		8,495		639
6/12/2017	Tampa 4		10,266		1,364		8,902		1,266
6/19/2017	Baltimore (4)		10,775		2,672		8,103		2,484
6/28/2017	Knoxville		9,115		1,656		7,459		1,573
6/29/2017	Boston		14,103		2,031		12,072		1,898
6/30/2017	New York City 2 (4)		26,482		16,712		9,770		16,333
7/27/2017	Jacksonville 3		8,096		888		7,208		810
8/30/2017	Orlando 4		9,037		1,790		7,247		1,698
9/14/2017	Los Angeles		28,750		7,382		21,368		7,284
9/14/2017	Miami		14,657		5,761		8,896		5,644
9/28/2017	Louisville 2		9,940		2,230		7,710		2,139
		$	397,495	$	156,734	$	240,761	$	177,723
Construction loans:
12/23/2015	Miami		17,733		10,999		6,734		10,817
		$	17,733	$	10,999	$	6,734	$	10,817
	Subtotal	$	415,228	$	167,733	$	247,495	$	188,540
Operating property loans:
7/7/2015	Newark		3,480		3,480		-		3,477
12/22/2015	Chicago		2,502		2,500		2		2,513
	Subtotal	$	5,982	$	5,980	$	2	$	5,990
	Total investments	$	421,210	$	173,713	$	247,497	$	194,530

(1)	Represents principal balance of loan gross of origination fees.
(2)	Facility had received certificate of occupancy as of September 30, 2017. See Note 4, Fair Value of Financial Instruments, for information regarding recognition of entrepreneurial profit.
(3)	Facility had achieved at least 40% construction completion but had not received certificate of occupancy as of September 30, 2017. See Note 4, Fair Value of Financial Instruments, for information regarding recognition of entrepreneurial profit.
(4)	These investments contain a higher loan-to-cost ratio and a higher interest rate, some of which interest is payment-in-kind ("PIK") interest. The PIK interest, computed at the contractual rate specified in each debt agreement, is periodically added to the principal balance of the debt and is recorded as interest income. Thus, the actual collection of this interest may be deferred until the time of debt principal repayment.

As of December 31, 2016, the aggregate committed principal amount of the Company’s investment portfolio was approximately $141.9 million and outstanding principal was $86.9 million, as described in more detail in the table below:

	Metropolitan					Remaining
	Statistical Area	Total Investment		Funded		Unfunded
Closing Date	("MSA")	Commitment		Investment (1)		Commitment		Fair Value
Development property investments:
Loan investments with a profits interest:
4/21/2015	Orlando 1 (2) (5)	$	5,372	$	5,308	$	64	$	7,302
6/10/2015	Atlanta 1 (2)		8,132		7,694		438		10,404
6/19/2015	Tampa (2)		5,369		5,285		84		6,279
6/26/2015	Atlanta 2 (2)		6,050		5,620		430		8,900
6/29/2015	Charlotte 1 (2)		7,624		6,842		782		9,853
7/2/2015	Milwaukee (2)		7,650		5,608		2,042		7,008
7/31/2015	New Haven (2)		6,930		5,257		1,673		6,730
8/10/2015	Pittsburgh (3)		5,266		3,497		1,769		4,551
8/14/2015	Raleigh		8,792		1,460		7,332		1,396
9/30/2015	Jacksonville 1 (2)		6,445		5,852		593		7,962
10/27/2015	Austin (3)		8,658		4,366		4,292		5,192
9/20/2016	Charlotte 2		12,888		1,446		11,442		1,298
11/17/2016	Orlando 2 (5)		5,134		1,342		3,792		1,237
11/17/2016	Jacksonville 2		7,530		624		6,906		551
		$	101,840	$	60,201	$	41,639	$	78,663
Construction loans:
8/5/2015	West Palm Beach (4)		7,500		6,712		788		6,702
8/5/2015	Sarasota (4)		4,792		3,485		1,307		3,473
12/23/2015	Miami		17,733		6,517		11,216		6,264
		$	30,025	$	16,714	$	13,311	$	16,439
	Subtotal	$	131,865	$	76,915	$	54,950	$	95,102
Operating property loans:
6/19/2015	New Orleans (4)		2,800		2,800		-		2,768
7/7/2015	Newark		3,480		3,480		-		3,441
10/30/2015	Nashville (4)		1,210		1,210		-		1,204
12/22/2015	Chicago		2,502		2,500		2		2,492
	Subtotal	$	9,992	$	9,990	$	2	$	9,905
	Total investments	$	141,857	$	86,905	$	54,952	$	105,007

Schedule of Changes in Fair Value of Investments

(1)	Represents principal balance of loan gross of origination fees.
(2)	Facility had received certificate of occupancy as of December 31, 2016. See Note 4, Fair Value of Financial Instruments, for information regarding recognition of entrepreneurial profit.
(3)	Facility had achieved at least 40% construction completion but had not received certificate of occupancy as of December 31, 2016. See Note 4, Fair Value of Financial Instruments, for information regarding recognition of entrepreneurial profit.
(4)	These investments were fully repaid during the nine months ended September 30, 2017.
(5)	In the nine months ended September 30, 2017, the Company purchased the economic rights of the Class A membership units of the limited liability companies which own these development property investments. As such, these investments are presented as self-storage real estate owned in the September 30, 2017 Consolidated Balance Sheet. See Note 7, Self-Storage Real Estate Owned, for additional discussion.

The following table provides a reconciliation of the funded principal to the fair market value of investments at September 30, 2017:

Funded principal	$	173,713
Adjustments:
Unamortized origination fees		(3,627)
Change in fair value of investments		24,528
Other		(84)
Fair value of investments	$	194,530

The following table provides a reconciliation of the funded principal to the fair market value of investments at December 31, 2016:

Funded principal	$	86,905
Adjustments:
Unamortized origination fees		(1,056)
Change in fair value of investments		19,242
Other		(84)
Fair value of investments	$	105,007

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

9 Months Ended

Sep. 30, 2017

FAIR VALUE OF FINANCIAL INSTRUMENTS [Abstract]

Summary of Valuation Techniques and Inputs Used to Measure the Fair Value

The table below summarizes the valuation techniques and inputs used to measure the fair value of items categorized in Level 3 of the fair value hierarchy.

Instrument	Valuation technique and assumptions	Hierarchy classification
Development property investments	Valuations are determined using an Income Approach analysis, using the discounted cash flow method model, capturing the prepayment penalty / call price schedule as applicable. The valuation models are calibrated to the total investment net drawn amount as of the issuance date.	Level 3
Development property investments with a profits interest  (a)	Valuations are determined using an Income Approach analysis, using the discounted cash flow method model, capturing the prepayment penalty / call price schedule as applicable. The valuation models are calibrated to the total investment net drawn amount as of the issuance date factoring in the value of the profits interests.	Level 3
	An option-pricing method (OPM) framework is utilized to calculate the value of the profits interests.
Operating property loans	Valuations are determined using an Income Approach analysis, using the discounted cash flow method model, capturing the prepayment penalty / call price schedule as applicable.	Level 3

Summary of Significant Unobservable Inputs Used

The following tables summarize the significant unobservable inputs the Company used to value its investments categorized within Level 3 as of September 30, 2017 and December 31, 2016. These tables are not intended to be all-inclusive, but instead to capture the significant unobservable inputs relevant to the Company’s determination of fair values.

As of September 30, 2017
		Unobservable Inputs
	Primary Valuation			Weighted
Asset Category	Techniques	Input	Estimated Range	Average
Development property investments (a)	Income approach analysis	Market yields/discount rate	7.72 - 10.37%	8.72%
		Exit date	0.33 - 6.96 years	2.87 years
Development property investments with a profits interest (b)	Option pricing model	Volatility	63.82 - 93.54%	73.85%
		Exit date	0.67 - 6.96 years	3.02 years
		Capitalization rate (c)	5.35 - 6.00%	5.50%
		Discount rate	8.35 - 9.00%	8.50%
Operating property loans	Income approach analysis	Market yields/discount rate	5.86 - 6.76%	6.24%
		Exit date (d)	4.23 - 4.91 years	4.62 years

(a)	The valuation technique for the development property investments with a profits interest does not differ from the development property investments without a profits interest. Therefore, this line item focuses on all development property investments, including those with a profits interest.
(b)	The valuation technique for the development property investments with a profits interest does not differ from the development property investments without a profits interest. The development property investments with a profits interest only require incremental valuation techniques to determine the value of the profits interest. Therefore this line only focuses on the profits interest valuation.
(c)	Thirteen properties were 40% - 100% complete, thus requiring a capitalization rate to derive entrepreneurial profit. Capitalization rates are estimated based on current data derived from independent sources in the markets in which the Company holds investments.
(d)	The exit dates for the operating property loans are the contractual maturity dates.

As of December 31, 2016
		Unobservable Inputs
	Primary Valuation			Weighted
Asset Category	Techniques	Input	Estimated Range	Average
Development property investments (a)	Income approach analysis	Market yields/discount rate	7.23 - 9.28%	8.34%
		Exit date	0.17 - 3.88 years	1.81 years
Development property investments with a profits interest (b)	Option pricing model	Volatility	68.72 - 73.46%	73.17%
		Exit date	1.42 - 3.88 years	2.12 years
		Capitalization rate (c)	5.25 - 5.50%	5.47%
		Discount rate	8.25 - 8.50%	8.47%
Operating property loans	Income approach analysis	Market yields/discount rate	6.09 - 7.20%	6.73%
		Exit date (d)	4.50 - 5.66 years	5.07 years

Schedule of Change in Fair Value of Investments Due to Change in Market Yield Discount Rates

The following fluctuations in the market yields/discount rates would have had the following impact on the fair value of our investments:

	Increase (decrease) in fair value of investments
Change in market yields/discount rates (in millions)	September 30, 2017		December 31, 2016
Up 25 basis points	$	(0.9)	$	(0.3)
Down 25 basis points, subject to a minimum yield/rate of 10 basis points		1.0		0.3

Schedule of Change in Fair Value of Investments Due to Change in Capitalization Rates

The following fluctuations in the capitalization rates would have had the following impact on the fair value of our investments:

	Increase (decrease) in fair value of investments
Change in capitalization rates (in millions)	September 30, 2017		December 31, 2016
Up 25 basis points	$	(2.5)	$	(2.1)
Down 25 basis points		2.7		2.3
Up 50 basis points		(4.8)		(3.8)
Down 50 basis points		5.8		4.6

Changes in Investments that Use Level 3 Inputs

The following table presents changes in investments that use Level 3 inputs for the nine month period ended September 30, 2017:

Balance at December 31, 2016	$	105,007
Net realized gains		-
Net unrealized gains		9,066
Fundings of principal and change in unamortized origination fees		110,600
Repayments of loans		(22,746)
Payment-in-kind interest		5,522
Reclassification of self-storage real estate owned		(12,919)
Net transfers in or out of Level 3		-
Balance at September 30, 2017	$	194,530

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INVESTMENT IN REAL ESTATE VENTURE (Tables)

9 Months Ended

Sep. 30, 2017

INVESTMENT IN REAL ESTATE VENTURE [Abstract]

Equity Method Investments

As of September 30, 2017,  the SL1 Venture had eleven development property investments with a profits interest as described in more detail in the table below:

	Metropolitan					Remaining
	Statistical Area	Total Investment		Funded		Unfunded
Closing Date	("MSA")	Commitment		Investment (1)		Commitment		Fair Value
5/14/2015	Miami 1 (2) (3)	$	13,867	$	9,455	$	4,412	$	10,929
5/14/2015	Miami 2 (2) (3)		14,849		8,486		6,363		8,947
9/25/2015	Fort Lauderdale (2) (3)		13,230		7,298		5,932		7,796
4/15/2016	Washington DC (4)		17,269		14,346		2,923		15,937
4/29/2016	Atlanta 1 (3)		10,223		5,140		5,083		5,459
7/19/2016	Jacksonville (4)		8,127		6,989		1,138		10,541
7/21/2016	New Jersey		7,828		1,621		6,207		1,561
8/15/2016	Atlanta 2 (4)		8,772		6,535		2,237		7,423
8/25/2016	Denver (3)		11,032		7,605		3,427		8,678
9/28/2016	Columbia (4)		9,199		7,651		1,548		8,525
12/22/2016	Raleigh		8,877		2,431		6,446		2,398
	Total	$	123,273	$	77,557	$	45,716	$	88,194

(1)	Represents principal balance of loan gross of origination fees.
(2)	These development property investments (having approximately $8.1 million of outstanding principal at contribution) were contributed to the SL1 Venture on March 31, 2016 by the Company.
(3)	Facility had achieved at least 40% construction completion but had not received certificate of occupancy as of September 30, 2017. See Note 4, Fair Value of Financial Instruments, for information regarding recognition of entrepreneurial profit.
(4)	Facility had received certificate of occupancy as of September 30, 2017. See Note 4, Fair Value of Financial Instruments, for information regarding recognition of entrepreneurial profit.

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VARIABLE INTEREST ENTITIES (Tables)

9 Months Ended

Sep. 30, 2017

VARIABLE INTEREST ENTITIES [Abstract]

Schedule of Variable Interest Entities

The Company’s maximum exposure to loss as a result of its involvement with the development property VIEs is as follows:

	September 30, 2017		December 31, 2016
Assets recorded related to VIEs	$	188,540	$	95,102
Unfunded loan commitments to VIEs		247,495		54,950
Maximum exposure to loss	$	436,035	$	150,052

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SELF-STORAGE REAL ESTATE OWNED (Tables)

9 Months Ended

Sep. 30, 2017

INVESTMENT IN REAL ESTATE VENTURE [Abstract]

Schedule of Cost Basis of Real Estate Investments

The following table shows the Company’s basis in this facility as of August 9, 2017:

Funded principal balance, net of unamortized origination fees	$	9,139
Unrealized appreciation on investments		3,780
Cash consideration paid		2,856
Net property working capital acquired		52
Total cost basis	$	15,827

Real Estate Investment, Impact in Consolidated Balance Sheet , Disclosure

The following table shows the impact of this real estate investment on the Company’s Consolidated Balance Sheet as of September 30, 2017:

	September 30, 2017
Cash and cash equivalents	$	60
Prepaid expenses and other assets		2
Land		1,505
Building and improvements		13,720
In-place leases		602
Accumulated depreciation and amortization		(233)
Self-storage real estate owned	$	15,594
Accounts payable, accrued expenses and other liabilities	$	125

Real Estate Investment, Impact in Consolidated Statement of Operations, Disclosure

The following table shows the impact of this real estate investment on the Company’s Consolidated Statement of Operations for the three and nine months ended September 30, 2017:

	Three months ended		Nine months ended
	September 30, 2017		September 30, 2017
Rental revenues	$	160	$	328
Property operating expenses of real estate owned		(114)		(188)
Depreciation and amortization expense		(172)		(233)
Total expenses of real estate owned	$	(286)	$	(421)

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DEBT (Tables)

9 Months Ended

Sep. 30, 2017

DEBT [Abstract]

Bank Commitments and Outstanding Balances of Senior Participations

The table below details the bank commitment and outstanding balance of our senior participation at September 30, 2017:

	Commitment by Bank		Amount Borrowed		Remaining Funds		Interest Rate	Effective Interest Rate at  September 30, 2017		Maturity Date
Miami A Note	$	10,001	$	732	$	9,269	30-day LIBOR + 3.10%	4.33	%	January 31, 2018
Unamortized fees				(64)
Net balance			$	668

 The table below details the bank commitments and outstanding balances of our senior participations at December 31, 2016:

	Commitment by Bank		Amount Borrowed		Remaining Funds		Interest Rate	Effective Interest Rate at  December 31, 2016		Maturity Date
Operating Property A Note	$	1,820	$	1,820	$	-	30-day LIBOR + 3.85%	4.47	%	April 1, 2019
Miami A Note		10,001		-		10,001	30-day LIBOR + 3.10%	3.72	%	July 1, 2017
July 2016 A Notes		14,185		13,420		765	30-day LIBOR + 3.50%	4.12	%	August 1, 2019
October 2016 A Note		4,405		3,375		1,030	30-day LIBOR + 3.50%	4.12	%	September 1, 2021
Total	$	30,411		18,615	$	11,796
Unamortized fees				(33)
Net balance			$	18,582

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STOCKHOLDERS' EQUITY (Tables)

9 Months Ended

Sep. 30, 2017

Stockholders' Equity [Abstract]

Summary of Changes in Restricted Shares

A summary of changes in the Company’s restricted shares of common stock for the three and nine months ended September 30, 2017 and 2016 is as follows:

	Three months ended				Three months ended
	September 30, 2017				September 30, 2016
			Weighted				Weighted
			average grant				average grant
	Shares		date fair value		Shares		date fair value
Nonvested at June 30,		202,502	$	21.33		139,168	$	19.91
Granted		-		-		-		-
Vested		(17,500)		18.64		(17,500)		18.64
Forfeited		-		-		-		-
Nonvested at September 30,		185,002	$	21.58		121,668	$	20.10

	Nine months ended				Nine months ended
	September 30, 2017				September 30, 2016
			Weighted				Weighted
			average grant				average grant
	Shares		date fair value		Shares		date fair value
Nonvested at December 31,		120,001	$	20.10		162,500	$	20.08
Granted		111,414		22.59		14,340		13.95
Vested		(46,413)		20.28		(55,172)		18.27
Forfeited		-		-		-		-
Nonvested at September 30,		185,002	$	21.58		121,668	$	20.10

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EARNINGS PER SHARE (Tables)

9 Months Ended

Sep. 30, 2017

EARNINGS PER SHARE [Abstract]

Schedule of Earnings per Share, Basic and Diluted

For the three and nine months ended September 30, 2017 and 2016, the Company’s basic earnings per share is computed using the two-class method, and our diluted earnings per share is computed using the more dilutive of the treasury stock method or two-class method:

	Three months ended September 30,				Nine months ended September 30,
	2017		2016		2017		2016
Shares outstanding
Weighted average common shares - basic		14,042,350		5,831,135		10,935,776		5,926,215
Effect of dilutive securities		201,995		131,958		172,764		149,971
Weighted average common shares, all classes		14,244,345		5,963,093		11,108,540		6,076,186
Calculation of Earnings per Share - basic
Net income	$	4,457	$	4,994	$	11,434	$	11,528
Less:
Net income allocated to preferred stockholders		310		n/a		1,033		n/a
Net income allocated to unvested restricted shares		57		111		156		285
Net income attributable to common shareholders - two-class method	$	4,090	$	4,883	$	10,245	$	11,243
Weighted average common shares - basic		14,042,350		5,831,135		10,935,776		5,926,215
Earnings per share - basic	$	0.29	$	0.84	$	0.94	$	1.90
Calculation of Earnings per Share - diluted
Net income	$	4,457	$	4,994	$	11,434	$	11,528
Less:
Net income allocated to preferred stockholders		310		n/a		1,033		n/a
Net income attributable to common shareholders - two-class method	$	4,147	$	4,994	$	10,401	$	11,528
Weighted average common shares - diluted		14,244,345		5,963,093		11,108,540		6,076,186
Earnings per share - diluted	$	0.29	$	0.84	$	0.94	$	1.90

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SUBSEQUENT EVENTS (Tables)

9 Months Ended

Sep. 30, 2017

Schedule of Investments

As of September 30, 2017, the aggregate committed principal amount of the Company’s investment portfolio was approximately $421.2 million and outstanding principal was $173.7 million, as described in more detail in the table below:

	Metropolitan					Remaining
	Statistical Area	Total Investment		Funded		Unfunded
Closing Date	("MSA")	Commitment		Investment (1)		Commitment		Fair Value
Development property investments:
Loan investments with a profits interest:
6/10/2015	Atlanta 1 (2)	$	8,132	$	8,010	$	122	$	10,507
6/19/2015	Tampa 1 (2)		5,369		5,285		84		6,058
6/26/2015	Atlanta 2 (2)		6,050		5,754		296		8,519
6/29/2015	Charlotte 1 (2)		7,624		7,126		498		10,551
7/2/2015	Milwaukee (2)		7,650		7,377		273		8,762
7/31/2015	New Haven (2)		6,930		6,412		518		8,399
8/10/2015	Pittsburgh (2)		5,266		4,574		692		6,591
8/14/2015	Raleigh (3)		8,792		4,277		4,515		4,260
9/30/2015	Jacksonville 1 (2)		6,445		5,988		457		8,830
10/27/2015	Austin (2)		8,658		7,000		1,658		8,779
9/20/2016	Charlotte 2 (3)		12,888		4,517		8,371		4,360
11/17/2016	Jacksonville 2 (3)		7,530		3,899		3,631		4,453
1/4/2017	New York City 1 (2)		16,117		13,165		2,952		16,712
1/18/2017	Atlanta 3		14,115		3,471		10,644		3,314
1/31/2017	Atlanta 4		13,678		5,698		7,980		5,667
2/24/2017	Orlando 3		8,056		1,468		6,588		1,409
2/24/2017	New Orleans		12,549		-		12,549		-
2/27/2017	Atlanta 5		17,492		3,910		13,582		3,790
3/1/2017	Fort Lauderdale		9,952		1,945		8,007		1,875
3/1/2017	Houston		13,630		3,382		10,248		3,283
4/14/2017	Louisville 1		8,523		1,471		7,052		1,394
4/20/2017	Denver 1		9,806		1,906		7,900		1,822
4/20/2017	Denver 2		11,164		2,877		8,287		2,790
5/2/2017	Atlanta 6		12,543		3,117		9,426		3,017
5/2/2017	Tampa 2		8,091		890		7,201		813
5/19/2017	Tampa 3		9,224		729		8,495		639
6/12/2017	Tampa 4		10,266		1,364		8,902		1,266
6/19/2017	Baltimore (4)		10,775		2,672		8,103		2,484
6/28/2017	Knoxville		9,115		1,656		7,459		1,573
6/29/2017	Boston		14,103		2,031		12,072		1,898
6/30/2017	New York City 2 (4)		26,482		16,712		9,770		16,333
7/27/2017	Jacksonville 3		8,096		888		7,208		810
8/30/2017	Orlando 4		9,037		1,790		7,247		1,698
9/14/2017	Los Angeles		28,750		7,382		21,368		7,284
9/14/2017	Miami		14,657		5,761		8,896		5,644
9/28/2017	Louisville 2		9,940		2,230		7,710		2,139
		$	397,495	$	156,734	$	240,761	$	177,723
Construction loans:
12/23/2015	Miami		17,733		10,999		6,734		10,817
		$	17,733	$	10,999	$	6,734	$	10,817
	Subtotal	$	415,228	$	167,733	$	247,495	$	188,540
Operating property loans:
7/7/2015	Newark		3,480		3,480		-		3,477
12/22/2015	Chicago		2,502		2,500		2		2,513
	Subtotal	$	5,982	$	5,980	$	2	$	5,990
	Total investments	$	421,210	$	173,713	$	247,497	$	194,530

(1)	Represents principal balance of loan gross of origination fees.
(2)	Facility had received certificate of occupancy as of September 30, 2017. See Note 4, Fair Value of Financial Instruments, for information regarding recognition of entrepreneurial profit.
(3)	Facility had achieved at least 40% construction completion but had not received certificate of occupancy as of September 30, 2017. See Note 4, Fair Value of Financial Instruments, for information regarding recognition of entrepreneurial profit.
(4)	These investments contain a higher loan-to-cost ratio and a higher interest rate, some of which interest is payment-in-kind ("PIK") interest. The PIK interest, computed at the contractual rate specified in each debt agreement, is periodically added to the principal balance of the debt and is recorded as interest income. Thus, the actual collection of this interest may be deferred until the time of debt principal repayment.

As of December 31, 2016, the aggregate committed principal amount of the Company’s investment portfolio was approximately $141.9 million and outstanding principal was $86.9 million, as described in more detail in the table below:

	Metropolitan					Remaining
	Statistical Area	Total Investment		Funded		Unfunded
Closing Date	("MSA")	Commitment		Investment (1)		Commitment		Fair Value
Development property investments:
Loan investments with a profits interest:
4/21/2015	Orlando 1 (2) (5)	$	5,372	$	5,308	$	64	$	7,302
6/10/2015	Atlanta 1 (2)		8,132		7,694		438		10,404
6/19/2015	Tampa (2)		5,369		5,285		84		6,279
6/26/2015	Atlanta 2 (2)		6,050		5,620		430		8,900
6/29/2015	Charlotte 1 (2)		7,624		6,842		782		9,853
7/2/2015	Milwaukee (2)		7,650		5,608		2,042		7,008
7/31/2015	New Haven (2)		6,930		5,257		1,673		6,730
8/10/2015	Pittsburgh (3)		5,266		3,497		1,769		4,551
8/14/2015	Raleigh		8,792		1,460		7,332		1,396
9/30/2015	Jacksonville 1 (2)		6,445		5,852		593		7,962
10/27/2015	Austin (3)		8,658		4,366		4,292		5,192
9/20/2016	Charlotte 2		12,888		1,446		11,442		1,298
11/17/2016	Orlando 2 (5)		5,134		1,342		3,792		1,237
11/17/2016	Jacksonville 2		7,530		624		6,906		551
		$	101,840	$	60,201	$	41,639	$	78,663
Construction loans:
8/5/2015	West Palm Beach (4)		7,500		6,712		788		6,702
8/5/2015	Sarasota (4)		4,792		3,485		1,307		3,473
12/23/2015	Miami		17,733		6,517		11,216		6,264
		$	30,025	$	16,714	$	13,311	$	16,439
	Subtotal	$	131,865	$	76,915	$	54,950	$	95,102
Operating property loans:
6/19/2015	New Orleans (4)		2,800		2,800		-		2,768
7/7/2015	Newark		3,480		3,480		-		3,441
10/30/2015	Nashville (4)		1,210		1,210		-		1,204
12/22/2015	Chicago		2,502		2,500		2		2,492
	Subtotal	$	9,992	$	9,990	$	2	$	9,905
	Total investments	$	141,857	$	86,905	$	54,952	$	105,007

Development Property Investment [Member]

Schedule of Investments

Subsequent to September 30, 2017, the Company closed on the following development property investment with a profits interest:

		Total Investment
Closing Date	MSA	Commitment
10/12/2017	Miami 2	$	9,459
10/30/2017	New Jersey		14,701
	Total	$	24,160

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SIGNIFICANT ACCOUNTING POLICIES (Narrative) (Details) - USD ($)				3 Months Ended		9 Months Ended
	Jul. 26, 2017	Jul. 26, 2017	Jul. 25, 2017	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Jul. 27, 2018
Significant Accounting Policies [Line Items]
Deferred Offering Costs				$ 2,200,000		$ 2,200,000
Transaction and other expenses				0	$ 2,000	0	$ 2,100,000
Cash received upon closing of the credit facility						403,000
Paydown of the credit facility						20,000,000
Repurchase of senior loan participation						$ (1,854,000)
Scenario, Plan [Member]
Significant Accounting Policies [Line Items]
Deferred Offering Costs								$ 2,800,000
Building and Building Improvements [Member]
Significant Accounting Policies [Line Items]
Property, Plant and Equipment, Useful Life						40 years
Series A Preferred Stock [Member]
Significant Accounting Policies [Line Items]
Value of Shares to Be issued Prior to Commitment Period	$ 50,000,000					$ 50,000,000
Cumulative Preferred Stock [Member]
Significant Accounting Policies [Line Items]
Decrease in Cumulative Preferred Stock Value				$ 600,000		$ 600,000
Development Property Investment [Member]
Significant Accounting Policies [Line Items]
Equity Method Investment, Ownership Percentage				49.90%		49.90%
Jernigan Capital Operating Company LLC [Member]
Significant Accounting Policies [Line Items]
Proceeds from lines of credit		$ 20,000,000	$ 20,000,000
Paydown of the credit facility			$ 17,800,000

XML

SIGNIFICANT ACCOUNTING POLICIES (Financial Instruments Measured at Fair Value on a Recurring Basis) (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Development property investments	$ 188,540	$ 95,102
Operating property loans	5,990	9,905
Total investments	194,530	105,007
Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Development property investments	188,540	95,102
Operating property loans	5,990	9,905
Total investments	$ 194,530	$ 105,007

XML

SIGNIFICANT ACCOUNTING POLICIES (Schedule of Consolidated Statements of Cash Flows - Supplemental Disclosures) (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Supplemental disclosure of cash flow information:
Interest paid	$ 705	$ 141
Supplemental disclosure of non-cash investing and financing activities:
Stock dividend paid on preferred stock	1,194
Dividends declared, but not paid, on preferred stock	310
Dividends declared, but not paid, on common stock	4,983	2,087
Contribution of assets to real estate venture		$ 7,693
Reclassification of self-storage real estate owned	12,919
Other loans paid off with issuance of development property investments	$ 1,587

XML

INVESTMENTS (Narrative) (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)	Sep. 30, 2017 USD ($) property	Sep. 30, 2016 USD ($)	Dec. 31, 2016 USD ($)
Schedule of Investments [Line Items]
Investment Commitment	$ 421,210		$ 421,210
Funded Investment, outstanding	173,713		173,713		$ 86,905
Revenues	3,361	$ 1,698	8,261	$ 4,374
Operating Income (Loss), Total	653	$ (169)	1,131	(3,368)
New Orleans MSA Development Property Investment [Member]
Schedule of Investments [Line Items]
Equity Method Investment, Summarized Financial Information, Net Income (Loss)			$ 4,100
Construction Loans [Member]
Schedule of Investments [Line Items]
Mortgage loans on real estate, interest rate			6.90%
Mortgage Loans on Real Estate, Periodic Payment Terms			P18M
Investment Commitment	$ 17,700		$ 17,700
Development Property Investment [Member]
Schedule of Investments [Line Items]
Number of Investments | property			36
Equity Method Investment, Ownership Percentage	49.90%		49.90%
Mortgage loans on real estate, interest rate			6.90%
Mortgage Loans on Real Estate, Periodic Payment Terms			P72M
Equity Method Investment, Assets, Total	$ 188,200		$ 188,200		71,000
Equity Method Investment, Liabilities, Total	156,700		156,700		60,200
Investment Commitment	397,500		397,500
Revenues			$ 2,200	300
Operating Income (Loss), Total	200			$ (600)
Put Option Purchase Price Terms			an investor has an option to put its interest to the Company upon the event of default of the underlying property loans. The put, if exercised, requires the Company to purchase the member's interest at the original purchase price plus a yield of 4.5% on such purchase price.
Operating Property Loans [Member]
Schedule of Investments [Line Items]
Mortgage Loans on Real Estate, Periodic Payment Terms			P72M
Investment Commitment	5,982		$ 5,982
Operating Property Loans [Member] | Maximum [Member]
Schedule of Investments [Line Items]
Mortgage loans on real estate, interest rate			6.90%
Operating Property Loans [Member] | Minimum [Member]
Schedule of Investments [Line Items]
Mortgage loans on real estate, interest rate			5.85%
Investment Commitment [Member]
Schedule of Investments [Line Items]
Investment Commitment					141,857
Investment Commitment [Member] | Operating Property Loans [Member]
Schedule of Investments [Line Items]
Investment Commitment					9,992
Funded Investment [Member]
Schedule of Investments [Line Items]
Funded Investment, outstanding	173,713		$ 173,713		86,905
Funded Investment [Member] | Operating Property Loans [Member]
Schedule of Investments [Line Items]
Funded Investment, outstanding	$ 5,980		$ 5,980		$ 9,990

XML

INVESTMENTS (Schedule of Investments) (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Schedule of Investments [Line Items]
Investment Commitment	$ 421,210
Funded Investment	173,713	$ 86,905
Development property investments, Fair Value	188,540	95,102
Operating property loans, Fair Value	5,990	9,905
Investments, Fair Value Disclosure	$ 194,530	105,007
Percentage of completion of construction	100.00%
Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 415,228
Development property investments, Fair Value	188,540	95,102
Operating Property Loans [Member]
Schedule of Investments [Line Items]
Investment Commitment	5,982
Operating property loans, Fair Value	5,990	9,905
Investment Commitment [Member]
Schedule of Investments [Line Items]
Investment Commitment		141,857
Investment Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment		131,865
Investment Commitment [Member] | Operating Property Loans [Member]
Schedule of Investments [Line Items]
Investment Commitment		9,992
Funded Investment [Member]
Schedule of Investments [Line Items]
Funded Investment	173,713	86,905
Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	167,733	76,915
Funded Investment [Member] | Operating Property Loans [Member]
Schedule of Investments [Line Items]
Funded Investment	5,980	9,990
Unfunded Commitment [Member]
Schedule of Investments [Line Items]
Investment Commitment	247,497	54,952
Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	247,495	54,950
Unfunded Commitment [Member] | Operating Property Loans [Member]
Schedule of Investments [Line Items]
Investment Commitment	2	2
Loan investments [Member]
Schedule of Investments [Line Items]
Development property investments, Fair Value	88,194
Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	397,495
Development property investments, Fair Value	177,723	78,663
Loan investments [Member] | Investment Commitment [Member]
Schedule of Investments [Line Items]
Investment Commitment	123,273
Loan investments [Member] | Investment Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment		101,840
Loan investments [Member] | Funded Investment [Member]
Schedule of Investments [Line Items]
Funded Investment	77,557
Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	156,734	60,201
Loan investments [Member] | Unfunded Commitment [Member]
Schedule of Investments [Line Items]
Investment Commitment	45,716
Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	240,761	41,639
Construction Loans [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	17,733
Development property investments, Fair Value	10,817	16,439
Construction Loans [Member] | Investment Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment		30,025
Construction Loans [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	10,999	16,714
Construction Loans [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 6,734	$ 13,311
Atlanta 1 [Member] | Loan investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	4/29/2016
Development property investments, Fair Value	$ 5,459
Atlanta 1 [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	6/10/2015	6/10/2015
Investment Commitment	$ 8,132
Development property investments, Fair Value	10,507	$ 10,404
Atlanta 1 [Member] | Loan investments [Member] | Investment Commitment [Member]
Schedule of Investments [Line Items]
Investment Commitment	10,223
Atlanta 1 [Member] | Loan investments [Member] | Investment Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment		8,132
Atlanta 1 [Member] | Loan investments [Member] | Funded Investment [Member]
Schedule of Investments [Line Items]
Funded Investment	5,140
Atlanta 1 [Member] | Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	8,010	7,694
Atlanta 1 [Member] | Loan investments [Member] | Unfunded Commitment [Member]
Schedule of Investments [Line Items]
Investment Commitment	5,083
Atlanta 1 [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 122	$ 438
Tampa 1 [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	6/19/2015
Investment Commitment	$ 5,369
Development property investments, Fair Value	6,058
Tampa 1 [Member] | Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	5,285
Tampa 1 [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 84
Atlanta 2 [Member] | Loan investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	8/15/2016
Development property investments, Fair Value	$ 7,423
Atlanta 2 [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	6/26/2015	6/26/2015
Investment Commitment	$ 6,050
Development property investments, Fair Value	8,519	$ 8,900
Atlanta 2 [Member] | Loan investments [Member] | Investment Commitment [Member]
Schedule of Investments [Line Items]
Investment Commitment	8,772
Atlanta 2 [Member] | Loan investments [Member] | Investment Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment		6,050
Atlanta 2 [Member] | Loan investments [Member] | Funded Investment [Member]
Schedule of Investments [Line Items]
Funded Investment	6,535
Atlanta 2 [Member] | Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	5,754	5,620
Atlanta 2 [Member] | Loan investments [Member] | Unfunded Commitment [Member]
Schedule of Investments [Line Items]
Investment Commitment	2,237
Atlanta 2 [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 296	$ 430
Charlotte 1 [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	6/29/2015	6/29/2015
Investment Commitment	$ 7,624
Development property investments, Fair Value	10,551	$ 9,853
Charlotte 1 [Member] | Loan investments [Member] | Investment Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment		7,624
Charlotte 1 [Member] | Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	7,126	6,842
Charlotte 1 [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 498	$ 782
Milwaukee [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	7/2/2015	7/2/2015
Investment Commitment	$ 7,650
Development property investments, Fair Value	8,762	$ 7,008
Milwaukee [Member] | Loan investments [Member] | Investment Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment		7,650
Milwaukee [Member] | Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	7,377	5,608
Milwaukee [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 273	$ 2,042
New Haven [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	7/31/2015	7/31/2015
Investment Commitment	$ 6,930
Development property investments, Fair Value	8,399	$ 6,730
New Haven [Member] | Loan investments [Member] | Investment Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment		6,930
New Haven [Member] | Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	6,412	5,257
New Haven [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 518	$ 1,673
Pittsburgh [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	8/10/2015	8/10/2015
Investment Commitment	$ 5,266
Development property investments, Fair Value	6,591	$ 4,551
Pittsburgh [Member] | Loan investments [Member] | Investment Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment		5,266
Pittsburgh [Member] | Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	4,574	3,497
Pittsburgh [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 692	$ 1,769
Raleigh [Member] | Loan investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	12/22/2016
Development property investments, Fair Value	$ 2,398
Raleigh [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	8/14/2015	8/14/2015
Investment Commitment	$ 8,792
Development property investments, Fair Value	4,260	$ 1,396
Raleigh [Member] | Loan investments [Member] | Investment Commitment [Member]
Schedule of Investments [Line Items]
Investment Commitment	8,877
Raleigh [Member] | Loan investments [Member] | Investment Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment		8,792
Raleigh [Member] | Loan investments [Member] | Funded Investment [Member]
Schedule of Investments [Line Items]
Funded Investment	2,431
Raleigh [Member] | Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	4,277	1,460
Raleigh [Member] | Loan investments [Member] | Unfunded Commitment [Member]
Schedule of Investments [Line Items]
Investment Commitment	6,446
Raleigh [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 4,515	$ 7,332
Jacksonville 1 [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	9/30/2015	9/30/2015
Investment Commitment	$ 6,445
Development property investments, Fair Value	8,830	$ 7,962
Jacksonville 1 [Member] | Loan investments [Member] | Investment Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment		6,445
Jacksonville 1 [Member] | Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	5,988	5,852
Jacksonville 1 [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 457	$ 593
Austin [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	10/27/2015	10/27/2015
Investment Commitment	$ 8,658
Development property investments, Fair Value	8,779	$ 5,192
Austin [Member] | Loan investments [Member] | Investment Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment		8,658
Austin [Member] | Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	7,000	4,366
Austin [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 1,658	$ 4,292
Charlotte 2 [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	9/20/2016	9/20/2016
Investment Commitment	$ 12,888
Development property investments, Fair Value	4,360	$ 1,298
Charlotte 2 [Member] | Loan investments [Member] | Investment Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment		12,888
Charlotte 2 [Member] | Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	4,517	1,446
Charlotte 2 [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 8,371	$ 11,442
Jacksonville 2 [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	11/17/2016	11/17/2016
Investment Commitment	$ 7,530
Development property investments, Fair Value	4,453	$ 551
Jacksonville 2 [Member] | Loan investments [Member] | Investment Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment		7,530
Jacksonville 2 [Member] | Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	3,899	624
Jacksonville 2 [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 3,631	$ 6,906
New York City 1 [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	1/4/2017
Investment Commitment	$ 16,117
Development property investments, Fair Value	16,712
New York City 1 [Member] | Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	13,165
New York City 1 [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 2,952
Atlanta 3 [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	1/18/2017
Investment Commitment	$ 14,115
Development property investments, Fair Value	3,314
Atlanta 3 [Member] | Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	3,471
Atlanta 3 [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 10,644
Atlanta 4 [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	1/31/2017
Investment Commitment	$ 13,678
Development property investments, Fair Value	5,667
Atlanta 4 [Member] | Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	5,698
Atlanta 4 [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 7,980
Orlando 3 [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	2/24/2017
Investment Commitment	$ 8,056
Development property investments, Fair Value	1,409
Orlando 3 [Member] | Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	1,468
Orlando 3 [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 6,588
New Orleans [Member] | Operating Property Loans [Member]
Schedule of Investments [Line Items]
Investment Closing Date		6/19/2015
Operating property loans, Fair Value		$ 2,768
New Orleans [Member] | Investment Commitment [Member] | Operating Property Loans [Member]
Schedule of Investments [Line Items]
Investment Commitment		2,800
New Orleans [Member] | Funded Investment [Member] | Operating Property Loans [Member]
Schedule of Investments [Line Items]
Funded Investment		$ 2,800
New Orleans [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	2/24/2017
Investment Commitment	$ 12,549
New Orleans [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 12,549
Atlanta 5 [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	2/27/2017
Investment Commitment	$ 17,492
Development property investments, Fair Value	3,790
Atlanta 5 [Member] | Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	3,910
Atlanta 5 [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 13,582
Fort Lauderdale [Member] | Loan investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	9/25/2015
Development property investments, Fair Value	$ 7,796
Fort Lauderdale [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	3/1/2017
Investment Commitment	$ 9,952
Development property investments, Fair Value	1,875
Fort Lauderdale [Member] | Loan investments [Member] | Investment Commitment [Member]
Schedule of Investments [Line Items]
Investment Commitment	13,230
Fort Lauderdale [Member] | Loan investments [Member] | Funded Investment [Member]
Schedule of Investments [Line Items]
Funded Investment	7,298
Fort Lauderdale [Member] | Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	1,945
Fort Lauderdale [Member] | Loan investments [Member] | Unfunded Commitment [Member]
Schedule of Investments [Line Items]
Investment Commitment	5,932
Fort Lauderdale [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 8,007
Houston [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	3/1/2017
Investment Commitment	$ 13,630
Development property investments, Fair Value	3,283
Houston [Member] | Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	3,382
Houston [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 10,248
Louisville 1 [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	4/14/2017
Investment Commitment	$ 8,523
Development property investments, Fair Value	1,394
Louisville 1 [Member] | Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	1,471
Louisville 1 [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 7,052
Denver 1 [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	4/20/2017
Investment Commitment	$ 9,806
Development property investments, Fair Value	1,822
Denver 1 [Member] | Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	1,906
Denver 1 [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 7,900
Denver 2 [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	4/20/2017
Investment Commitment	$ 11,164
Development property investments, Fair Value	2,790
Denver 2 [Member] | Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	2,877
Denver 2 [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 8,287
Atlanta 6 [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	5/2/2017
Investment Commitment	$ 12,543
Development property investments, Fair Value	3,017
Atlanta 6 [Member] | Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	3,117
Atlanta 6 [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 9,426
Tampa 2 [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	5/2/2017
Investment Commitment	$ 8,091
Development property investments, Fair Value	813
Tampa 2 [Member] | Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	890
Tampa 2 [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 7,201
Tampa 3 [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	5/19/2017
Investment Commitment	$ 9,224
Development property investments, Fair Value	639
Tampa 3 [Member] | Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	729
Tampa 3 [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 8,495
Tampa 4 [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	6/12/2017
Investment Commitment	$ 10,266
Development property investments, Fair Value	1,266
Tampa 4 [Member] | Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	1,364
Tampa 4 [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 8,902
West Palm Beach [Member] | Construction Loans [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date		8/5/2015
Development property investments, Fair Value		$ 6,702
West Palm Beach [Member] | Construction Loans [Member] | Investment Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment		7,500
West Palm Beach [Member] | Construction Loans [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment		6,712
West Palm Beach [Member] | Construction Loans [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment		$ 788
Sarasota [Member] | Construction Loans [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date		8/5/2015
Development property investments, Fair Value		$ 3,473
Sarasota [Member] | Construction Loans [Member] | Investment Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment		4,792
Sarasota [Member] | Construction Loans [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment		3,485
Sarasota [Member] | Construction Loans [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment		$ 1,307
Baltimore [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	6/19/2017
Investment Commitment	$ 10,775
Development property investments, Fair Value	2,484
Baltimore [Member] | Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	2,672
Baltimore [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 8,103
Knoxville [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	6/28/2017
Investment Commitment	$ 9,115
Development property investments, Fair Value	1,573
Knoxville [Member] | Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	1,656
Knoxville [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 7,459
Boston [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	6/29/2017
Investment Commitment	$ 14,103
Development property investments, Fair Value	1,898
Boston [Member] | Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	2,031
Boston [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 12,072
New York City 2 [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	6/30/2017
Investment Commitment	$ 26,482
Development property investments, Fair Value	16,333
New York City 2 [Member] | Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	16,712
New York City 2 [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 9,770
Jacksonville 3 [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	7/27/2017
Investment Commitment	$ 8,096
Development property investments, Fair Value	810
Jacksonville 3 [Member] | Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	888
Jacksonville 3 [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 7,208
Orlando 4 [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	8/30/2017
Investment Commitment	$ 9,037
Development property investments, Fair Value	1,698
Orlando 4 [Member] | Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	1,790
Orlando 4 [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 7,247
Los Angeles [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	9/14/2017
Investment Commitment	$ 28,750
Development property investments, Fair Value	7,284
Los Angeles [Member] | Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	7,382
Los Angeles [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 21,368
Miami [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	9/14/2017
Investment Commitment	$ 14,657
Development property investments, Fair Value	5,644
Miami [Member] | Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	5,761
Miami [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 8,896
Miami [Member] | Construction Loans [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	12/23/2015	12/23/2015
Investment Commitment	$ 17,733
Development property investments, Fair Value	10,817	$ 6,264
Miami [Member] | Construction Loans [Member] | Investment Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment		17,733
Miami [Member] | Construction Loans [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	10,999	6,517
Miami [Member] | Construction Loans [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 6,734	$ 11,216
Louisville 2 [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date	9/28/2017
Investment Commitment	$ 9,940
Development property investments, Fair Value	2,139
Louisville 2 [Member] | Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment	2,230
Louisville 2 [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 7,710
Newark [Member] | Operating Property Loans [Member]
Schedule of Investments [Line Items]
Investment Closing Date	7/7/2015	7/7/2015
Investment Commitment	$ 3,480
Operating property loans, Fair Value	3,477	$ 3,441
Newark [Member] | Investment Commitment [Member] | Operating Property Loans [Member]
Schedule of Investments [Line Items]
Investment Commitment		3,480
Newark [Member] | Funded Investment [Member] | Operating Property Loans [Member]
Schedule of Investments [Line Items]
Funded Investment	$ 3,480	$ 3,480
Chicago [Member] | Operating Property Loans [Member]
Schedule of Investments [Line Items]
Investment Closing Date	12/22/2015	12/22/2015
Investment Commitment	$ 2,502
Operating property loans, Fair Value	2,513	$ 2,492
Chicago [Member] | Investment Commitment [Member] | Operating Property Loans [Member]
Schedule of Investments [Line Items]
Investment Commitment		2,502
Chicago [Member] | Funded Investment [Member] | Operating Property Loans [Member]
Schedule of Investments [Line Items]
Funded Investment	2,500	2,500
Chicago [Member] | Unfunded Commitment [Member] | Operating Property Loans [Member]
Schedule of Investments [Line Items]
Investment Commitment	$ 2	$ 2
Orlando 1 [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date		4/21/2015
Development property investments, Fair Value		$ 7,302
Orlando 1 [Member] | Loan investments [Member] | Investment Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment		5,372
Orlando 1 [Member] | Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment		5,308
Orlando 1 [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment		$ 64
Tampa [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date		6/19/2015
Development property investments, Fair Value		$ 6,279
Tampa [Member] | Loan investments [Member] | Investment Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment		5,369
Tampa [Member] | Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment		5,285
Tampa [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment		$ 84
Orlando 2 [Member] | Loan investments [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Closing Date		11/17/2016
Development property investments, Fair Value		$ 1,237
Orlando 2 [Member] | Loan investments [Member] | Investment Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment		5,134
Orlando 2 [Member] | Loan investments [Member] | Funded Investment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Funded Investment		1,342
Orlando 2 [Member] | Loan investments [Member] | Unfunded Commitment [Member] | Development Property Investments [Member]
Schedule of Investments [Line Items]
Investment Commitment		$ 3,792
Nashville [Member] | Operating Property Loans [Member]
Schedule of Investments [Line Items]
Investment Closing Date		10/30/2015
Operating property loans, Fair Value		$ 1,204
Nashville [Member] | Investment Commitment [Member] | Operating Property Loans [Member]
Schedule of Investments [Line Items]
Investment Commitment		1,210
Nashville [Member] | Funded Investment [Member] | Operating Property Loans [Member]
Schedule of Investments [Line Items]
Funded Investment		$ 1,210
Minimum [Member]
Schedule of Investments [Line Items]
Percentage of completion of construction	40.00%	40.00%

XML

INVESTMENTS (Schedule of Changes in Fair Value of Investments) (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
INVESTMENTS [Abstract]
Funded principal	$ 173,713	$ 86,905
Adjustments:
Unamortized origination fees	(3,627)	(1,056)
Change in fair value of investments	24,528	19,242
Other	(84)	(84)
Fair value of investments	$ 194,530	$ 105,007

XML

FAIR VALUE OF FINANCIAL INSTRUMENTS (Narrative) (Details) - USD ($) $ in Millions	9 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Fair Value, Concentration of Risk, Financial Statement Captions [Line Items]
Percentage of completion of construction	100.00%
Percentage of construciton completion threshold percentage when most entrepreneurial profit is earned	40.00%
Investment Owned, Unrecognized Unrealized Appreciation (Depreciation), Net	$ 24.5	$ 19.2
Minimum [Member]
Fair Value, Concentration of Risk, Financial Statement Captions [Line Items]
Percentage of completion of construction	40.00%	40.00%

XML

FAIR VALUE OF FINANCIAL INSTRUMENTS (Summary of Significant Unobservable Inputs Used) (Details)		9 Months Ended	12 Months Ended
		Sep. 30, 2017	Dec. 31, 2016
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Percentage of completion of construction		100.00%
Minimum [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Percentage of completion of construction		40.00%	40.00%
Development Property Investments [Member] | Minimum [Member] | Income Approach Valuation Technique [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Exit date		3 months 29 days	2 months 1 day
Market yields/ discount rate		7.72%	7.23%
Development Property Investments [Member] | Maximum [Member] | Income Approach Valuation Technique [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Exit date		6 years 11 months 15 days	3 years 10 months 17 days
Market yields/ discount rate		10.37%	9.28%
Development Property Investments [Member] | Weighted Average [Member] | Income Approach Valuation Technique [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Exit date		2 years 10 months 14 days	1 year 9 months 22 days
Market yields/ discount rate		8.72%	8.34%
Development Property Investments [Member] | Loan Investments With Profits Interest [Member] | Minimum [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Market yields/ discount rate		8.35%
Development Property Investments [Member] | Loan Investments With Profits Interest [Member] | Minimum [Member] | Option Pricing Model [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Volatility		63.82%	68.72%
Exit date		8 months 2 days	1 year 5 months 1 day
Capitalization rate	[1]	5.35%	5.25%
Market yields/ discount rate			8.25%
Development Property Investments [Member] | Loan Investments With Profits Interest [Member] | Maximum [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Market yields/ discount rate		9.00%
Development Property Investments [Member] | Loan Investments With Profits Interest [Member] | Maximum [Member] | Option Pricing Model [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Volatility		93.54%	73.46%
Exit date		6 years 11 months 15 days	3 years 10 months 17 days
Capitalization rate		6.00%	5.50%
Market yields/ discount rate			8.50%
Development Property Investments [Member] | Loan Investments With Profits Interest [Member] | Weighted Average [Member] | Option Pricing Model [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Volatility		73.85%	73.17%
Exit date		3 years 7 days	2 years 1 month 13 days
Capitalization rate	[1]	5.50%	5.47%
Market yields/ discount rate		8.50%	8.47%
Thirteen Properties [Member] | Minimum [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Percentage of completion of construction		40.00%
Thirteen Properties [Member] | Maximum [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Percentage of completion of construction		100.00%
Ten Properties [Member} | Minimum [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Percentage of completion of construction			40.00%
Ten Properties [Member} | Maximum [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Percentage of completion of construction			100.00%
Operating Property Loans [Member] | Minimum [Member] | Income Approach Valuation Technique [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Exit date		4 years 2 months 23 days	4 years 6 months
Market yields/ discount rate		5.86%	6.09%
Operating Property Loans [Member] | Maximum [Member] | Income Approach Valuation Technique [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Exit date		4 years 10 months 28 days	5 years 7 months 28 days
Market yields/ discount rate		6.76%	7.20%
Operating Property Loans [Member] | Weighted Average [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Exit date			5 years 26 days
Market yields/ discount rate			6.73%
Operating Property Loans [Member] | Weighted Average [Member] | Income Approach Valuation Technique [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Exit date		4 years 7 months 13 days
Market yields/ discount rate		6.24%

[1] Thirteen properties were 40% - 100% complete, thus requiring a capitalization rate to derive entrepreneurial profit. Capitalization rates are estimated based on current data derived from independent sources in the markets in which the Company holds investments.

XML

FAIR VALUE OF FINANCIAL INSTRUMENTS (Schedule of Change in Fair Value of Investments Due to Change in Market Yield Discount Rates) (Details) - Market Yield and Discount Rate [Member] - USD ($) $ in Millions	9 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Up 25 Basis Points [Member]
Investments in and Advances to Affiliates [Line Items]
Increase (decrease) in fair value of investments	$ (0.9)	$ (0.3)
Down 25 Basis Points [Member]
Investments in and Advances to Affiliates [Line Items]
Increase (decrease) in fair value of investments	$ 1.0	$ 0.3

XML

FAIR VALUE OF FINANCIAL INSTRUMENTS (Schedule of Change in Fair Value of Investments Due to Change in Capitalization Rates) (Details) - USD ($) $ in Millions	9 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Up 25 Basis Points [Member]
Investments in and Advances to Affiliates [Line Items]
Increase (decrease) in fair value of investments	$ (2.5)	$ (2.1)
Down 25 Basis Points [Member]
Investments in and Advances to Affiliates [Line Items]
Increase (decrease) in fair value of investments	2.7	2.3
Up 50 basis points [Member]
Investments in and Advances to Affiliates [Line Items]
Increase (decrease) in fair value of investments	(4.8)	(3.8)
Down 50 Basis Points [Member]
Investments in and Advances to Affiliates [Line Items]
Increase (decrease) in fair value of investments	$ 5.8	$ 4.6

XML

FAIR VALUE OF FINANCIAL INSTRUMENTS (Changes in Investments that Use Level 3 Inputs) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
FAIR VALUE OF FINANCIAL INSTRUMENTS [Abstract]
Balance as of December 31, 2016			$ 105,007
Net unrealized gains	$ 3,384	$ 4,867	9,066	$ 14,185
Fundings of principal and change in unamortized origination fees			110,600
Repayments of loans			(22,746)
Payment-in-kind interest			5,522
Reclassification of self-storage real estate owned			(12,919)
Balance at September 30, 2017	$ 194,530		$ 194,530

XML

INVESTMENT IN REAL ESTATE VENTURE (Narrative) (Details) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016	Mar. 31, 2016
Investments Real Estate Properties [Line Items]
Real Estate Investments, Joint Ventures	$ 12,573,000		$ 12,573,000		$ 5,373,000
Other Nonrecurring (Income) Expense	0	$ 2,000	$ 0	$ 2,100,000
Investments in Joint Venture, Distribution Terms			1% of the committed principal amount of loans made by the SL1 Venture, exclusive of the loans contributed to the SL1 Venture by the Company. Operating cash flow of the SL1 Venture (after debt service, reserves and the foregoing priority distributions) is distributed in accordance with capital commitments. Residual cash flow from capital and other events (after debt service, reserves and priority distributions) will be distributed (i) pro rata in accordance with capital commitments (its "Percentage Interest") until each member has received a return of all capital contributed; (ii) pro rata in accordance with each member's Percentage Interest until Heitman has achieved a 14% internal rate of return; (iii) to Heitman in an amount equal to its Percentage Interest less 10% and to the Company in an amount equal to the Company's Percentage Interest plus 10% until Heitman has achieved a 17% internal rate of return; (iv) to Heitman in an amount equal to its Percentage Interest less 20% and to the Company in an amount equal to the Company's Percentage Interest plus 20% until Heitman has achieved a 20% internal rate of return; and (v) any excess to Heitman in an amount equal to its Percentage Interest less 30% and to the Company in an amount equal to the Company's Percentage Interest plus 30%. However, the Company will not be entitled to any such promoted interest prior to the earlier to occur of the third anniversary of the JV Agreement and Heitman receiving distributions to the extent necessary to provide Heitman with a 1.48 multiple on its contributed capital.
Loans Receivable, Net	173,713,000		$ 173,713,000		86,905,000
Proceeds from Real Estate and Real Estate Joint Ventures				$ 7,291,000
SL1 Venture [Member]
Investments Real Estate Properties [Line Items]
Real Estate Investments, Joint Ventures	81,400,000		$ 81,400,000
Limited Liability Company (LLC) or Limited Partnership (LP), Members or Limited Partners, Ownership Interest			10.00%
Investment Owned, Balance, Principal Amount	123,300,000		$ 123,300,000
Equity Method Investment, Summarized Financial Information, Assets, Total	88,800,000		88,800,000
Other Nonrecurring (Income) Expense			200,000
Equity Method Investment, Summarized Financial Information, Liabilities, Total	3,600,000		3,600,000
Equity Method Investment, Summarized Financial Information, Net Income (Loss)	6,600,000		$ 14,100,000
Investment Yield Percentage On Purchase Price			4.50%
Joint venture agreement percentage of priority distribution percentage of commited principal amount			1.00%
Loans Receivable, Net	12,200,000		$ 12,200,000
Proceeds from Real Estate and Real Estate Joint Ventures					7,300,000
Agreement Metric, Return Multiple			1.48
SL1 Venture [Member] | Parent Company [Member]
Investments Real Estate Properties [Line Items]
Real Estate Investments, Joint Ventures	12,300,000		$ 12,300,000
Investment Owned, Balance, Principal Amount						$ 41,900,000
Investments in Affiliates, Subsidiaries, Associates, and Joint Ventures, Fair Value Disclosure						7,700,000
Equity Method Investment, Summarized Financial Information, Net Income (Loss)	700,000		$ 1,700,000
Loans Receivable, Net						$ 8,100,000
IRR Threshold One [Member]
Investments Real Estate Properties [Line Items]
Agreement Metric, Internal Rate of Return			14.00%
Agreement Metric, Capital Distribution Percentage to Third Party			10.00%
Agreement Metric, Capital Distribution Percentage			10.00%
IRR Threshold Two [Member]
Investments Real Estate Properties [Line Items]
Agreement Metric, Internal Rate of Return			17.00%
Agreement Metric, Capital Distribution Percentage to Third Party			20.00%
Agreement Metric, Capital Distribution Percentage			20.00%
IRR Threshold Three [Member]
Investments Real Estate Properties [Line Items]
Agreement Metric, Internal Rate of Return			20.00%
Agreement Metric, Capital Distribution Percentage to Third Party			30.00%
Agreement Metric, Capital Distribution Percentage			30.00%
Heitman And Large Institutional Co-Investor [Member] | SL1 Venture [Member]
Investments Real Estate Properties [Line Items]
Real Estate Investments, Joint Ventures	110,000,000		$ 110,000,000
Limited Liability Company (LLC) or Limited Partnership (LP), Members or Limited Partners, Ownership Interest			90.00%
Other Nonrecurring (Income) Expense			$ 3,500,000		2,300,000
HVP III Storage Lenders Investor, LLC [Member]
Investments Real Estate Properties [Line Items]
Payments to Acquire Interest in Joint Venture					$ 7,300,000
HVP III Storage Lenders Investor, LLC [Member] | SL1 Venture [Member]
Investments Real Estate Properties [Line Items]
Real Estate Investments, Joint Ventures	111,000,000		111,000,000
Equity Method Investment, Summarized Financial Information, Net Income (Loss)	$ 5,800,000		$ 12,400,000

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INVESTMENT IN REAL ESTATE VENTURE (Equity Method Investments) (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Dec. 31, 2016	Mar. 31, 2016
Real Estate Properties [Line Items]
Equity Method Investments, Fair Value Disclosure	$ 188,540	$ 95,102
Investment Commitment	421,210
Funded Investment	$ 173,713	86,905
Percentage of completion of construction	100.00%
Washington DC [Member]
Real Estate Properties [Line Items]
Percentage of completion of construction	40.00%
Investment Commitment [Member]
Real Estate Properties [Line Items]
Investment Commitment		141,857
Funded Investment [Member]
Real Estate Properties [Line Items]
Funded Investment	$ 173,713	86,905
Unfunded Commitment [Member]
Real Estate Properties [Line Items]
Investment Commitment	247,497	$ 54,952
Loan investments [Member]
Real Estate Properties [Line Items]
Equity Method Investments, Fair Value Disclosure	$ 88,194
Loan investments [Member] | SL1 Venture [Member]
Real Estate Properties [Line Items]
Funded Investment			$ 8,100
Loan investments [Member] | Miami 1 [Member]
Real Estate Properties [Line Items]
Investment Closing Date	5/14/2015
Equity Method Investments, Fair Value Disclosure	$ 10,929
Loan investments [Member] | Miami 2 [Member]
Real Estate Properties [Line Items]
Investment Closing Date	5/14/2015
Equity Method Investments, Fair Value Disclosure	$ 8,947
Loan investments [Member] | Fort Lauderdale [Member]
Real Estate Properties [Line Items]
Investment Closing Date	9/25/2015
Equity Method Investments, Fair Value Disclosure	$ 7,796
Loan investments [Member] | Washington DC [Member]
Real Estate Properties [Line Items]
Investment Closing Date	4/15/2016
Equity Method Investments, Fair Value Disclosure	$ 15,937
Loan investments [Member] | Atlanta 1 [Member]
Real Estate Properties [Line Items]
Investment Closing Date	4/29/2016
Equity Method Investments, Fair Value Disclosure	$ 5,459
Loan investments [Member] | Jacksonville [Member]
Real Estate Properties [Line Items]
Investment Closing Date	7/19/2016
Equity Method Investments, Fair Value Disclosure	$ 10,541
Loan investments [Member] | New Jersey [Member]
Real Estate Properties [Line Items]
Investment Closing Date	7/21/2016
Equity Method Investments, Fair Value Disclosure	$ 1,561
Loan investments [Member] | Atlanta 2 [Member]
Real Estate Properties [Line Items]
Investment Closing Date	8/15/2016
Equity Method Investments, Fair Value Disclosure	$ 7,423
Loan investments [Member] | Denver [Member]
Real Estate Properties [Line Items]
Investment Closing Date	8/25/2016
Equity Method Investments, Fair Value Disclosure	$ 8,678
Loan investments [Member] | Columbia [Member]
Real Estate Properties [Line Items]
Investment Closing Date	9/28/2016
Equity Method Investments, Fair Value Disclosure	$ 8,525
Loan investments [Member] | Raleigh [Member]
Real Estate Properties [Line Items]
Investment Closing Date	12/22/2016
Equity Method Investments, Fair Value Disclosure	$ 2,398
Loan investments [Member] | Investment Commitment [Member]
Real Estate Properties [Line Items]
Investment Commitment	123,273
Loan investments [Member] | Investment Commitment [Member] | Miami 1 [Member]
Real Estate Properties [Line Items]
Investment Commitment	13,867
Loan investments [Member] | Investment Commitment [Member] | Miami 2 [Member]
Real Estate Properties [Line Items]
Investment Commitment	14,849
Loan investments [Member] | Investment Commitment [Member] | Fort Lauderdale [Member]
Real Estate Properties [Line Items]
Investment Commitment	13,230
Loan investments [Member] | Investment Commitment [Member] | Washington DC [Member]
Real Estate Properties [Line Items]
Investment Commitment	17,269
Loan investments [Member] | Investment Commitment [Member] | Atlanta 1 [Member]
Real Estate Properties [Line Items]
Investment Commitment	10,223
Loan investments [Member] | Investment Commitment [Member] | Jacksonville [Member]
Real Estate Properties [Line Items]
Investment Commitment	8,127
Loan investments [Member] | Investment Commitment [Member] | New Jersey [Member]
Real Estate Properties [Line Items]
Investment Commitment	7,828
Loan investments [Member] | Investment Commitment [Member] | Atlanta 2 [Member]
Real Estate Properties [Line Items]
Investment Commitment	8,772
Loan investments [Member] | Investment Commitment [Member] | Denver [Member]
Real Estate Properties [Line Items]
Investment Commitment	11,032
Loan investments [Member] | Investment Commitment [Member] | Columbia [Member]
Real Estate Properties [Line Items]
Investment Commitment	9,199
Loan investments [Member] | Investment Commitment [Member] | Raleigh [Member]
Real Estate Properties [Line Items]
Investment Commitment	8,877
Loan investments [Member] | Funded Investment [Member]
Real Estate Properties [Line Items]
Funded Investment	77,557
Loan investments [Member] | Funded Investment [Member] | Miami 1 [Member]
Real Estate Properties [Line Items]
Funded Investment	9,455
Loan investments [Member] | Funded Investment [Member] | Miami 2 [Member]
Real Estate Properties [Line Items]
Funded Investment	8,486
Loan investments [Member] | Funded Investment [Member] | Fort Lauderdale [Member]
Real Estate Properties [Line Items]
Funded Investment	7,298
Loan investments [Member] | Funded Investment [Member] | Washington DC [Member]
Real Estate Properties [Line Items]
Funded Investment	14,346
Loan investments [Member] | Funded Investment [Member] | Atlanta 1 [Member]
Real Estate Properties [Line Items]
Funded Investment	5,140
Loan investments [Member] | Funded Investment [Member] | Jacksonville [Member]
Real Estate Properties [Line Items]
Funded Investment	6,989
Loan investments [Member] | Funded Investment [Member] | New Jersey [Member]
Real Estate Properties [Line Items]
Funded Investment	1,621
Loan investments [Member] | Funded Investment [Member] | Atlanta 2 [Member]
Real Estate Properties [Line Items]
Funded Investment	6,535
Loan investments [Member] | Funded Investment [Member] | Denver [Member]
Real Estate Properties [Line Items]
Funded Investment	7,605
Loan investments [Member] | Funded Investment [Member] | Columbia [Member]
Real Estate Properties [Line Items]
Funded Investment	7,651
Loan investments [Member] | Funded Investment [Member] | Raleigh [Member]
Real Estate Properties [Line Items]
Funded Investment	2,431
Loan investments [Member] | Unfunded Commitment [Member]
Real Estate Properties [Line Items]
Investment Commitment	45,716
Loan investments [Member] | Unfunded Commitment [Member] | Miami 1 [Member]
Real Estate Properties [Line Items]
Investment Commitment	4,412
Loan investments [Member] | Unfunded Commitment [Member] | Miami 2 [Member]
Real Estate Properties [Line Items]
Investment Commitment	6,363
Loan investments [Member] | Unfunded Commitment [Member] | Fort Lauderdale [Member]
Real Estate Properties [Line Items]
Investment Commitment	5,932
Loan investments [Member] | Unfunded Commitment [Member] | Washington DC [Member]
Real Estate Properties [Line Items]
Investment Commitment	2,923
Loan investments [Member] | Unfunded Commitment [Member] | Atlanta 1 [Member]
Real Estate Properties [Line Items]
Investment Commitment	5,083
Loan investments [Member] | Unfunded Commitment [Member] | Jacksonville [Member]
Real Estate Properties [Line Items]
Investment Commitment	1,138
Loan investments [Member] | Unfunded Commitment [Member] | New Jersey [Member]
Real Estate Properties [Line Items]
Investment Commitment	6,207
Loan investments [Member] | Unfunded Commitment [Member] | Atlanta 2 [Member]
Real Estate Properties [Line Items]
Investment Commitment	2,237
Loan investments [Member] | Unfunded Commitment [Member] | Denver [Member]
Real Estate Properties [Line Items]
Investment Commitment	3,427
Loan investments [Member] | Unfunded Commitment [Member] | Columbia [Member]
Real Estate Properties [Line Items]
Investment Commitment	1,548
Loan investments [Member] | Unfunded Commitment [Member] | Raleigh [Member]
Real Estate Properties [Line Items]
Investment Commitment	$ 6,446

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VARIABLE INTEREST ENTITIES (Narrative) (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Variable Interest Entity [Line Items]
Development property investments	$ 188,540	$ 95,102
Investment Commitment	421,210
Investment in Real Estate Venture [Member] | Unfunded Commitment [Member]
Variable Interest Entity [Line Items]
Investment Commitment	4,500	$ 9,400
SL1 Venture [Member]
Variable Interest Entity [Line Items]
Investment Commitment	$ 12,300

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VARIABLE INTEREST ENTITIES (Schedule of Variable Interest Entities) (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Variable Interest Entity, Not Primary Beneficiary, Disclosures [Abstract]
Assets recorded related to VIEs	$ 188,540	$ 95,102
Unfunded loan commitments to VIEs	247,495	54,950
Maximum exposure to loss	$ 436,035	$ 150,052

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SELF-STORAGE REAL ESTATE OWNED (Narrative) (Details) - USD ($) $ in Thousands			9 Months Ended
	Aug. 09, 2017	Feb. 03, 2017	Sep. 30, 2017
Payments To Self Storage Real Estate Owned			$ 2,856
Orlando 1 [Member]
Limited Liability Company (LLC) or Limited Partnership (LP), Members or Limited Partners, Ownership Interest	50.00%	50.00%
Payments To Self Storage Real Estate Owned		$ 1,300
Equity Method Investment, Ownership Percentage	100.00%
Orlando 2 [Member]
Payments To Self Storage Real Estate Owned	$ 1,600
Equity Method Investment, Ownership Percentage	100.00%
Development Property Investment [Member]
Equity Method Investment, Ownership Percentage			49.90%
Class A ship Units [Member] | Development Property Investment [Member] | Minimum [Member] | Orlando 1 [Member]
Equity Method Investment, Ownership Percentage		49.90%
Class A ship Units [Member] | Development Property Investment [Member] | Maximum [Member] | Orlando 1 [Member]
Equity Method Investment, Ownership Percentage		74.90%

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SELF-STORAGE REAL ESTATE OWNED (Schedule of Cost Basis of Real Estate Investment) (Details) $ in Thousands	Aug. 09, 2017 USD ($)
INVESTMENT IN REAL ESTATE VENTURE [Abstract]
Funded principal balance, net of unamortized origination fees	$ 9,139
Unrealized appreciation on investments	3,780
Cash consideration paid	2,856
Net property working capital acquired	52
Total cost basis	$ 15,827

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SELF-STORAGE REAL ESTATE OWNED (Real Estate Investment, Impact in Consolidated Balance Sheet , Disclosure) (Details) $ in Thousands	Sep. 30, 2017 USD ($)
Self-storage real estate owned	$ 15,594
Real Estate Investment [Member]
Cash	60
Accounts Receivable	2
Land	1,505
Building and improvements	13,720
In-place leases	602
Accumulated depreciation	(233)
Self-storage real estate owned	15,594
Accrued liabilities	$ 125

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SELF-STORAGE REAL ESTATE OWNED (Real Estate Investment, Impact in Consolidated Statement of Operations, Disclosure) (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2017
INVESTMENT IN REAL ESTATE VENTURE [Abstract]
Rental revenues	$ 160	$ 328
General property operating expenses	(114)	(188)
Depreciation expense	(172)	(233)
Property operating expenses of real estate owned	$ (286)	$ (421)

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OTHER LOANS, AT COST (Narrative) (Details) - USD ($)	9 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Loans Receivable [Member]
Proceeds from loans	$ 2,900,000
Committed funds for loans maximum borrowing capacity	4,200,000
Payments for loans	2,600,000
Five Bridge Loans [Member]
Allowance for loan losses		$ 0
Six Revolving Loan Agreements [Member]
Loans outstanding		1,700,000
Eight Revolving Loan Agreements [Member]
Loans outstanding	1,400,000
Allowance for loan losses	$ 0	0
Minimum [Member] | Loans Receivable [Member]
Interest rate on committed loans	6.90%
Line of Credit [Member] | Seven Bridge Loans [Member]
Proceeds from loans	$ 17,400,000
Line of Credit [Member] | Two Bridge Loans [Member]
Loans outstanding	$ 7,300,000
Line of Credit [Member] | Maximum [Member] | Loans Receivable [Member]
Interest rate on committed loans	7.00%
Revolving Credit Facility [Member] | Agreement One [Member]
Committed funds for loans maximum borrowing capacity	$ 500,000
Revolving Credit Facility [Member] | Agreement Two [Member]
Committed funds for loans maximum borrowing capacity	500,000
Revolving Credit Facility [Member] | Agreement Three [Member]
Committed funds for loans maximum borrowing capacity	500,000
Revolving Credit Facility [Member] | Agreement Four [Member]
Committed funds for loans maximum borrowing capacity	500,000
Revolving Credit Facility [Member] | Agreement Five [Member]
Committed funds for loans maximum borrowing capacity	100,000
Revolving Credit Facility [Member] | Agreement Six [Member]
Committed funds for loans maximum borrowing capacity	400,000
Revolving Credit Facility [Member] | Agreement Seven [Member]
Committed funds for loans maximum borrowing capacity	700,000
Revolving Credit Facility [Member] | Agreement Eight [Member]
Committed funds for loans maximum borrowing capacity	$ 1,000,000
Secured Debt [Member] | Five Bridge Loans [Member]
Loans outstanding		$ 10,100,000

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DEBT (Credit Facility) (Narrative) (Details) - Jernigan Capital Operating Company LLC [Member]			6 Months Ended	9 Months Ended	11 Months Ended	19 Months Ended	21 Months Ended
	Jul. 26, 2017 USD ($)	Jul. 25, 2017 USD ($)	Dec. 31, 2018 USD ($)	Sep. 30, 2017 USD ($)	Jun. 30, 2018	Jul. 24, 2020	Sep. 30, 2020 USD ($)
Line of Credit Facility [Line Items]
Proceeds from lines of credit	$ 20,000,000	$ 20,000,000
Line of Credit Facility, Current Borrowing Capacity	33,300,000	33,300,000
Repayments of lines of credit	$ 20,000,000
KeyBank National Association [Member]
Line of Credit Facility [Line Items]
Commitment by Bank		200,000,000
Line of Credit Facility, Current Borrowing Capacity		$ 100,000,000		$ 33,300,000
Debt instrument, maturity date				Jul. 24, 2020
Company loans secured by mortgage loans borrowing base availability maximum percentage				60.00%
Company loans secured by mortgage loans underlying real estate fair value minimum percentage to maximum principal amount borrowed				50.00%
Mortgage loans minimal months inclusion in borrowing base period				18 months
Debt instrument convenant related to debt service amount, ratio				1.30
Company loans secured by self-storage properties underlying real estate fair value minimum percentage to maximum principal amount borrowed				65.00%
Debt instrument convenant related to debt service coverage amount ratio				1.30
Debt instrument per diem fee rate percentage				0.35%
Debt instrument covenant total consoildated indebtness maximum percentage of gross asset value				50
Debt instrument covenants consolidated tanible net worth, minimum				$ 183,300,000
Debt instrument covenants any additional net offering proceeds percentage included in consolidated tangible net worth				75.00%
Debt instrument covenants threshold amount that limits unhedged variable rate				$ 50,000,000
Debt instrument covenants unhedged variable rate maximum percentage				25.00%
Debt instrument covenant debt service coverage ratio				2
Long-term line of credit				$ 0
Line of credit facility, covenant compliance				As of September 30, 2017, the Company was in compliance with all of its financial covenants and it anticipates being in compliance with all of its financial covenants throughout the term of the Credit Facility.
KeyBank National Association [Member] | Scenario, Plan [Member]
Line of Credit Facility [Line Items]
Debt instrument covenants minimum fixed coverage ratio			0.90		0.75	1.20
Debt instrument covenants liquidity minimal amount			$ 50,000,000
Debt instrument covenant additional amount included onto total unfunded loan commitments							$ 25,000,000
Maximum [Member] | KeyBank National Association [Member] | Base Rate [Member]
Line of Credit Facility [Line Items]
Debt instrument, basis spread on variable rate				2.75%
Maximum [Member] | KeyBank National Association [Member] | London Interbank Offered Rate (LIBOR) [Member]
Line of Credit Facility [Line Items]
Debt instrument, basis spread on variable rate				3.75%
Minimum [Member] | KeyBank National Association [Member] | Base Rate [Member]
Line of Credit Facility [Line Items]
Debt instrument, basis spread on variable rate				1.75%
Minimum [Member] | KeyBank National Association [Member] | London Interbank Offered Rate (LIBOR) [Member]
Line of Credit Facility [Line Items]
Debt instrument, basis spread on variable rate				2.75%

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DEBT (Senior Participations) (Narrative) (Details) - USD ($)							3 Months Ended	9 Months Ended		12 Months Ended
	Jul. 20, 2017	Dec. 14, 2016	Oct. 18, 2016	Jul. 26, 2016	May 27, 2016	Apr. 29, 2016	Sep. 30, 2017	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Debt Instrument [Line Items]
Senior loan participations							$ 668,000	$ 668,000		$ 18,582,000
Proceeds from early payment of operating property loan								1,755,000	$ 17,550,000
Commitment amount							421,210,000	421,210,000
Loss on modifications of debt							(232,000)	$ (232,000)
Construction Loans [Member]
Debt Instrument [Line Items]
Mortgage loans on real estate, interest rate								6.90%
Commitment amount							17,700,000	$ 17,700,000
Senior Notes [Member]
Debt Instrument [Line Items]
Senior loan participations										18,615,000
Cash consideration from senior participations										30,411,000
Senior Notes [Member] | Nashville [Member]
Debt Instrument [Line Items]
Proceeds from early payment of operating property loan	$ 2,800,000	$ 5,200,000
Operating Property A Notes [Member]
Debt Instrument [Line Items]
Senior loan participations							0	0
Operating Property A Notes [Member] | Nashville [Member]
Debt Instrument [Line Items]
Repurchase of senior participation	1,800,000
Prepayment penalty included in the repurchase amount	$ 18,000
Operating Property A Notes [Member] | Senior Notes [Member]
Debt Instrument [Line Items]
Senior participants, face amount						$ 7,800,000
Proceeds from issuance of senior long-term debt						$ 5,000,000
Senior loan participations										1,820,000
Cash consideration from senior participations										$ 1,820,000
Repurchase of senior participation		3,400,000
Prepayment penalty included in the repurchase amount		$ 100,000
Debt instrument, effective interest rate										4.47%
Debt maturity date										Apr. 01, 2019
Minimum amount of cash required in depository or money market accounts							$ 500,000	$ 500,000
Operating Property A Notes [Member] | Senior Notes [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate							3.85%	3.85%		3.85%
Miami A Note [Member]
Debt Instrument [Line Items]
Senior loan participations							$ 700,000	$ 700,000
Debt instrument fee, description								The Company also paid a loan fee of 100 basis points, or $0.1 million upon closing of the loan.
Miami A Note [Member] | Senior Notes [Member]
Debt Instrument [Line Items]
Senior loan participations							$ 732,000	$ 732,000
Cash consideration from senior participations					$ 10,000,000			$ 10,001,000		$ 10,001,000
Debt instrument, effective interest rate							4.33%	4.33%		3.72%
Debt maturity date					Jul. 01, 2017			Jan. 31, 2018		Jul. 01, 2017
Debt instrument fee					$ 100,000
Debt instrument threshold amount outstanding related to senior notes					7,700,000
Miami A Note [Member] | Senior Notes [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate								3.10%		3.10%
July 2016 A Notes and October 2016 A Notes [Member]
Debt Instrument [Line Items]
Loss on modifications of debt							$ 200,000	$ 200,000
July 2016 A Notes [Member]
Debt Instrument [Line Items]
Senior loan participations							$ 0	$ 0
Cash consideration from senior participations				$ 14,200,000
July 2016 A Notes [Member] | Senior Notes [Member]
Debt Instrument [Line Items]
Senior loan participations				$ 12,500,000						$ 13,420,000
Cash consideration from senior participations										$ 14,185,000
Mortgage loans on real estate, interest rate				6.90%
Debt instrument, effective interest rate										4.12%
Debt maturity date										Aug. 01, 2019
Commitment amount				$ 21,800,000
July 2016 A Notes [Member] | Senior Notes [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate							3.50%	3.50%		3.50%
October 2016 A Note [Member]
Debt Instrument [Line Items]
Senior loan participations			$ 3,400,000				$ 0	$ 0
Cash consideration from senior participations			$ 4,400,000
October 2016 A Note [Member] | Senior Notes [Member]
Debt Instrument [Line Items]
Senior loan participations										$ 3,375,000
Cash consideration from senior participations										$ 4,405,000
Mortgage loans on real estate, interest rate			6.90%
Debt instrument, basis spread on variable rate							3.50%	3.50%
Debt instrument, effective interest rate										4.12%
Debt maturity date										Sep. 01, 2021
Commitment amount			$ 6,800,000
October 2016 A Note [Member] | Senior Notes [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate										3.50%
Development Property Investments [Member]
Debt Instrument [Line Items]
Commitment amount							$ 415,228,000	$ 415,228,000
Development Property Investments [Member] | Construction Loans [Member] | Miami [Member]
Debt Instrument [Line Items]
Commitment amount					$ 17,700,000
Construction Loans [Member] | Development Property Investments [Member]
Debt Instrument [Line Items]
Commitment amount							17,733,000	17,733,000
Construction Loans [Member] | Development Property Investments [Member] | Miami [Member]
Debt Instrument [Line Items]
Commitment amount							$ 17,733,000	$ 17,733,000

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DEBT (Commitments and Outstanding Balances of Senior Participations) (Details) - USD ($)					3 Months Ended	9 Months Ended		12 Months Ended
	Dec. 14, 2016	Oct. 18, 2016	Jul. 26, 2016	May 27, 2016	Sep. 30, 2017	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Debt Instrument [Line Items]
Amount Borrowed					$ 668,000	$ 668,000		$ 18,582,000
Proceeds from early payment of operating property loan						1,755,000	$ 17,550,000
Senior Notes [Member]
Debt Instrument [Line Items]
Commitment by Bank								30,411,000
Amount Borrowed								18,615,000
Remaining Funds								11,796,000
Unamortized fees					(64,000)	(64,000)		(33,000)
Net balance					668,000	668,000		18,582,000
Operating Property A Notes [Member]
Debt Instrument [Line Items]
Amount Borrowed					$ 0	$ 0
Operating Property A Notes [Member] | Senior Notes [Member]
Debt Instrument [Line Items]
Commitment by Bank								1,820,000
Amount Borrowed								$ 1,820,000
Effective Interest Rate								4.47%
Maturity Date								Apr. 01, 2019
Repurchase of senior participation	$ 3,400,000
Prepayment penalty included in the repurchase amount	$ 100,000
Operating Property A Notes [Member] | Senior Notes [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument [Line Items]
Interest Rate in addition to 30-day LIBOR					3.85%	3.85%		3.85%
Miami A Note [Member]
Debt Instrument [Line Items]
Amount Borrowed					$ 700,000	$ 700,000
Miami A Note [Member] | Senior Notes [Member]
Debt Instrument [Line Items]
Commitment by Bank				$ 10,000,000		10,001,000		$ 10,001,000
Amount Borrowed					732,000	732,000
Remaining Funds					$ 9,269,000	$ 9,269,000		$ 10,001,000
Effective Interest Rate					4.33%	4.33%		3.72%
Maturity Date				Jul. 01, 2017		Jan. 31, 2018		Jul. 01, 2017
Miami A Note [Member] | Senior Notes [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument [Line Items]
Interest Rate in addition to 30-day LIBOR						3.10%		3.10%
July 2016 A Notes [Member]
Debt Instrument [Line Items]
Commitment by Bank			$ 14,200,000
Amount Borrowed					$ 0	$ 0
July 2016 A Notes [Member] | Senior Notes [Member]
Debt Instrument [Line Items]
Commitment by Bank								$ 14,185,000
Amount Borrowed			$ 12,500,000					13,420,000
Remaining Funds								$ 765,000
Effective Interest Rate								4.12%
Maturity Date								Aug. 01, 2019
July 2016 A Notes [Member] | Senior Notes [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument [Line Items]
Interest Rate in addition to 30-day LIBOR					3.50%	3.50%		3.50%
October 2016 A Note [Member]
Debt Instrument [Line Items]
Commitment by Bank		$ 4,400,000
Amount Borrowed		$ 3,400,000			$ 0	$ 0
October 2016 A Note [Member] | Senior Notes [Member]
Debt Instrument [Line Items]
Commitment by Bank								$ 4,405,000
Amount Borrowed								3,375,000
Remaining Funds								$ 1,030,000
Interest Rate in addition to 30-day LIBOR					3.50%	3.50%
Effective Interest Rate								4.12%
Maturity Date								Sep. 01, 2021
October 2016 A Note [Member] | Senior Notes [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument [Line Items]
Interest Rate in addition to 30-day LIBOR								3.50%

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STOCKHOLDERS' EQUITY (Narrative) (Details) $ / shares in Units, $ in Thousands											3 Months Ended		9 Months Ended		12 Months Ended
	Aug. 01, 2017 $ / shares	Jul. 26, 2017 USD ($)	Jun. 27, 2017 USD ($) shares	May 03, 2017 $ / shares shares	Apr. 05, 2017 USD ($) shares	Mar. 07, 2017 $ / shares	Dec. 13, 2016 USD ($) shares	May 20, 2016 USD ($) shares	Jun. 15, 2015 shares	Apr. 01, 2015 shares	Sep. 30, 2017 USD ($) $ / shares shares	Sep. 30, 2016 shares	Sep. 30, 2017 USD ($) $ / shares shares	Sep. 30, 2016 USD ($) shares	Dec. 31, 2016 USD ($) $ / shares shares	Dec. 31, 2015 shares	Dec. 31, 2020 shares	Dec. 31, 2019 shares	Dec. 31, 2018 shares	Jul. 27, 2017 USD ($) $ / shares	Jun. 30, 2017 shares	Jun. 30, 2016 shares	Apr. 30, 2015 shares
Class of Stock [Line Items]
Common stock, shares issued											14,235,848		14,235,848		8,956,354
Common stock, shares outstanding											14,235,848		14,235,848		8,956,354
Preferred stock, shares issued											10,000		10,000		10,000
Nonvested restricted stock											185,002	121,668	185,002	121,668							202,502	139,168
Preferred stock, shares authorized											100,000,000		100,000,000		100,000,000
Issuance of shares, net of offering costs (in shares)			4,025,000				2,996,311
Net proceeds from issuance of common stock | $			$ 83,900				$ 53,500						$ 108,074
Number of shares, vested											17,500	17,500
Stock price per share | $ / shares											$ 20.55		$ 20.55		$ 21.05
Number of shares repurchased and retired													213,078
Retirement of common stock | $													$ 3,200
Stock repurchase program, remaining authorized amount | $											$ 6,800		$ 6,800
Expenses related to restricted stock awards, period for recognition													2 years 6 months		2 years 6 months
Preferred stock, par value (in dollars per share) | $ / shares											$ 0.01		$ 0.01		$ 0.01
Series A Preferred Stock [Member]
Class of Stock [Line Items]
Preferred stock, shares issued											10,000		10,000
Preferred stock, shares outstanding															10,000
Value of shares to be issued prior to expiration of commitment period | $		$ 50,000											$ 50,000
Amount of preferred shares issuable in future | $																				$ 100,000
Percentage of increase in book value													25.00%
Internal rate of return to the preferred shareholders													14.00%
Preferred stock, par value (in dollars per share) | $ / shares																				$ 0.01
Preferred stock, liquidation preferance per share | $ / shares																				$ 1,000
Preferred Stock, Redemption Terms													The Series A Preferred Stock may be redeemed at the Company's option (i) after five years from the Effective Date at a price equal to 105% of the Liquidation Value per share plus the value of all accumulated and unpaid Cash Distributions and Stock Dividends, and (ii) after six years from the Effective Date at a price equal to 100% of the Liquidation Value per share plus the value of all accumulated and unpaid Cash Distributions and Stock Dividends. In the event of certain change of control events affecting the Company prior to the third anniversary of the Effective Date, the Company must redeem all shares of Series A Preferred Stock for a price equal to (a) the Liquidation Value, plus (b) accumulated and unpaid Cash Distributions and Stock Dividends, plus (c) a make-whole premium designed to provide the holders of the Series A Preferred Stock with a return on the redeemed shares equal to a 14.0% internal rate of return through the third anniversary of the Effective Date.
Debt instrument covenant debt to total intangible asset ratio													0.4
Dividends declared date	Aug. 01, 2017			May 03, 2017		Mar. 07, 2017
Dividend payable, amount per share | $ / shares	$ 17.89			$ 17.69		$ 17.50
Dividends payable date	Oct. 13, 2017			Jul. 14, 2017		Apr. 14, 2017
Dividends payable, date of record	Oct. 01, 2017			Jul. 01, 2017		Apr. 01, 2017
Series A Preferred Stock [Member] | Scenario, Plan [Member]
Class of Stock [Line Items]
Amount of preferred shares issuable in future | $																				$ 125,000
Series A Preferred Stock [Member] | Until Sixth Anniversary [Member]
Class of Stock [Line Items]
Preferred stock, dividend rate													7.00%
Series A Preferred Stock [Member] | After Sixth Anniversary [Member]
Class of Stock [Line Items]
Preferred stock, dividend rate													8.50%
Series A Preferred Stock [Member] | Occurrence of certain triggering events [Member]
Class of Stock [Line Items]
Preferred stock, dividend rate													5.00%
Maximum [Member]
Class of Stock [Line Items]
Stock repurchase program, authorized amount | $								$ 10,000
Maximum [Member] | Series A Preferred Stock [Member]
Class of Stock [Line Items]
Amount of preferred shares issuable in future | $																				35,000
Maximum [Member] | Series A Preferred Stock [Member] | Monthly Increments [Member]
Class of Stock [Line Items]
Amount of preferred shares issuable in future | $																				15,000
Minimum [Member] | Series A Preferred Stock [Member] | Monthly Increments [Member]
Class of Stock [Line Items]
Amount of preferred shares issuable in future | $																				$ 5,000
Restricted Stock [Member]
Class of Stock [Line Items]
Nonvested restricted stock											185,002	121,668	185,002	121,668	120,001	162,500
Number of shares granted													111,414	14,340
Number of shares, vested													46,413	55,172
Restricted stock expense, recognized | $											$ 300		$ 1,000	$ 800
Restricted Stock [Member] | Series A Preferred Stock [Member]
Class of Stock [Line Items]
Issuances of stock-based awards (in shares)													10,000
Proceeds from issuance of preferred stock | $													$ 10,000
Non Employee Director [Member] | Restricted Stock [Member]
Class of Stock [Line Items]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Share-based Awards Other than Options | $											$ 3,300		$ 3,300		$ 2,000
Equity Incentive Plan 2015 [Member]
Class of Stock [Line Items]
Shares reserved for future issuance																							200,000
Equity Incentive Plan 2015 [Member] | Restricted Stock [Member]
Class of Stock [Line Items]
Shares reserved for issuance				370,000
Number of shares increased (decreased) related to share base payment plan				170,000
Number of shares granted				6,414				14,340		10,000
Equity Incentive Plan 2015 [Member] | Non Employee Director [Member] | Restricted Stock [Member]
Class of Stock [Line Items]
Number of shares granted				2,138				3,585		2,500
Equity award vesting period										3 years
Equity Incentive Plan 2015 [Member] | Manager [Member] | Restricted Stock [Member]
Class of Stock [Line Items]
Number of shares granted				105,000					100,000							52,500
Equity award vesting period				3 years					5 years							3 years
Amended and Restated 2015 Equity Incentive Plan [Member] | Restricted Stock [Member]
Class of Stock [Line Items]
Number of shares granted													288,254		176,840
Amended and Restated 2015 Equity Incentive Plan [Member] | Restricted Stock [Member] | Maximum [Member]
Class of Stock [Line Items]
Expenses related to restricted stock awards, period for recognition													5 years
Amended and Restated 2015 Equity Incentive Plan [Member] | Restricted Stock [Member] | Minimum [Member]
Class of Stock [Line Items]
Expenses related to restricted stock awards, period for recognition													3 years
Amended and Restated 2015 Equity Incentive Plan [Member] | Non Employee Director [Member] | Restricted Stock [Member]
Class of Stock [Line Items]
Number of shares, vested															55,172
Number of shares forfeited															1,667
Amended and Restated 2015 Equity Incentive Plan [Member] | Non Employee Director [Member] | Restricted Stock [Member] | Share-based Compensation Award, Tranche Two [Member] | Scenario, Forecast [Member]
Class of Stock [Line Items]
Number of vested or expected to vest shares																			75,003
Amended and Restated 2015 Equity Incentive Plan [Member] | Non Employee Director [Member] | Restricted Stock [Member] | Share-based Compensation Award, Tranche Three [Member] | Scenario, Forecast [Member]
Class of Stock [Line Items]
Number of vested or expected to vest shares																		55,001
Amended and Restated 2015 Equity Incentive Plan [Member] | Non Employee Director [Member] | Restricted Stock [Member] | Share Based Compensation Award Tranche Four [Member] | Scenario, Forecast [Member]
Class of Stock [Line Items]
Number of vested or expected to vest shares																	54,998
ATM Program [Member]
Class of Stock [Line Items]
Issuance of shares, net of offering costs (in shares)					1,093,202
Net proceeds from issuance of common stock | $													$ 24,200
Stock repurchase program, authorized amount | $					$ 50,000
Shares issued, price per share | $ / shares											$ 22.69		$ 22.69
Common Stock [Member]
Class of Stock [Line Items]
Issuance of shares, net of offering costs (in shares)													4,025,000
Issuances of stock-based awards (in shares)													111,414	14,340

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STOCKHOLDERS' EQUITY (Summary of Changes in Restricted Shares) (Details) - $ / shares	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Class of Stock [Line Items]
Shares, Nonvested shares at beginning of period	202,502	139,168
Shares, Vested	(17,500)	(17,500)
Shares, Nonvested shares at end of period	185,002	121,668	185,002	121,668
Weighted average grant date fair value, Nonvested at beginning of period	$ 21.33	$ 19.91
Weighted average grant date fair value, Vested	18.64	18.64
Weighted average grant date fair value, Nonvested at end of period	$ 21.58	$ 20.10	$ 21.58	$ 20.10
Restricted Stock [Member]
Class of Stock [Line Items]
Shares, Nonvested shares at beginning of period			120,001	162,500	162,500
Shares, Granted			111,414	14,340
Shares, Vested			(46,413)	(55,172)
Shares, Nonvested shares at end of period	185,002	121,668	185,002	121,668	120,001
Weighted average grant date fair value, Nonvested at beginning of period			$ 20.10	$ 20.08	$ 20.08
Weighted average grant date fair value, Granted			22.59	13.95
Weighted average grant date fair value, Vested			20.28	18.27
Weighted average grant date fair value, Nonvested at end of period	$ 21.58	$ 20.10	$ 21.58	$ 20.10	$ 20.10

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EARNINGS PER SHARE (Schedule of Earnings per Share, Basic and Diluted) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Share Outstanding [Abstract]
Weighted average common shares - basic	14,042,350	5,831,135	10,935,776	5,926,215
Effect of dilutive securities	201,995	131,958	172,764	149,971
Weighted average common shares, all classes	14,244,345	5,963,093	11,108,540	6,076,186
Calculation of Earnings per Share - basic
Net income	$ 4,457	$ 4,994	$ 11,434	$ 11,528
Net income allocated to preferred stockholders	310		1,033
Net income allocated to unvested restricted shares	57	111	156	285
Net income attributable to common shareholders - two-class method	$ 4,090	$ 4,883	$ 10,245	$ 11,243
Weighted average common shares - basic	14,042,350	5,831,135	10,935,776	5,926,215
Earnings per share - basic	$ 0.29	$ 0.84	$ 0.94	$ 1.90
Calculation of Earnings per Share - diluted
Net income	$ 4,457	$ 4,994	$ 11,434	$ 11,528
Net income allocated to preferred stockholders	310		1,033
Net income attributable to common shareholders - two-class method	$ 4,147	$ 4,994	$ 10,401	$ 11,528
Weighted average common shares - diluted	14,244,345	5,963,093	11,108,540	6,076,186
Earnings per share - diluted	$ 0.29	$ 0.84	$ 0.94	$ 1.90

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RELATED PARTY TRANSACTIONS (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Related Party Transaction [Line Items]
Development property investments	$ 188,540		$ 188,540		$ 95,102
Base management fee, annual rate			1.50%
Percentage of base management fee	0.375%		0.375%
Expenses Reimbursed To Manager	$ 800	$ 800	$ 2,300	$ 2,400
Management fee expense	1,036	402	2,373	1,218
Income (Loss) from equity method investments	730	436	1,747	854
Transaction and other expenses		2		2,129
Deferred Termination Fee to Manager				239
Due to Affiliate	1,438		1,438		1,008
Investment in and advances to real estate venture	12,573		12,573		5,373
Interest income from investments	3,173	1,698	7,759	4,374
SL1 Venture [Member]
Related Party Transaction [Line Items]
Income (Loss) from equity method investments	700	400	1,700	900
Investment in and advances to real estate venture	12,600		12,600		5,400
Equity Method Investments [Member]
Related Party Transaction [Line Items]
Development property investments	177,700		177,700		$ 78,700
Accumulated change in fair value from equity method investment and interest income realized	$ 4,800	$ 5,700	$ 13,000	$ 15,700

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SUBSEQUENT EVENTS (Narrative) (Details) - USD ($) $ / shares in Units, $ in Thousands										9 Months Ended
	Nov. 01, 2017	Oct. 26, 2017	Oct. 06, 2017	Aug. 01, 2017	Jun. 27, 2017	May 03, 2017	Apr. 05, 2017	Mar. 07, 2017	Dec. 13, 2016	Sep. 30, 2017
Subsequent Event [Line Items]
Issuance of shares, net of offering costs (in shares)					4,025,000				2,996,311
Net proceeds from issuance of common stock					$ 83,900				$ 53,500	$ 108,074
ATM Program [Member]
Subsequent Event [Line Items]
Issuance of shares, net of offering costs (in shares)							1,093,202
Shares issued, price per share										$ 22.69
Net proceeds from issuance of common stock										$ 24,200
ATM Program [Member] | Subsequent Event [Member]
Subsequent Event [Line Items]
Issuance of shares, net of offering costs (in shares)			29,416
Shares issued, price per share			$ 20.50
Net proceeds from issuance of common stock			$ 600
Series A Preferred Stock [Member]
Subsequent Event [Line Items]
Dividends declared date				Aug. 01, 2017		May 03, 2017		Mar. 07, 2017
Dividend payable, amount per share				$ 17.89		$ 17.69		$ 17.50
Dividends payable date				Oct. 13, 2017		Jul. 14, 2017		Apr. 14, 2017
Dividends payable, date of record				Oct. 01, 2017		Jul. 01, 2017		Apr. 01, 2017
Series A Preferred Stock [Member] | Subsequent Event [Member]
Subsequent Event [Line Items]
Issuance of shares, net of offering costs (in shares)		10,000
Proceeds from issuance of preferred stock		$ 10,000
Common Stock [Member]
Subsequent Event [Line Items]
Dividends declared date	Nov. 01, 2017
Common Stock [Member] | Subsequent Event [Member]
Subsequent Event [Line Items]
Dividend payable, amount per share	$ 0.35
Dividends payable date	Jan. 12, 2018
Dividends payable, date of record	Jan. 02, 2018

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SUBSEQUENT EVENTS (Schedule of Investments) (Details) - USD ($) $ in Thousands			9 Months Ended
	Oct. 30, 2017	Oct. 13, 2017	Sep. 30, 2017
Subsequent Event [Line Items]
Investment Commitment			$ 421,210
New Jersey [Member] | Subsequent Event [Member]
Subsequent Event [Line Items]
Investment Closing Date	10/30/2017
Investment Commitment	$ 14,701
Development Property Investments [Member]
Subsequent Event [Line Items]
Investment Commitment			415,228
Development Property Investments [Member] | Subsequent Event [Member]
Subsequent Event [Line Items]
Investment Commitment	$ 24,160
Development Property Investments [Member] | Miami 2 [Member] | Subsequent Event [Member]
Subsequent Event [Line Items]
Investment Closing Date		10/12/2017
Investment Commitment		$ 9,459
Operating Property Loans [Member]
Subsequent Event [Line Items]
Investment Commitment			$ 5,982
Loan investments [Member] | Miami 2 [Member]
Subsequent Event [Line Items]
Investment Closing Date			5/14/2015
Loan investments [Member] | New Jersey [Member]
Subsequent Event [Line Items]
Investment Closing Date			7/21/2016
Loan investments [Member] | Development Property Investments [Member]
Subsequent Event [Line Items]
Investment Commitment			$ 397,495
Construction Loans [Member] | Development Property Investments [Member]
Subsequent Event [Line Items]
Investment Commitment			$ 17,733