Commercial Loan Investments

12 Months Ended

Dec. 31, 2016

Receivables [Abstract]

Commercial Loan Investments

NOTE 3.       COMMERCIAL LOAN INVESTMENTS

Our investments in commercial loans or similar structured finance investments, such as mezzanine loans or other subordinated debt, have been and are expected to continue to be secured by commercial or residential real estate or the borrower’s pledge of its ownership interest in the entity that owns the real estate. The first mortgage loans we invest in or originate are for commercial real estate located in the United States and its territories, and are current or performing with either a fixed or floating rate. Some of these loans may be syndicated in either a pari-passu or senior/subordinated structure. Commercial first mortgage loans generally provide for a higher recovery rate due to their senior position in the underlying collateral. Commercial mezzanine loans are typically secured by a pledge of the borrower’s equity ownership in the underlying commercial real estate. Unlike a mortgage, a mezzanine loan is not secured by a lien on the property. An investor’s rights in a mezzanine loan are usually governed by an intercreditor agreement that provides holders with the rights to cure defaults and exercise control on certain decisions of any senior debt secured by the same commercial property.

On September 24, 2015, the Company originated a $14.5 million first mortgage loan secured by a hotel in San Juan, Puerto Rico. The loan was to have matured in September 2018 and bore a floating interest rate of 30-day London Interbank Offer Rate (“LIBOR”) plus 900 basis points, of which 700 basis points were payable currently and 200 basis points accrued over the term of the loan. At closing, a loan origination fee of approximately $181,000 was received by the Company and was being accreted ratably into income through the contractual maturity date. On May 26, 2016, this $14.5 million first mortgage loan was repaid at a discount of approximately $218,000. At payoff, the remaining loan origination fee of approximately $145,000, net of loan costs of approximately $32,000, was accreted into income.

During the year ended December 31, 2016, the approximately $9.0 million B-Note secured by a property in Sarasota, Florida and the $10.0 mezzanine loan secured by property in Dallas, Texas were extended by the borrowers, each borrower having exercised one-year extension options thereby extending the maturity dates to June 2017 and September 2017, respectively, with maximum maturity extensions to June 2018 and September 2019, respectively.  

As of December 31, 2016, the Company owned three performing commercial loan investments which have an aggregate outstanding principal balance of approximately $24.0 million. These loans are secured by real estate, or the borrower’s equity interest in real estate, located in Dallas, Texas, Sarasota, Florida, and Atlanta, Georgia and have an average remaining maturity of approximately 0.9 years and a weighted average interest rate of 8.9%.

The Company’s commercial loan investment portfolio was comprised of the following at December 31, 2016:

	Date of	Maturity	Original Face		Current Face		Carrying
Description	Investment	Date	Amount		Amount		Value		Coupon Rate
Mezz – Hotel – Atlanta, GA	January 2014	February 2019	$	5,000,000	$	5,000,000	$	5,000,000	12.00%
B-Note – Retail Shopping Center, Sarasota, FL	May 2014	June 2017		8,960,467		8,960,467		8,960,467	30 ‑day LIBOR plus 7.50%
Mezz – Hotel, Dallas, TX	September 2014	September 2017		10,000,000		10,000,000		10,000,000	30 day LIBOR plus 7.25%
Total			$	23,960,467	$	23,960,467	$	23,960,467

The carrying value of the commercial loan investment as of December 31, 2016 consisted of the following: 

	Total
Current Face Amount	$	23,960,467
Unamortized Fees		—
Unaccreted Origination Fees		—
Total Commercial Loan Investments	$	23,960,467

The Company’s commercial loan investment portfolio was comprised of the following at December 31, 2015:

	Date of	Maturity	Original Face		Current Face		Carrying
Description	Investment	Date	Amount		Amount		Value		Coupon Rate
Mezz – Hotel – Atlanta, GA	January 2014	February 2019	$	5,000,000	$	5,000,000	$	5,000,000	12.00%
B-Note – Retail Shopping Center, Sarasota, FL	May 2014	June 2016		8,960,467		8,960,467		8,960,467	30 day LIBOR plus 7.50%
Mezz – Hotel, Dallas, TX	September 2014	September 2016		10,000,000		10,000,000		10,000,000	30 day LIBOR plus 7.25%
First Mortgage – Hotel, San Juan, Puerto Rico	September 2015	September 2018		14,500,000		14,500,000		14,371,489	30 day LIBOR plus 9.00%
Total			$	38,460,467	$	38,460,467	$	38,331,956

The carrying value of the commercial loan investment as of December 31, 2015 consisted of the following:

	Total
Current Face Amount	$	38,460,467
Unamortized Fees		36,382
Unaccreted Origination Fees		(164,893)
Total Commercial Loan Investments	$	38,331,956