COMMERCIAL LOAN INVESTMENTS

6 Months Ended

Jun. 30, 2020

COMMERCIAL LOAN INVESTMENTS

COMMERCIAL LOAN INVESTMENTS

NOTE 4. 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.

In light of the COVID-19 Pandemic, the Company began marketing its commercial loan portfolio in advance of their upcoming maturities to further strengthen the Company’s liquidity. The Company received multiple bids for the portfolio including a bid offering a value that was at a discount to par. Additionally, the Company implemented the guidance regarding CECL effective January 1, 2020, which resulted in an allowance reserve of approximately $252,000. The CECL reserve combined with the impairment related to marketing the loan portfolio resulted in an aggregate impairment charge on the loan portfolio of approximately $1.9 million, or $0.30 per share, after tax during the three months ended March 31, 2020.

During the three months ended June 30, 2020, the Company sold four of its commercial loan investments in two separate transactions generating aggregate proceeds of approximately $20.0 million and resulting in a second quarter loss of approximately $353,000, or approximately $0.06 per share, after tax. For the six months ended June 30, 2020, the total loss on the loan portfolio disposition, including the impairment and CECL reserve charges on the four loans disposed of, in the three months ended March 31, 2020, was approximately $2.1 million, or $0.33 per share, after tax.

The Company’s commercial loan investments were comprised of the following at June 30, 2020:

Description	Date of Investment	Maturity Date	Original Face Amount		Current Face Amount		Carrying Value		Coupon Rate
Ground Lease Loan – 400 Josephine Street, Austin, TX	July 2019	N/A	$	16,250,000	$	16,250,000	$	16,635,073	N/A
LPGA Buyer Loan – Daytona Beach, FL	Oct 2019	Oct 2020		2,070,000		2,070,000		1,853,839	7.50%
			$	18,320,000	$	18,320,000	$	18,488,912

The carrying value of the commercial loan investment portfolio at June 30, 2020 and December 31, 2019 consisted of the following:

	June 30, 2020		December 31, 2019
Current Face Amount	$	18,320,000	$	34,570,000
Imputed Interest over Rent Payments Received on Ground Lease Loan		385,073		193,943
Unaccreted Origination Fees		(9,161)		(138,770)
Impairment / CECL Reserve		(207,000)		—
Total Commercial Loan Investments	$	18,488,912	$	34,625,173