COMMERCIAL LOAN AND MASTER LEASE INVESTMENTS

12 Months Ended

Dec. 31, 2021

COMMERCIAL LOAN AND MASTER LEASE INVESTMENTS.

COMMERCIAL LOAN AND MASTER LEASE INVESTMENTS

NOTE 5.       COMMERCIAL LOAN AND MASTER LEASE 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 real estate or the borrower’s pledge of its ownership interest in the entity that owns the real estate. The 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.

2021 Activity. On June 30, 2021, the Company originated a loan in connection with the sale of a land parcel with an existing structure located in Daytona Beach, Florida. The principal loan amount of $0.4 million bears interest at a fixed rate of 10.00% and has an initial term of 1.5 years.

The Company’s commercial loan and master lease investments were comprised of the following at December 31, 2021 (in thousands):

Description	Date of Investment	Maturity Date	Original Face Amount		Current Face Amount		Carrying Value		Coupon Rate
Carpenter Hotel – 400 Josephine Street, Austin, TX	July 2019	N/A	$	16,250	$	16,250	$	17,189	N/A
Westland Gateway Plaza – Hialeah, FL	September 2020	N/A		21,085		21,085		21,148	N/A
Mortgage Note – 4311 Maple Avenue – Dallas, TX	October 2020	April 2023		400		400		394	7.50%
Mortgage Note – 110 N Beach Street – Daytona Beach, FL	June 2021	December 2022		364		364		364	10.00%
			$	38,099	$	38,099	$	39,095

The Company’s commercial loan and master lease investments were comprised of the following at December 31, 2020 (in thousands):

Description	Date of Investment	Maturity Date	Original Face Amount		Current Face Amount		Carrying Value		Coupon Rate
Carpenter Hotel – 400 Josephine Street, Austin, TX	July 2019	N/A	$	16,250	$	16,250	$	16,827	N/A
Westland Gateway Plaza – Hialeah, FL	September 2020	N/A		21,085		21,085		21,101	N/A
Mortgage Note – 4311 Maple Avenue – Dallas, TX	October 2020	April 2023		400		400		392	7.50%
			$	37,735	$	37,735	$	38,320

The carrying value of the commercial loan and master lease investment portfolio at December 31, 2021 and 2020 consisted of the following (in thousands):

	As of
	December 31, 2021		December 31, 2020
Current Face Amount	$	38,099	$	37,735
Imputed Interest over Rent Payments Received		1,002		593
Unaccreted Origination Fees		(2)		(4)
CECL Reserve		(4)		(4)
Total Commercial Loan and Master Lease Investments	$	39,095	$	38,320

2020 Activity. 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 $0.3 million. The CECL reserve combined with the impairment related to marketing the loan portfolio resulted in an aggregate impairment charge on the loan portfolio of $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 and master lease investments in two separate transactions generating aggregate proceeds of $20.0 million and resulting in a second quarter loss of $0.4 million, or $0.06 per share, after tax. For the year ended December 31, 2020, the total loss on the loan portfolio disposition, including the $1.9 million impairment and CECL reserve charges on the four loans disposed of was $2.1 million, or $0.33 per share, after tax.

On September 25, 2020, the Company acquired a 108,000 square foot retail property in Hialeah, Florida for $21.0 million which is master-leased to a national retail developer (the “Master Tenant”) . The 25-year lease includes annual rent escalations as well as certain future purchase rights by the Master Tenant (“Westland Gateway Plaza Lease”). Pursuant to FASB ASC Topic 842, Leases, due to the future repurchase rights, the Westland Gateway Plaza Lease does not qualify for treatment as a property purchase and has been accounted for on the consolidated balance sheets as a commercial loan and master lease investment. The Company has imputed interest on the Westland Gateway Plaza Lease which is being recognized as interest income on commercial loan and master lease investments in the Company’s consolidated statements of operations.

On October 13, 2020, the Company originated a loan in connection with the sale of a vacant land parcel located adjacent to the formerly owned property in Dallas, Texas, leased to 7-Eleven which was sold in June 2020. The principal loan amount of $0.4 million bears interest at a fixed rate of 7.50% and has an initial term of 2.5 years.

On November 3, 2020, the Company’s $2.0 million loan with the buyer of the Company’s former golf operations was repaid by the borrower generating proceeds of $2.0 million.