In 2017, we originated a subordinate loan junior to a $33.0 million third-party mortgage, secured by a hotel in Anaheim, CA. In December 2020, due to non-performance, we assumed legal title through the execution of a deed-in-lieu of foreclosure. We intended to sell the hotel and, as such, as of the date of the title assumption, we recorded the hotel property on our condensed consolidated balance sheet at its fair market value less costs to sell, net of a realized loss of $2.4 million, that was previously recorded as Specific CECL Allowance.

As of March 31, 2021, there was an increase in our expected costs to sell the property, and therefore, we recorded a $0.6 million loss during the three months ended March 31, 2021, as realized losses and impairments on real estate owned in our condensed consolidated statement of operations. During the second quarter of 2021 the property was sold at our cost basis and no additional gain or loss was recorded. The $33.0 million first mortgage was repaid upon the sale of the property.

In 2017, we originated a $20.0 million junior mezzanine loan which was subordinate to: (i) a $110.0 million mortgage loan, and (ii) a $24.5 million senior mezzanine loan, secured by a full-service luxury hotel in Washington, D.C. During the first quarter of 2020, we recorded a $10.0 million Specific CECL Allowance and placed our junior mezzanine loan on non-accrual status.

On May 24, 2021, we purchased the $24.5 million senior mezzanine loan at par and acquired legal title to the hotel through a deed-in-lieu of foreclosure. We assumed the hotel’s assets and liabilities (including the $110.0 million mortgage loan) and recorded an additional $10.0 million charge reflecting the difference between the fair value of the hotel’s net assets and the carrying amount of the loan. This $10.0 million loss on title assumption plus the previously recorded Specific CECL Allowance of $10.0 million resulted in a $20.0 million realized loss on investments included in our condensed consolidated statement of operations during the second quarter of 2021.

On May 24, 2021, in accordance with ASC 805, "Business Combinations," we allocated the fair value of the hotel’s acquired assets and assumed debt. The non-recurring fair value measurement was classified as Level III within the fair value hierarchy due to the use of significant unobservable inputs. On June 29, 2021, we repaid the $110.0 million mortgage loan against the property. As of March 1, 2022, the hotel assets and liabilities met the criteria to be classified as held for sale under ASC Topic 360, "Property, Plant, and Equipment." As of March 1, 2022, we ceased recording depreciation on the building and furniture, fixtures, and equipment on the condensed consolidated statement of operations.


	September 30, 2022
Assets:
Cash	$	5,858
Land	58,742
Buildings	86,973
Furniture, fixtures, and equipment	8,811
Accumulated depreciation	(3,349)
Other assets	5,024
Total Assets	$	162,059
Liabilities:

Accounts payable, accrued expenses and other liabilities	6,116
Total Liabilities	$	6,116
Net Real Estate Assets	$	155,943

For the three and nine months ended September 30, 2022 and 2021, we recorded the operating revenue, expenses and fixed asset depreciation and amortization in our condensed consolidated income statement as shown below ($ in thousands):


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Operations related to real estate owned:
Revenue from operations	$	14,428	$	5,896	$	42,098	$	7,270
Operating expenses	(13,308)		(6,914)		(36,094)		(8,908)
Depreciation and amortization	—		(1,096)		(704)		(1,548)
Net income (loss) from real estate owned	$	1,120	$	(2,114)	$	5,300	$	(3,186)

In 2015, we originated a $122.2 million multifamily development commercial mortgage loan secured by an assemblage of properties in downtown Brooklyn, NY. In 2020, the loan went into default and we recorded a $30.0 million Specific CECL Allowance, due to the deterioration of market conditions attributable to COVID-19. As a result of improved market conditions we reversed $20 million of Specific CECL Allowance during the second quarter of 2021. In the second quarter of 2022, we reversed the remaining $10 million Specific CECL Allowance as a result of market rent growth and value created from development activities at the underlying property.

On August 3, 2022, we acquired legal title of the property through a deed-in-lieu of foreclosure and accounted for the asset acquisition in accordance with ASC 805, "Business Combinations." At that time, our amortized cost basis in the commercial mortgage loan was $226.5 million. We recorded the real estate assumed at a fair value of $270.1 million based on the market value of the land. We recognized a realized gain of $43.6 million, recorded within realized gain on investments on our condensed consolidated statement of operations, which reflects the difference between the fair value of the property and the carrying value of the loan at the time of acquisition. The non-recurring fair value measurement was classified as Level III within the fair value hierarchy due to the use of significant unobservable inputs, including comparable sales of similar properties in the market. Since title acquisition we have capitalized an additional $21.1 million of construction and financing costs. As of September 30, 2022, our cost basis in the property was $291.1 million.

Upon taking title, we concurrently contributed the property to a joint venture with a third party real estate developer. Through our wholly owned subsidiaries, we hold a 100% equity ownership interest in the joint venture and our partner is only entitled to profit upon achievement of certain returns under our joint venture agreement. Concurrently with taking title to the property, we obtained $164.8 million in construction financing on the property.

The construction financing includes a maximum commitment of $388.4 million, an interest rate of SOFR+2.55%, and current maturity of August 2026, with an option for us to extend for one year contingent upon meeting certain conditions. The construction financing agreement contains the following financial covenants: (i) our unencumbered liquidity must be greater $100.0 million and (ii) our net worth must be greater than $600.0 million. Under these covenants, our General CECL Allowance is added back to our net worth calculation. At September 30, 2022, we were in compliance with these covenants.