Quarterly report pursuant to Section 13 or 15(d)

Related Party Transactions

v3.19.2
Related Party Transactions
6 Months Ended
Jun. 30, 2019
Related Party Transactions  
Related Party Transactions

9.    Related Party Transactions

Until March 11, 2019, the Company leased office space, on a month-to-month basis, in a building owned by Union News of New Haven, Inc., an entity that is controlled and 20%-owned by Jeffrey Villano, the Company’s co-CEO. Rent and other facility related charges paid by the Company to Union News for the six- and three-month periods ended June 30, 2019 were $4,500 and $-0-, respectively, and for the six- and three-month periods ended June 30, 2018 were $9,000 and $4,500, respectively. The Company moved to its new office in March 2019 so no further rental payments are payable to JJV.

 

Prior to the Exchange, from time to time, JJV would acquire certain troubled assets from third parties who were not existing SCP borrowers. In such instances, JJV would borrow money from SCP to finance these acquisitions. As part of the Exchange, the Company acquired the notes evidencing these loans from SCP. The principal balance of the loans to JJV at June 30, 2019 was $869,627. The Company accounts for these arrangements as separate loans to JJV. The income earned on these loans is equivalent to the income earned on similar loans in the portfolio. All underwriting guidelines are adhered to. The mortgage documents allow JJV to sell the properties in case of default with proceeds in excess of loan principal and accrued expense being returned to JJV. Since the Exchange, the Company no longer loans money to JJV. During the three and six months ended June 30, 2019, JJV paid $20,276 and $46,624, respectively, of interest to the Company. Interest paid by JJV to the Company during the three- and six-month periods ended June 30, 2018 were $32,955 and $59,005, respectively.

 

In the ordinary course of business, the Company may originate, fund, manage and service mortgage loans to shareholders (members in the case of loans funded prior to the Exchange). The underwriting process on these loans is consistent with Company policy. The terms of such loans, including the interest rate, income, origination fees and other closing costs are the same as those applicable to loans made to unrelated third parties in the portfolio. As of June 30, 2019, mortgage loans to shareholders totaled $4,575,902. Interest income earned on these mortgage loans totaled $225,024.

 

In 2018 the Company sold two notes, having an aggregate original principal amount of $1,717,000, to a shareholder at par. In the first quarter of 2019, the Company sold a third note, having an aggregate original principal amount of $500,000, to the same shareholder at par. All three notes are secured by commercial properties. The Company continued to service the notes on behalf of the purchaser. In December 2018, the Company reacquired one of the notes, having an original principal amount of $1,200,000, and in the first quarter of 2019 reacquired the other two notes, having an aggregate principal amount, $1,017,000. The balance owed to the purchaser for the notes, $1,200,000 at December 31, 2018 and $2,217,000 at June 30, 2019, is characterized as due to shareholder on the Company’s balance sheets for the relevant periods. On July 26, 2019, principal and interest due to shareholder were paid in full. (See Note 11.)

At June 30, 2019 and December 31, 2018, amounts owed by JJV to the Company were $22,794 and $22,977, respectively, and is reflected as other receivables on the Company’s balance sheet.

For the six months ended June 30, 2019 and 2018, the wife of one of our executive officers was paid $50,000 and $37,500, respectively, for accounting and financial reporting services provided to the Company.