| Related Party Transactions | 9 Months Ended |
| Sep. 30, 2014 |
| Related Party Transactions [Abstract] | ' |
| Related Party Transactions Disclosure [Text Block] | ' |
| K. Related Party Transactions |
|
| As of September 30, 2014, we had approximately $19.5 million of notes receivables – related parties, consisting of 4 related party loans, and one participation interest – related party totaling approximately $76.1 million. Notes receivables – related parties and participation interest – related party represented approximately 25% of our total assets as of September 30, 2014. As of September 30, 2014, we had approximately $626,000 of accrued interest receivable – related parties, and we had paid our general partner approximately $10.8 million since inception for acquisition and origination fee expenses associated with the notes receivable, notes receivable – related parties and participation interest – related party. For the nine months ended September 30, 2014, we recognized approximately $7.4 million and $385,000 for interest income – related parties and mortgage and transaction service revenues – related parties, respectively. We also recognized approximately $911,000 of general and administrative – related parties expenses for the nine months ended September 30, 2014. As of September 30, 2014, we had 8 outstanding limited repayment guarantees benefitting related parties with total credit risk to us of approximately $101.6 million, of which approximately $79.6 million had been borrowed against by the debtor. |
|
| As of December 31, 2013, we had approximately $27.8 million of notes receivables – related parties, consisting of 6 related party loans, and one participation interest – related party totaling approximately $70.8 million. Notes receivables – related parties and participation interest – related party represented approximately 27% of our total assets as of December 31, 2013. As of December 31, 2013, we had approximately $1.2 million of accrued interest receivable – related parties, and we had paid our general partner approximately $10.6 million since inception for acquisition and origination fee expenses associated with the notes receivable, notes receivable – related parties and participation interest – related party. For the year ended December 31, 2013, we recognized approximately $15.2 million and $246,000 for interest income – related parties and mortgage and transaction service revenues – related parties, respectively. We also recognized approximately $5.4 million of general and administrative – related parties expenses for the year ended December 31, 2013. As of December 31, 2013, we had 8 outstanding limited repayment guarantees benefitting related parties with total credit risk to us of approximately $80.9 million, of which approximately $35.2 million had been borrowed against by the debtor. |
|
| Land Development and certain of its affiliates receive fees in connection with the acquisition and management of the assets and reimbursement of costs of the Partnership. |
|
| We reimburse General Services for operating expenses incurred by General Services in assisting Land Development in our management (the “Operating Expense Reimbursement”). General Services and Land Development are each owned 99.9% by UMT Holdings and 0.1% by UMT Services, which serves as the general partner for both General Services and Land Development. |
|
| Our general partner receives Placement Fees of 3% of the net amount available for investment in mortgages payable to our general partner for processing and origination costs (including, but not limited to, legal fees and expenses, travel and communications expenses, costs of appraisals, accounting fees and expenses, and title insurance funded by us) associated with notes receivable or participation interests that we have entered into. Such costs were amortized into expense on a straight-line basis, and were fully amortized as of December 31, 2013. |
|
| Land Development currently receives an unsubordinated promotional interest equal to 10% of cash available for distribution prior to the return to our limited partners of all of their capital contributions and an 8% annual cumulative (non-compounded) return on their net capital contributions. After our limited partners receive a return of their net capital contributions and an 8% annual cumulative (non-compounded) return on their net capital contributions, Land Development will receive a subordinated promotional interest equal to 15% of remaining cash available for distribution, including net proceeds from capital transactions or a pro rata portion thereof. |
|
| Land Development receives a carried interest, which is an equity interest in us to participate in all distributions, other than distributions attributable to its promotional interest of cash available for distribution and net proceeds from capital transactions. If Land Development enters into commitments to investments in mortgages in excess of 82% of the gross offering proceeds, it will be entitled to a carried interest equal to (1) 1% for the first 2.5% of commitments to investments in mortgages above 82% of the gross offering proceeds (or if commitments to investments in mortgages are above 82% but no more than 84.5%, 1% multiplied by the fractional amount of commitments to investments in mortgages above 82%), (2) 1% for the next 2% of additional commitments to investments in mortgages above 84.5% of the gross offering proceeds (or if commitments to investments in mortgages are above 84.5% but no more than 86.5%, 1% multiplied by the fractional amount of commitments to investments in mortgages above 84.5%) and (3) 1% for each additional 1% of additional commitments to investments in mortgages above 86.5% of the gross offering proceeds (or a fractional percentage equal to the fractional amount of any 1% of additional commitments to investments in mortgages). |
|
| For services rendered in connection with the servicing of our loans, we incur a monthly Mortgage Servicing Fee payable to Land Development equal to one-twelfth of 0.25% of our aggregate outstanding development notes receivable balance as of the last day of the month. Such fees are included in general and administrative – related parties expenses. The unpaid portion of such fees is included in accrued liabilities – related parties on our balance sheet. |
|
| An affiliate of Land Development serves as the advisor to UMT and UDF IV. The general partner of UDF LOF is a wholly-owned subsidiary of Land Development. Land Development serves as the asset manager of UDF I, UDF IV and UDF LOF. |
|
| The table below summarizes the payment of related party fees and reimbursements associated with the Offering and origination and management of assets for the nine months ended September 30, 2014 and 2013. We believe that these fees and reimbursements are reasonable and customary for comparable mortgage programs. |
|
| | | | For the Nine Months Ended | |
| | | | September 30, | |
| Payee | | Purpose | | 2014 | | | 2013 | |
| Land Development | | | | | | | | | | | | |
| | Placement Fees | | $ | 120,000 | | 8 | % | | $ | 201,000 | | 4 | % |
| | Promotional interest | | | 398,000 | | 26 | % | | | 2,889,000 | | 63 | % |
| | Carried interest | | | 152,000 | | 10 | % | | | 449,000 | | 10 | % |
| | Mortgage Servicing Fee | | | 425,000 | | 28 | % | | | 743,000 | | 16 | % |
| General Services | | | | | | | | | | | | | | |
| | Operating Expense Reimbursement | | | 431,000 | | 28 | % | | | 318,000 | | 7 | % |
| Total Payments | | | | $ | 1,526,000 | | 100 | % | | $ | 4,600,000 | | 100 | % |
| | | | | | | | | | | | | | |
|
| The table below summarizes general and administrative – related parties expenses for the three months ended September 30, 2014 and 2013. We believe that these expenses are reasonable and customary for comparable mortgage programs. |
|
| | For the Three Months Ended | | | | |
| | September 30, | | | | |
| General and administrative – related parties expenses | | 2014 | | 2013 | | | | |
| | | | | | | | | | | | |
| Amortization of Placement Fees | | $ | - | | - | | $ | 306,000 | | 44 | % | | | |
| Mortgage Servicing Fee | | | 261,000 | | 61 | % | | 250,000 | | 36 | % | | | |
| Amortization of debt financing fees | | | 27,000 | | 6 | % | | - | | - | | | | |
| Operating Expense Reimbursement | | | 142,000 | | 33 | % | | 140,000 | | 20 | % | | | |
| Total general and administrative – related parties expenses | | $ | 430,000 | | 100 | % | $ | 696,000 | | 100 | % | | | |
|
| The table below summarizes general and administrative – related parties expenses for the nine months ended September 30, 2014 and 2013. We believe that these expenses are reasonable and customary for comparable mortgage programs. |
|
| | For the Nine Months Ended | | | | |
| | September 30, | | | | |
| General and administrative – related parties expenses | 2014 | | 2013 | | | | |
| | | | | | | | | | | |
| Amortization of Placement Fees | | $ | - | | - | | $ | 917,000 | | 44 | % | | | |
| Mortgage Servicing Fee | | | 775,000 | | 62 | % | | 746,000 | | 36 | % | | | |
| Amortization of debt financing fees | | | 53,000 | | 4 | % | | - | | - | | | | |
| Operating Expense Reimbursement | | | 425,000 | | 34 | % | | 419,000 | | 20 | % | | | |
| Total general and administrative – related parties expenses | $ | 1,253,000 | | 100 | % | $ | 2,082,000 | | 100 | % | | | |
|
| Notes Receivable – Related Parties |
|
| In connection with notes receivable – related parties, participation interest – related party, and loan participations sold to related parties, as required by our Partnership Agreement and the NASAA Mortgage Program Guidelines, the Partnership obtained an opinion from Jackson Claborn, Inc., an independent advisor, stating that the transactions are fair and at least as reasonable to the Partnership as a transaction with an unaffiliated party in similar circumstances. |
|
| UDF PM Note |
|
| In September 2007, we originated a secured promissory note to UDF PM, LLC, a Texas limited liability company and wholly-owned subsidiary of UDF I (“UDF PM”), in the principal amount of approximately $6.4 million (the “UDF PM Note”). Our general partner serves as the asset manager for UDF I. The UDF PM Note, which bears an interest rate of 15% per annum, is initially collateralized by a second lien deed of trust on approximately 335 finished lots and 15 acres of land located in Texas and, per the Fourth Loan Modification Agreement to the Secured Promissory Note, matures on September 4, 2015, as amended. In determining whether to modify the UDF PM Note, we evaluated the economic conditions, the estimated value and performance of the underlying collateral, the guarantor, adverse situations that may affect the borrower’s ability to pay or the value of the collateral and other relevant factors. In connection with the UDF PM Note, UDF PM agreed to pay us commitment fees equal to 3% of each advance on the note, or $187,500. We did not recognize any commitment fee income in connection with the UDF PM Note for the three and nine months ended September 30, 2014 or 2013. For the three months ended September 30, 2014 and 2013, we recognized approximately $11,000 and $9,000, respectively, of interest income – related parties related to the UDF PM Note. For the nine months ended September 30, 2014 and 2013, we recognized approximately $31,000 and $28,000, respectively, of interest income – related parties related to the UDF PM Note. Approximately $308,000 and $270,000 is included in notes receivable – related parties as of September 30, 2014 and December 31, 2013, respectively. Approximately $3,000 and $10,000 is included in accrued interest receivable – related parties as of September 30, 2014 and December 31, 2013, respectively. |
|
| UDF X Note |
|
| In November 2007, we originated a secured promissory note to United Development Funding X, L.P., a Delaware limited partnership and wholly-owned subsidiary of our general partner (“UDF X”), in the principal amount of approximately $70.0 million (the “UDF X Note”). In August 2008, we amended the UDF X Note to reduce the commitment amount to $25.0 million. In November 2012, we amended the UDF X Note to increase the commitment amount to $26.0 million. In determining whether to modify this loan, we evaluated the economic conditions, the estimated value and performance of the underlying collateral, the guarantor, adverse situations that may affect the borrower’s ability to pay or the value of the collateral and other relevant factors. The UDF X Note, which bears an interest rate of 15% per annum, is collateralized by a pledge of 100% of the ownership interests in UDF X and is payable on November 11, 2015, as amended. In connection with the UDF X Note, UDF X agreed to pay us commitment fees equal to 3% of each advance on the note, or approximately $751,000. For the three months ended September 30, 2014 and 2013, we recognized approximately $605,000 and $806,000, respectively, of interest income – related parties related to the UDF X Note. For the nine months ended September 30, 2014 and 2013, we recognized approximately $1.9 million and $2.4 million, respectively, of interest income – related parties related to the UDF X Note. Approximately $15.7 million and $18.3 million is included in notes receivable – related parties as of September 30, 2014 and December 31, 2013, respectively. Approximately $361,000 and $196,000 is included in accrued interest receivable – related parties as of September 30, 2014 and December 31, 2013, respectively. |
|
| UDF NP Loan |
|
| In December 2007, we originated a secured promissory note to UDF Northpointe, LLC, a Texas limited liability company that was a wholly-owned subsidiary of UDF I at the time of the note’s origination (“Northpointe LLC”), in the principal amount of approximately $6.0 million (the “UDF NP Loan”). Our general partner serves as the asset manager for UDF I. In December 2008, Northpointe LLC was purchased by an unrelated third party, which assumed the UDF NP Loan. In May 2009, Northpointe LLC assigned its obligations associated with the UDF NP Loan and its interests in the collateral by a special warranty deed to UDF Northpointe II, L.P. (“Northpointe II”), a subsidiary of UDF I. Concurrent with this assignment, Northpointe LLC entered into a contract for deed with Northpointe II whereby Northpointe LLC agreed to make payments to Northpointe II for all debt service payments in consideration for Northpointe II transferring ownership and possession of the collateral back to Northpointe LLC. The secured promissory note, which bears an interest rate of 12% per annum, is initially collateralized by a second lien deed of trust on 251 finished lots and 110 acres of land in Texas and was payable on December 28, 2010. The maturity date was extended to December 28, 2013 pursuant to a modification agreement effective as of September 30, 2011 that also increased the UDF NP Loan to a maximum of $15.0 million, pursuant to a second secured promissory note in the principal amount of $9.0 million. In December 2013, the note was amended to further extend the maturity date to December 28, 2014. In determining whether to modify this loan, we evaluated the economic conditions, the estimated value and performance of the underlying collateral, the guarantor, adverse situations that may affect the borrower’s ability to pay or the value of the collateral and other relevant factors. The second secured promissory note bears the same interest rate and is secured by the same collateral as the original promissory note. For the three months ended September 30, 2014 and 2013, we recognized approximately $119,000 and $344,000, respectively, of interest income – related parties related to this loan. For the nine months ended September 30, 2014 and 2013, we recognized approximately $553,000 and $1.1 million, respectively, of interest income – related parties related to this loan. Approximately $3.4 million and $9.1 million is included in notes receivable – related parties associated with the UDF NP Loan as of September 30, 2014 and December 31, 2013, respectively. Approximately $43,000 is included in accrued interest receivable – related parties associated with the UDF NP Loan as of September 30, 2014. There was no balance in accrued interest receivable – related parties associated with the UDF NP Loan as of December 31, 2013. |
|
| UDF LOF Note |
|
| In August 2008, we originated a secured revolving line-of-credit to UDF LOF in the principal amount of up to $25.0 million, pursuant to a Secured Line of Credit Promissory Note (the “UDF LOF Note”). The general partner of UDF LOF is a wholly-owned subsidiary of our general partner, and our general partner serves as the asset manager for UDF LOF. The UDF LOF Note, which bore interest at a base rate equal to 15% per annum, was secured by a lien of all of UDF LOF’s existing and future acquired assets. In August 2011, we amended the UDF LOF Note to reduce the commitment amount to $10.0 million. In August 2013, the note was amended to further extend the maturity date to August 20, 2014. In determining whether to modify this loan, we evaluated the economic conditions, the estimated value and performance of the underlying collateral, the guarantor, adverse situations that may affect the borrower’s ability to pay or the value of the collateral and other relevant factors. In January 2010, the balance of the UDF LOF Note was paid in full, although UDF LOF still had the ability to draw on the UDF LOF Note until it matured. The UDF LOF Note matured in August 2014 and was not renewed. In connection with this note, UDF LOF agreed to pay us commitment fees equal to 3% of each advance on the note, or approximately $587,000. We did not recognize any commitment fee income or interest income – related parties related to the UDF LOF Note for the three or nine months ended September 30, 2014 or 2013. There was no balance in notes receivable – related parties or accrued interest receivable – related parties associated with the UDF LOF Note as of September 30, 2014 or December 31, 2013. |
|
| BTC Note |
|
| In August 2008, we originated a secured promissory note with Buffington Texas Classic Homes, Ltd., a Texas limited partnership (“Buffington Classic”), in the principal amount of $2.0 million (the “BTC Note”). Our general partner had a minority partner interest in Buffington Classic. The secured note, which bore interest at 14% per annum, was secured by a first lien on finished lot inventory that was owned and controlled by Buffington Classic. Pursuant to an Agreement and Plan of Merger dated November 30, 2009, Buffington Capital Homes, Ltd., a Texas limited partnership (“Buffington Capital”), merged into Buffington Texas Classic Homes, LLC (“BTC LLC”), which is ultimately owned and controlled by BHG. Our general partner has a minority limited partnership interest in BHG. As a result of the merger and pursuant to the Agreement and First Amendment to Loan Agreement dated December 8, 2009, BTC LLC succeeded to all the rights, responsibilities and obligations of Buffington Classic under the BTC Note. In determining whether to modify this loan, we evaluated the economic conditions, the estimated value and performance of the underlying collateral, the guarantor, adverse situations that may affect the borrower’s ability to pay or the value of the collateral and other relevant factors. BTC LLC’s payment and performance of the BTC Note was guaranteed by Buffington Land, Ltd., a Texas limited partnership, and, pursuant to the Extension Agreement and Fifth Amendment to Loan Agreement dated August 21, 2013, matured on August 21, 2014. The BTC Note was paid in full in August 2014 and not renewed. We did not recognize any interest income – related parties related to the BTC Note for the three or nine months ended September 30, 2014 or 2013. There was no balance in notes receivable – related parties or accrued interest receivable – related parties associated with the BTC Note as of September 30, 2014 or December 31, 2013. |
|
| HTC Loan |
|
| Effective December 2008, we modified a secured promissory note evidencing a loan (the “HTC Loan”) in the principal amount of approximately $8.1 million to UDF I that we originated in December 2006 in the principal amount of approximately $6.9 million. Our general partner serves as the asset manager for UDF I. UDF I’s obligations under the HTC Loan were secured by a first lien deed of trust filed on 190 entitled single-family home lots located in Thornton, Colorado. The HTC Loan bore interest at a base rate equal to 12% per annum and interest payments were due monthly. Effective September 30, 2011, the HTC Loan was increased to a maximum of $12.8 million, pursuant to a second secured promissory note in the principal amount of $4.7 million. The second secured promissory note bore the same interest rate and was secured by the same collateral as the original promissory note. The HTC Loan had an initial maturity date of December 31, 2011, but was extended to September 30, 2012 pursuant to a fourth amendment to secured promissory note effective as of September 30, 2011. Effective September 30, 2012, the principal amount available under the HTC Loan was increased to a maximum of $15.6 million and the maturity date was extended to September 30, 2015, pursuant to a fifth amendment to secured promissory note. In determining whether to modify this loan, we evaluated the economic conditions, the estimated value and performance of the underlying collateral, the guarantor, adverse situations that may affect the borrower’s ability to pay or the value of the collateral and other relevant factors. Effective October 1, 2013, UDF I assigned all rights, title and interest in a promissory note payable by an unrelated party to the Partnership in exchange for cancellation of the HTC Loan. We did not recognize any interest income – related parties related to the HTC Loan for the three months ended September 30, 2014. For the three months ended September 30, 2013, we recognized approximately $378,000 of interest income – related parties related to the HTC Loan. We did not recognize any interest income – related parties related to the HTC Loan for the nine months ended September 30, 2014. For the nine months ended September 30, 2013 we recognized approximately $1.2 million of interest income – related parties related to the HTC Loan. There was no balance in notes receivable – related parties or accrued interest receivable – related parties associated with the HTC Loan as of September 30, 2014 or December 31, 2013. |
|
| Ash Creek Note |
|
| In April 2011, we originated a promissory note to UDF Ash Creek, L.P. (the “Ash Creek Note”), a Delaware limited partnership and wholly-owned subsidiary of UDF I, in the principal amount of $50,000. Our general partner serves as the asset manager for UDF I. The Ash Creek Note, which bears interest at a base rate equal to 15% per annum, was originally payable on December 5, 2011. Effective December 5, 2011, we entered into an extension agreement with the borrower pursuant to which the maturity date of the Ash Creek Note was extended to December 21, 2012. In December 2012, we amended the Ash Creek Note to increase the commitment amount to $65,000 and extend the maturity date from December 21, 2012 to December 21, 2013. Effective December 21, 2013, we entered into an extension agreement with the borrower pursuant to which the maturity date of the Ash Creek Note was extended to December 21, 2014. The Ash Creek Note is secured by a second lien deed of trust. Effective November 3, 2014, the Ash Creek Note was subsequently increased to $204,000. See Note M, “Subsequent Events” for further discussion. In determining whether to modify this loan, we evaluated the economic conditions, the estimated value and performance of the underlying collateral, the guarantor, adverse situations that may affect the borrower’s ability to pay or the value of the collateral and other relevant factors. For each of the three months ended September 30, 2014 and 2013, we recognized approximately $3,000 of interest income – related parties related to the Ash Creek Note. For the nine months ended September 30, 2014 and 2013, we recognized approximately $8,000 and $7,000, respectively, of interest income – related parties related to the Ash Creek Note. Approximately $76,000 and $67,000 is included in notes receivable – related parties as of September 30, 2014 and December 31, 2013, respectively, related to the Ash Creek Note. Approximately $6,000 and $7,000 is included in accrued interest receivable – related parties associated with the Ash Creek Note as of September 30, 2014 and December 31, 2013, respectively. |
| | | | | | | | | | | | | | |
|
| Participation Interest – Related Party |
|
| In September 2008, we entered into an Economic Interest Participation Agreement with UMT pursuant to which we purchased (i) an economic interest in the UMT Loan and (ii) a purchase option to acquire a full ownership participation interest in the UMT Loan (the “Option”). Our general partner serves as the asset manager for UDF I. An affiliate of our general partner serves as the advisor to UMT. As of December 31, 2010, the UMT Loan was a $60.0 million revolving line-of-credit facility evidenced by a Third Amended and Restated Secured Line of Credit Promissory Note dated as of August 17, 2009, as extended to December 31, 2010 by an amendment effective December 31, 2009. Effective December 31, 2010, the UMT Loan was subsequently increased to $75.0 million and the maturity date was extended to December 31, 2011 as evidenced by a Second Amendment to Third Amended and Restated Secured Line of Credit Promissory Note dated as of December 31, 2010. Effective December 31, 2011, the UMT Loan was amended and the maturity date was extended to December 31, 2012 as evidenced by a Third Amendment to Third Amended and Restated Secured Line of Credit Promissory Note dated as of December 31, 2011. Effective December 31, 2012, the UMT Loan was subsequently increased to $82.0 million and the maturity date was extended to December 31, 2013 as evidenced by a Fourth Amendment and Joinder Agreement to Third Amended and Restated Secured Line of Credit Promissory Note dated as of December 31, 2012. Effective October 1, 2013, the maturity date of the UMT Loan was further extended to December 31, 2014 and the interest rate was reduced from 14% to 9.25% per annum as evidenced by a Fifth Amendment to Third Amended and Restated Secured Line of Credit Promissory Note with UMT (as amended, the “UMT Note”). In determining whether to modify this loan, we evaluated the economic conditions, the estimated value and performance of the underlying collateral, the guarantor, adverse situations that may affect the borrower’s ability to pay or the value of the collateral and other relevant factors. The UMT Loan is secured by a security interest in the assets of UDF I including UDF I’s land development loans and equity investments pursuant to the First Amended and Restated Security Agreement dated as of September 30, 2004, executed by UDF I in favor of UMT (the “Security Agreement”). |
|
| Pursuant to the Economic Interest Participation Agreement, each time UDF I requests an advance of principal under the UMT Note, we will fund the required amount to UMT for application to its funding obligation to UDF I under the UMT Loan, and our economic interest in the UMT Loan will increase proportionately. Our economic interest in the UMT Loan gives us the right to receive payment from UMT of principal and accrued interest relating to amounts funded by us to UMT that are applied towards UMT’s funding obligations to UDF I under the UMT Loan. We may abate our funding obligations under the Economic Interest Participation Agreement at any time for a period of up to twelve months by giving UMT notice of the abatement. |
|
| The Option gives us the right to convert our economic interest into a full ownership participation interest in the UMT Loan at any time by giving written notice to UMT and paying an exercise price of $100. The participation interest includes all rights incidental to ownership of the UMT Note and the Security Agreement, including participation in the management and control of the UMT Loan. UMT will continue to manage and control the UMT Loan while we own an economic interest in the UMT Loan. If we exercise our Option and acquire a participation interest in the UMT Loan, UMT will serve as the loan administrator but both UMT and we will participate in the control and management of the UMT Loan. The purpose of the UMT Loan is to finance UDF I’s investments in real estate development projects. UDF I may use the UMT Loan proceeds to finance indebtedness associated with the acquisition of any assets and to seek income that qualifies under the Real Estate Investment Trust provisions of the Internal Revenue Code of 1986, as amended, to the extent such indebtedness, including indebtedness financed by funds advanced under the UMT Loan and indebtedness financed by funds advanced from any other source, including senior debt, is no less than 68% of the appraised value of all subordinate loans and equity interests for land development and/or land acquisition owned by UDF I and 75% for first lien secured loans for land development and/or acquisitions owned by UDF I. For the three months ended September 30, 2014 and 2013, we recognized approximately $1.7 million and $2.5 million, respectively, of interest income – related parties related to this Economic Interest Participation Agreement. For the nine months ended September 30, 2014 and 2013, we recognized approximately $4.9 million and $7.7 million, respectively, of interest income – related parties related to this Economic Interest Participation Agreement. Approximately $212,000 and $1.0 million is included in accrued interest receivable – related parties associated with this Economic Interest Participation Agreement as of September 30, 2014 and December 31, 2013. |
|
| As of September 30, 2014 and December 31, 2013, approximately $76.1 million and $70.8 million related to the Economic Interest Participation Agreement is included in participation interest – related party, respectively. |
|
| Loan Participations Sold to Related Parties |
|
| From inception through September 30, 2014, we have entered into 10 loan participation agreements with related parties whereby a related party has purchased a participation interest in a mortgage investment that we have originated. As of September 30, 2014, 5 of these agreements remain outstanding. |
|
| Our related parties participate in these mortgage investments by funding our lending obligations up to a maximum amount for each participation. Such participations entitle our related parties to receive payments of principal up to the amounts they have funded and interest from our borrower on the amounts they have funded, and to share in the proceeds of the collateral for the loan, including the land and related improvements to residential property owned by the borrowers and/or the ownership interests of the borrower that secure the original mortgage investment. The income earned by our related parties and the amounts our borrowers owe to our related parties for principal and interest earned with respect to these participation agreements are not reflected in our financial statements. |
|
| BTC Note |
|
| In August 2008, we originated the $2.0 million BTC Note with Buffington Classic. Effective March 2010, we entered into a Participation Agreement (“BTC Participation Agreement”) with UDF IV, pursuant to which UDF IV purchased a participation interest in the BTC Note. Our general partner serves as the asset manager of UDF IV. Pursuant to the BTC Participation Agreement, UDF IV participated in the BTC Note by funding our lending obligations under the BTC Note. The BTC Participation Agreement gave UDF IV the right to receive repayment of all principal and accrued interest relating to amounts funded by them under the BTC Participation Agreement. UDF IV’s participation interest was repaid as Buffington Classic repays the BTC Note. For each loan originated, Buffington Classic was required to pay interest monthly and to repay the principal advanced no later than 12 months following the origination of the loan. The BTC Note, as amended, matured on August 21, 2014. |
|
| We were required to purchase back from UDF IV the participation interest in the BTC Note (1) upon a foreclosure of our assets by our lenders, (2) upon the maturity of the BTC Note, or (3) at any time upon 30 days prior written notice from UDF IV. In such event, the purchase price paid to UDF IV was equal to the outstanding principal amount of the BTC Note on the date of termination, together with all accrued interest due thereon, plus any other amounts due to UDF IV under the BTC Participation Agreement. |
|
| On April 9, 2010, we entered into an Agent – Participant Agreement with UDF IV (the “Agent Agreement”). In accordance with the Agent Agreement, we continued to manage and control the BTC Note and UDF IV appointed us as its agent to act on its behalf with respect to all aspects of the BTC Note, provided that, pursuant to the Agent Agreement, UDF IV retained approval rights in connection with any material decisions pertaining to the administration and services of the loan and, with respect to any material modification to the loan and in the event that the loan becomes non-performing, UDF IV had effective control over the remedies relating to the enforcement of the loan, including ultimate control of the foreclosure process. The BTC Note and BTC Participation were paid in full in August 2014. |
|
| As of September 30, 2014 and December 31, 2013, we did not have an outstanding balance in notes receivable – related parties or accrued interest receivable – related parties associated with the BTC Note. We did not recognize any interest income associated with the BTC Note for the three or nine months ended September 30, 2014 or 2013. As of September 30, 2014 we did not have a participation interest associated with the BTC Participation agreement. As of December 31, 2013, UDF IV had a participation interest associated with the BTC Participation Agreement of approximately $280,000. The UDF IV participation interest is not included on our balance sheet. |
|
| TR II Finished Lot Note |
|
| In August 2009, we originated a $3.4 million secured promissory note (the “TR II Finished Lot Note”) with CTMGT Travis Ranch II, LLC, an unaffiliated Texas limited liability company. The TR II Finished Lot Note was originally secured by a subordinate, second lien deed of trust recorded against finished residential lots in the Travis Ranch residential subdivision located in Kaufman County, Texas. The TR II Finished Lot Note is guaranteed by the limited liability company owners of the borrower and by the principal of the borrower. The interest rate under the TR II Finished Lot Note is 15%. The borrower obtained a senior loan secured by a first lien deed of trust on the finished lots, which was paid in full in the first quarter of 2013. As a result, our deed of trust became a first lien. For so long as the senior loan was outstanding, proceeds from the sale of the residential lots securing the TR II Finished Lot Note were paid to the senior lender and were applied to reduce the outstanding balance of the senior loan. Following the payment of the senior lien in full, the proceeds from the sale of the residential lots securing the TR II Finished Lot Note are required to be used to repay the TR II Finished Lot Note. The TR II Finished Lot Note was due and payable in full on August 28, 2012. Pursuant to a loan modification agreement effective August 28, 2012, the maturity date on the TR II Finished Lot Note was extended to January 28, 2013. The TR II Finished Lot Note was increased to $3.8 million pursuant to a Borrower’s Certificate effective as of December 31, 2012. Pursuant to a second loan modification agreement effective January 28, 2013, the maturity date on the TR II Finished Lot Note was extended to January 28, 2014. Pursuant to a third loan modification agreement effective January 28, 2014, the maturity date on the TR II Finished Lot Note was further extended to January 28, 2015. In determining whether to modify this loan, we evaluated the economic conditions, the estimated value and performance of the underlying collateral, the guarantor, adverse situations that may affect the borrower’s ability to pay or the value of the collateral and other relevant factors. |
|
| Effective June 2010, we entered into a loan participation agreement with UDF IV pursuant to which UDF IV purchased a participation interest (the “TR II Finished Lot Participation”) in the TR II Finished Lot Note. Our general partner serves as the asset manager of UDF IV. Pursuant to the TR II Finished Lot Participation, UDF IV is entitled to receive repayment of its participation in the outstanding principal amount of the TR II Finished Lot Note, plus accrued interest thereon, over time as the borrower repays the loan. |
|
| As of September 30, 2014 and December 31, 2013, we did not have an outstanding balance in notes receivable or accrued interest receivable associated with the TR II Finished Lot Note. We did not recognize any interest income associated with the TR II Finished Lot Note for the three or nine months ended September 30, 2014 or 2013. As of September 30, 2014 and December 31, 2013, UDF IV had a participation interest associated with the TR II Finished Lot Participation of approximately $671,000 and $3.3 million, respectively. The UDF IV participation interest is not included on our balance sheet. |
|
| TR Paper Lot Note |
|
| In September 2009, we originated an $8.1 million secured promissory note (the “TR Paper Lot Note”) with CTMGT Travis Ranch, LLC, an unaffiliated Texas limited liability company. The borrower owns paper lots in the Travis Ranch residential subdivision of Kaufman County, Texas. A “paper” lot is a residential lot shown on a plat that has been accepted by the city or county, but which is currently undeveloped or under development. The TR Paper Lot Note was initially secured by a pledge of the equity interests in the borrower instead of a real property lien, effectively subordinating the TR Paper Lot Note to all real property liens. The TR Paper Lot Note is guaranteed by the limited liability company owners of the borrower and by the principal of the borrower. The interest rate under the TR Paper Lot Note is 15%. The borrower has obtained a senior loan secured by a first lien deed of trust on the paper lots. For so long as the senior loan is outstanding, proceeds from the sale of the paper lots will be paid to the senior lender and will be applied to reduce the outstanding balance of the senior loan. After the senior lien is paid in full, the proceeds from the sale of the paper lots are required to be used to repay the TR Paper Lot Note. The TR Paper Lot Note was due and payable in full on September 24, 2012. Pursuant to a loan modification agreement effective September 24, 2012, the maturity date on the TR Paper Lot Note was extended to January 28, 2013. The TR Paper Lot Note was increased to $11.0 million pursuant to a Borrower’s Confirmation Certificate effective as of December 31, 2012. Pursuant to a second loan modification agreement effective January 28, 2013, the maturity date on the TR Paper Lot Note was extended to January 28, 2014. Pursuant to a third loan modification agreement effective January 28, 2014, the maturity date on the TR Paper Lot Note was further extended to January 28, 2015. In determining whether to modify this loan, we evaluated the economic conditions, the estimated value and performance of the underlying collateral, the guarantor, adverse situations that may affect the borrower’s ability to pay or the value of the collateral and other relevant factors. |
|
| Effective June 2010, we entered into a loan participation agreement with UDF IV pursuant to which UDF IV purchased a participation interest (the “TR Paper Lot Participation”) in the TR Paper Lot Note. Our general partner serves as the asset manager of UDF IV. Pursuant to the TR Paper Lot Participation, UDF IV is entitled to receive repayment of its participation in the outstanding principal amount of the TR Paper Lot Note, plus its proportionate share of accrued interest thereon, over time as the borrower repays the TR Paper Lot Note. |
|
| As of September 30, 2014 and December 31, 2013, we did not have an outstanding balance in notes receivable or accrued interest receivable associated with the TR Paper Lot Note. We did not recognize any interest income associated with the TR Paper Lot Note for the three or nine months ended September 30, 2014 and 2013. As of September 30, 2014 and December 31, 2013, UDF IV had a participation interest associated with the TR Paper Lot Participation of approximately $14.8 million and $12.6 million, respectively. The UDF IV participation interest is not included on our balance sheet. |
|
| CTMGT Note |
|
| In December 2007, we originated a $25.0 million secured promissory note (the “CTMGT Note”) with CTMGT, LLC, an unaffiliated Texas limited liability company and its subsidiaries, who are co-borrowers of the CTMGT Note. The CTMGT Note was subsequently increased to $50.0 million pursuant to an amendment entered into in July 2008, and to $64.5 million pursuant to an amendment entered into in November 2011. The CTMGT Note is a co-investment loan secured by multiple investments. These investments are cross-collateralized and are secured by collateral-sharing arrangements in second liens covering finished lots and entitled land, pledges of the ownership interests in the borrowing entities, and guaranties. The collateral-sharing arrangements with UDF I and our borrowers allocate the proceeds of the co-investment collateral between us and our affiliate. Under these collateral-sharing arrangements for the CTMGT Note, we are entitled to receive 75% of collateral proceeds. In the event of a borrower’s bankruptcy, we are entitled to receive 100% of the collateral proceeds after payment of the senior lenders, ahead of payment to UDF I. The CTMGT collateral is located in multiple counties in the greater Dallas-Fort Worth area and surrounding counties. The interest rate on the CTMGT Note is 16.25%. Pursuant to the amendment entered into in November 2011, the maturity date of the CTMGT Note was extended to July 1, 2012. Pursuant to a second amendment entered into in July 2012, the maturity date of the CTMGT Note was extended to July 1, 2013. Effective July 1, 2013, we entered into a Third Extension and Modification Agreement with CTMGT, LLC, pursuant to which the maturity date of the CTMGT Note was further extended to July 1, 2014. Effective July 1, 2014, we entered into a Fourth Loan Modification Agreement with CTMGT, LLC, pursuant to which the maturity date of the CTMGT Note was further extended to July 1, 2015. In determining whether to modify this loan, we evaluated the economic conditions, the estimated value and performance of the underlying collateral, the guarantor, adverse situations that may affect the borrower’s ability to pay or the value of the collateral and other relevant factors. |
|
| Effective July 2011, we entered into a loan participation agreement with UDF LOF pursuant to which UDF LOF purchased a participation interest (the “CTMGT Participation”) in the CTMGT Note. The general partner of UDF LOF is a wholly-owned subsidiary of our general partner and our general partner serves as the asset manager for UDF LOF. Pursuant to the CTMGT Participation, UDF LOF is entitled to receive repayment of its participation in the outstanding principal amount of the CTMGT Note, plus its proportionate share of accrued interest thereon, over time as the borrower repays the note. |
|
| As of September 30, 2014 and December 31, 2013, we had an outstanding balance in notes receivable of approximately $44.0 million and $45.7 million, respectively, associated with the CTMGT Note. As of September 30, 2014, we had an outstanding balance in accrued interest receivable of approximately $4.3 million associated with the CTMGT Note. As of December 31, 2013, we did not have an outstanding balance in accrued interest receivable associated with the CTMGT Note. For each of the three months ended September 30, 2014 and 2013, we recognized approximately $1.8 million of interest income associated with the CTMGT Note. For the nine months ended September 30, 2014 and 2013, we recognized approximately $5.4 million and $5.2 million, respectively, of interest income associated with the CTMGT Note. As of September 30, 2014 and December 31, 2013, UDF LOF had a participation interest associated with the CTMGT Participation of approximately $14.2 million and $12.7 million, respectively. The UDF LOF participation interest is not included on our balance sheet. |
| | | | | | | | | | | | | | |
|
| Northpointe LLC Note |
|
| In December 2008, we originated a $4.2 million secured promissory note (the “Northpointe LLC Note”) with Northpointe LLC. The Northpointe LLC Note is initially collateralized by a first lien deed of trust on 303 finished lots in Texas and assignments of distributions from Northpointe LLC. The interest rate under the Northpointe LLC Note is 12%. Pursuant to the Second Loan Modification Agreement entered into in April 2012, the maturity date on the Northpointe LLC Note was December 4, 2012. Pursuant to a Third Loan Modification Agreement entered into in December 2012, the maturity date of the Northpointe LLC Note was extended to June 4, 2013. Pursuant to a Fourth Loan Modification Agreement entered into in June 2013, the maturity date of the Northpointe LLC Note was extended to June 4, 2014. Pursuant to the Fifth Loan Modification Agreement entered into in June 2014, the maturity date of the Northpointe LLC Note was further extended to June 4, 2015. In determining whether to modify the Northpointe LLC Note, we evaluated the economic conditions, the estimated value and performance of the underlying collateral, the guarantor, adverse situations that may affect the borrower’s ability to pay or the value of the collateral and other relevant factors. |
|
| Effective June 2012, we entered into a loan participation agreement with UDF IV pursuant to which UDF IV purchased a participation interest (the “Northpointe LLC Participation”) in the Northpointe LLC Note. Our general partner serves as the asset manager of UDF IV. Pursuant to the Northpointe LLC Participation, UDF IV is entitled to receive repayment of its participation in the outstanding principal amount of the Northpointe LLC Note, plus its proportionate share of accrued interest thereon, over time as the borrower repays the UDF Northpointe Note. |
|
| As of September 30, 2014 and December 31, 2013, we had an outstanding balance in notes receivable of approximately $41,000 and $57,000 associated with the Northpointe LLC Note. As of September 30, 2014 we had an outstanding balance in accrued interest receivable of $2,000 associated with the Northpointe LLC Note. As of December 31, 2013, we did not have an outstanding balance in accrued interest receivable associated with the Northpointe LLC Note. For the three months ended September 30, 2014 and 2013, we recognized approximately $1,000 and $100, respectively, of interest income associated with the Northpointe LLC Note. For the nine months ended September 30, 2014 and 2013, we recognized approximately $4,000 and $52,000, respectively, of interest income associated with the Northpointe LLC Note. As of September 30, 2014 and December 31, 2013, UDF IV had a participation interest associated with the Northpointe LLC Participation of approximately $1.1 million and $1.6 million, respectively. The UDF IV participation interest is not included on our balance sheet. |
|
| UDF NP Note |
|
| In December 2007, we originated the $6.0 million UDF NP Loan with Northpointe LLC. In December 2008, Northpointe LLC was purchased by an unrelated third party which assumed the UDF NP Loan. In May 2009, Northpointe LLC assigned its obligations associated with the UDF NP Loan and its interests in the collateral by special warranty deed to Northpointe II, a subsidiary of UDF I. Concurrent with this assignment, Northpointe LLC entered into a contract for deed with Northpointe II whereby Northpointe LLC agreed to make payments to Northpointe II for all debt service payments in consideration for Northpointe II transferring ownership and possession of the collateral back to Northpointe LLC. The secured promissory note, which bears an interest rate of 12% per annum, is initially collateralized by a second lien deed of trust on 251 finished lots and 110 acres of land in Texas and was payable on December 28, 2010. The maturity date was extended to December 28, 2013 pursuant to a modification agreement effective as of September 30, 2011, which also increased the UDF NP Loan to a maximum of $15.0 million, pursuant to a second secured promissory note in the principal amount of $9.0 million. In December 2013, the note was amended to further extend the maturity date to December 28, 2014. In determining whether to modify this loan, we evaluated the economic conditions, the estimated value and performance of the underlying collateral, the guarantor, adverse situations that may affect the borrower’s ability to pay or the value of the collateral and other relevant factors. The second secured promissory note bears the same interest rate and is secured by the same collateral as the original promissory note. |
|
| Effective May 2013, we entered into a loan participation agreement with UDF IV pursuant to which UDF IV purchased a participation interest (the “Northpointe II LP Participation”) in the UDF NP Loan. Our general partner serves as the asset manager of UDF IV. Pursuant to the Northpointe II LP Participation, UDF IV is entitled to receive repayment of its participation in the outstanding principal amount of the UDF NP Loan, plus its proportionate share of accrued interest thereon, payable first in priority ahead of the Partnership, over time as the borrower repays the UDF NP Loan. |
|
| As of September 30, 2014 and December 31, 2013, we had an outstanding balance in notes receivable of approximately $3.4 million and $9.1 million, respectively, associated with the UDF NP Loan. As of September 30, 2014, we had an outstanding balance in accrued interest receivable of approximately $43,000 associated with the UDF NP Loan. As of December 31, 2013, we did not have an outstanding balance in accrued interest receivable associated with the UDF NP Loan. For the three months ended September 30, 2014 and 2013, we recognized approximately $119,000 and $344,000, respectively, of interest income associated with the UDF NP Loan. For the nine months ended September 30, 2014 and 2013, we recognized approximately $553,000 and $1.1 million, respectively, of interest income associated with the UDF NP Loan. As of September 30, 2014 and December 31, 2013, UDF IV had a participation interest associated with the Northpointe II LP Participation of approximately $7.0 million and $3.0 million, respectively. The UDF IV participation interest is not included on our balance sheet. |
|
| Credit Enhancement Fees – Related Parties |
|
| From time to time, the Partnership enters into guarantees of affiliates’ borrowings and provides credit enhancements for the benefit of senior lenders in connection with the Partnership’s affiliates and investments in partnerships (collectively referred to as “guarantees”). In connection with related party guarantees, as required by the Partnership Agreement and the NASAA Mortgage Program Guidelines, the Partnership obtained an opinion from Jackson Claborn, Inc., an independent advisor, stating that these guarantees are fair and at least as reasonable to the Partnership as a guarantee to an unaffiliated borrower in similar circumstances. |
|
| The following table represents the approximate amount included in mortgage and transaction service revenues – related parties income for the periods indicated associated with fees paid to the Partnership on related party guarantees, as discussed in Note I: |
|
| | For the Three Months Ended September 30, | | For the Nine Months Ended September 30, | | |
| Guarantee | | 2014 | | 2013 | | 2014 | | 2013 | | |
| Lending Credit Enhancement | | $ | - | | $ | 11,000 | | $ | - | | $ | 33,000 | | |
| REO PC Credit Enhancement | | | 3,000 | | | - | | | 10,000 | | | - | | |
| UMT HF TCB Guaranty | | | 13,000 | | | 12,000 | | | 37,000 | | | 33,000 | | |
| UDF IV HF Guaranty | | | 42,000 | | | 5,500 | | | 97,000 | | | 37,000 | | |
| UMT 15th Street Guaranty | | | 1,000 | | | 1,500 | | | 4,000 | | | 5,500 | | |
| UDF IV Acquisitions Guaranty | | | 47,000 | | | - | | | 119,000 | | | 33,000 | | |
| UDF IV Finance II Guaranty | | | 34,000 | | | - | | | 53,000 | | | 28,000 | | |
| UMT HF III Guaranty | | | 6,000 | | | 5,000 | | | 11,500 | | | 18,000 | | |
| UMT HF II Green Bank Guaranty | | | 2,000 | | | 1,000 | | | 5,500 | | | 2,500 | | |
| BHG Guaranty | | | - | | | 3,000 | | | - | | | 4,000 | | |
| UDF IV Finance VI Guaranty | | | 26,000 | | | - | | | 48,000 | | | - | | |
| Total | | $ | 174,000 | | $ | 39,000 | | $ | 385,000 | | $ | 194,000 | | |
|
| As of September 30, 2014 and December 31, 2013, approximately $396,000 and $297,000, respectively, is included in accounts receivable – related parties associated with fees paid to the Partnership on related party guarantees. |
| | | | | | | | | | | | | | |
