Accounts Receivable, Net

6 Months Ended

Jun. 30, 2020

Accounts Receivable, after Allowance for Credit Loss [Abstract]

Mortgage Notes and Other Notes Receivable

Mortgage notes and other notes receivable, including related accrued interest receivable, consist of loans originated by the Company and the related accrued and unpaid interest income as of the balance sheet date. Mortgage notes and other notes receivable are initially recorded at the amount advanced to the borrower less allowance for credit loss. Interest income is recognized using the effective interest method based on the stated interest rate over the estimated life of the note. Premiums and discounts are amortized or accreted into income over the estimated life of the note using the effective interest method.

The Company adopted Topic 326 effective January 1, 2020, which requires allowance for credit losses to be recorded to reflect that all mortgage notes and notes receivable have some inherent risk of loss regardless of credit quality, collateral, or other mitigating factors. While Topic 326 does not require any particular method for determining the reserves, it does specify that it should be based on relevant information about past events, including historical loss experience, current portfolio and market conditions, as well as reasonable and supportable forecasts for the term of each mortgage note or note receivable. The Company uses a forward looking commercial real estate forecasting tool to estimate its current expected credit losses (CECL) for each of its mortgage notes and notes receivable on a loan by loan basis. The CECL allowance required by Topic 326 is a valuation account that is deducted from the related mortgage note or note receivable.

Certain of the Company’s mortgage notes and notes receivable include commitments to fund incremental amounts to its borrowers. These future funding commitments are also subject to the CECL model. The allowance related to future funding is recorded as a liability and is included in Accounts payable and accrued liabilities in the accompanying consolidated balance sheet.

As permitted under Topic 326, the Company made an accounting policy election to not measure an allowance for credit losses for accrued interest receivables related to its mortgage notes and notes receivable. Accordingly, if accrued interest receivable is deemed to be uncollectible, the Company will record any necessary write-offs as a reversal of interest income. As of June 30, 2020, the Company believes that all accrued interest is collectible.

In the event the Company has a past due mortgage note or note receivable and foreclosure is probable, the Company measures expected credit losses based on the fair value of the collateral. The Company evaluates the collectability of both interest and principal for each of its mortgage notes and notes receivable on a quarterly basis to determine if foreclosure is probable. As of June 30, 2020, the Company does not have any mortgage notes receivable with past due principal balances.

Investment in Mortgage Notes and Notes Receivable

Effective January 1, 2020, the Company adopted Topic 326, which requires the Company to estimate and record credit losses for each of its mortgage notes and note receivable. The Company measures expected credit losses on its mortgage notes and notes receivable on an individual basis over the related contractual term as its financial instruments do not have similar risk characteristics. The Company has not experienced historical losses on its mortgage note portfolio; therefore, the Company uses a forward looking commercial real estate loss forecasting tool to estimate its expected credit losses. The loss forecasting tool is comprised of a probability of default model and a loss given default model

that utilizes the Company’s loan specific inputs as well as selected forward looking macroeconomic variables and mean loss rates. Based on certain inputs, such as origination year, balance, interest rate as well as collateral value and borrower operating income, the model produces life of loan expected losses on a loan by loan basis. As of June 30, 2020, the Company did not anticipate any prepayments therefore the contractual term of its mortgage notes was used for the calculation of the expected credit losses. The Company updates the model inputs at each reporting period to reflect, if applicable, any newly originated loans, changes to loan specific information on existing loans and current macroeconomic conditions.

During the six months ended June 30, 2020, the Company increased its expected credit losses by $4.7 million from its implementation estimate of $2.2 million. This increase was as a result of additional fundings as well as adjustments to current macroeconomic conditions resulting from the economic uncertainty and the rapidly changing environment surrounding the COVID-19 pandemic.

In response to the COVID-19 pandemic, the Company deferred interest payments for four borrowers. The deferrals require the borrower to pay the deferred interest in future periods. The Company assessed the deferrals and determined that the modifications did not result in troubled debt restructurings at June 30, 2020.

Investment in mortgage notes, including related accrued interest receivable, at June 30, 2020 and December 31, 2019 consists of the following (in thousands):



					Outstanding principal amount of mortgage		Carrying amount as of				Unfunded commitments
Description	Year of Origination	Interest Rate		Maturity Date	Outstanding principal amount of mortgage		June 30, 2020		December 31, 2019 (1)		June 30, 2020
Attraction property Powells Point, North Carolina	2019	7.75	%	6/30/2025	$	27,423	$	26,480	$	27,423	$	—
Fitness & wellness property Omaha, Nebraska	2017	7.85	%	1/3/2027	10,905		11,002		10,977		—
Fitness & wellness property Merriam, Kansas	2019	7.55	%	7/31/2029	8,384		8,515		5,985		707
Ski property Girdwood, Alaska	2019	8.25	%	12/31/2029	37,000		36,975		37,000		20,000
Fitness & wellness property Omaha, Nebraska	2016	7.85	%	6/30/2030	5,773		5,889		5,803		5,145
Experiential lodging property Nashville, Tennessee	2019	6.99	%	9/30/2031	71,223		68,311		70,396		—
Eat & play property Austin, Texas	2012	11.31	%	6/1/2033	11,488		11,814		11,582		—
Ski property West Dover and Wilmington, Vermont	2007	11.78	%	12/1/2034	51,050		51,023		51,050		—
Four ski properties Ohio and Pennsylvania	2007	10.75	%	12/1/2034	37,562		37,392		37,562		—
Ski property Chesterland, Ohio	2012	11.21	%	12/1/2034	4,550		4,367		4,550		—
Ski property Hunter, New York	2016	8.57	%	1/5/2036	21,000		20,999		21,000		—
Eat & play property Midvale, Utah	2015	10.25	%	5/31/2036	17,505		17,952		17,505		—
Eat & play property West Chester, Ohio	2015	9.75	%	8/1/2036	18,068		18,498		18,068		—
Private school property Mableton, Georgia	2017	9.02	%	4/30/2037	4,674		5,055		5,048		—
Fitness & wellness property Fort Collins, Colorado	2018	7.85	%	1/31/2038	10,292		10,235		10,360		—
Early childhood education center Lake Mary, Florida	2019	7.87	%	5/9/2039	4,200		4,304		4,258		—
Eat & play property Eugene, Oregon	2019	8.13	%	6/17/2039	14,700		14,799		14,800		—
Early childhood education center Lithia, Florida	2017	8.25	%	10/31/2039	3,959		4,058		4,024		—
					$	359,756	$	357,668	$	357,391	$	25,852

(1) Balances as of December 31, 2019 are prior to the adoption of ASC Topic 326.

Investment in notes receivable, including related accrued interest receivable, was $14.0 million at June 30, 2020 and December 31, 2019, and is included in Other assets in the accompanying consolidated balance sheets.

The following summarizes the activity within the allowance for credit losses related to mortgage notes, unfunded commitments and notes receivable for the six months ended June 30, 2020 (in thousands):



	Mortgage notes receivable		Unfunded commitments		Notes receivable		Total
Allowance for credit losses at January 1, 2020	$	2,000	$	114	$	49	$	2,163
Credit loss expense	4,422		73		181		4,676
Charge-offs	—		—		—		—
Recoveries	—		—		—		—
Allowance for credit losses	$	6,422	$	187	$	230	$	6,839

Accounts Receivable

The following table summarizes the carrying amounts of accounts receivable as of June 30, 2020 and December 31, 2019 (in thousands):



	June 30, 2020		December 31, 2019
Receivable from tenants	$	68,254	$	11,373
Receivable from non-tenants	816		2,103
Straight-line rent receivable	65,704		73,382
Total	$	134,774	$	86,858

During the six months ended June 30, 2020, the Company wrote-off straight-line receivables totaling $13.0 million, to straight-line rental revenue classified in rental revenue in the accompanying consolidated statements of (loss) income and comprehensive (loss) income. The $13.0 million straight-line write-offs were comprised of $5.0 million of straight-line accounts receivable and $8.0 million of sub-lessor ground lease straight-line accounts receivable.

As of June 30, 2020, receivable from tenants includes fixed rent payments of approximately $60.0 million that were deferred due to the COVID-19 pandemic and determined to be collectible. Additionally, approximately $41.0 million of amounts due from tenants were not booked as receivables as the full amounts were not deemed probable of collection as a result of COVID-19 pandemic. While deferments for this and future periods delay rent payments, these deferments do not release tenants from the obligation to pay the deferred amounts in the future. The repayment terms for these deferments vary by tenant and agreements with certain tenants are still being negotiated.