FAIR VALUE OF FINANCIAL INSTRUMENTS

6 Months Ended

Jun. 30, 2024

Fair Value Disclosures [Abstract]

FAIR VALUE OF FINANCIAL INSTRUMENTS

NOTE 17 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company had no financial instruments carried at fair value on a recurring basis at either June 30, 2024 and December 31, 2023.

The Company measures the fair value of certain assets on a non-recurring basis when events or changes in circumstances indicate that the carrying value of the assets may be impaired. Adjustments to fair value generally result from the application of lower of amortized cost or fair value accounting for assets held for sale or write-downs of an asset's value due to impairment.

During the six months ended June 30, 2024, the Company received a deed-in-lieu of foreclosure on a property that formerly collateralized a CRE whole loan. Upon receipt, the property was immediately contributed to a joint venture, and the Company's investment in that joint venture is included in investments in unconsolidated entities on the consolidated balance sheet. The property was appraised and determined to have a fair value of $20.3 million at the time of acquisition. Fair value was determined using a discounted cash flow valuation technique, with the significant unobservable inputs being an internal rate of return of 8.50% and a terminal cap rate of 7.00%. The valuation of this property held for sale fell under Level 3 of the fair value hierarchy.

The Company is required to disclose the fair value of financial instruments for which it is practicable to estimate that value. The fair values of the Company’s short-term financial instruments such as cash and cash equivalents, restricted cash, accrued interest receivable, principal paydowns receivable, accounts payable and other liabilities, accrued interest payable and distributions payable approximate their carrying values on the consolidated balance sheets. The fair values of the Company’s other financial assets and liabilities are estimated as follows:

CRE whole loans. The fair values of the Company’s loans held for investment are measured by discounting the expected future cash flows using the current interest rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. Par values of loans with variable interest rates are expected to approximate fair value unless evidence of credit deterioration exists, in which case the fair value approximates the par value less the loan’s allowance estimated through individual evaluation. The Company’s floating-rate CRE loans had interest rates from 7.88% to 13.94% and 7.88% to 13.96% at June 30, 2024 and December 31, 2023, respectively.

CRE mezzanine loan. Historically, this was measured by discounting the expected remaining cash flows using the current interest rates at which similar instruments would be originated for the same remaining maturity. The Company's mezzanine loan was fully reserved and had no carrying or fair value at June 30, 2024 or December 31, 2023.

Loan receivable- related party. This is estimated using a discounted cash flow model.

Senior notes in CRE securitizations, 5.75% Senior Unsecured Notes and junior subordinated notes. These are estimated using a discounted cash flow model with implied yields based on trades for similar securities.

Senior secured financing facility, warehouse financing facilities and mortgages payable. These are variable-rate debt instruments that are indexed to one-month Term SOFR that reset periodically and as a result, their carrying value approximates their fair value, excluding deferred debt issuance costs.

The fair values of the Company’s financial and non-financial assets that are not reported at fair value on the consolidated balance sheets are reported in the following table (in thousands):

			Fair Value Measurements
	Carrying Value		Fair Value(1)		Quoted Prices in Active Markets for Identical Assets of Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
At June 30, 2024:
Assets:
CRE whole loans	$	1,678,721	$	1,712,987	$	—	$	—	$	1,712,987
Loan receivable - related party		10,850		8,804		—		—		8,804
Liabilities:
Senior notes in CRE securitizations		1,093,953		1,074,687		—		—		1,074,687
Senior secured financing facility		60,539		63,099		—		—		63,099
Warehouse financing facilities		163,517		165,092		—		—		165,092
Mortgages payable		64,002		65,277		—		—		65,277
5.75% Senior Unsecured Notes		148,472		142,785		—		—		142,785
Junior subordinated notes		51,548		39,939		—		—		39,939
At December 31, 2023:
Assets:
CRE whole loans	$	1,828,336	$	1,858,265	$	—	$	—	$	1,858,265
Loan receivable - related party		10,975		8,598		—		—		8,598
Liabilities:
Senior notes in CRE securitizations		1,204,570		1,163,048		—		—		1,163,048
Senior secured financing facility		61,568		64,495		—		—		64,495
Warehouse financing facilities		168,588		170,861		—		—		170,861
Mortgages payable		41,786		43,779		—		—		43,779
5.75% Senior Unsecured Notes		148,140		138,795		—		—		138,795
Junior subordinated notes		51,548		38,406		—		—		38,406

(1)The fair values reflected in the table above represent management's best estimate of the fair value of the financial instruments and have no impact on the Company's performance or cash flows.