FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2022

Fair value measurements are determined based on the assumptions that market participants would use in pricing an asset or liability. As a basis for considering market participant assumptions in fair value measurements, FASB ASC 820, Fair Value Measurement and Disclosures, establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity's own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are the unobservable inputs for the asset or liability, which are typically based on an entity's own assumption, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on input from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

The Company's investments in marketable securities are valued using Level 1 inputs as the securities are publicly traded on major stock exchanges.

The Company's investment in the CMBS Trust is valued using Level 2 inputs with the assistance of an independent valuation agent who may use broker-dealer quotations, reported trades and other observable market data. The independent valuation agent's discounted cash flow models for securities such as those issued by the CMBS Trust generally consider the attributes applicable to a particular class of the security (e.g., credit rating, seniority), current market data, estimated cash flows for each security and incorporate specific collateral performance, as applicable. The Company has elected to apply the measurement alternative under GAAP and measures both the financial assets and financial liabilities of the CMBS Trust it consolidates using the fair value of the financial liabilities, which it considers more observable than the fair value of the financial assets.

The following table details the Company’s assets and liabilities measured at fair value on a recurring basis.


	December 31, 2022
	Level 1		Level 2		Level 3		Total
Assets
Investment in marketable securities	$	26,987	$	—	$	—	$	26,987
Real estate loans held in consolidated CMBS Trust, at fair value	—		1,156,263		—		1,156,263
Total	$	26,987	$	1,156,263	$	—	$	1,183,250

Liabilities
Bonds payable held in consolidated CMBS Trust, at fair value	$	—	$	1,125,096	$	—	$	1,125,096

	December 31, 2021
Assets	Level 1		Level 2		Level 3		Total
Investment in marketable securities	$	36,825	$	—	$	—	$	36,825

The fair value of the Company's line of credit and mortgage loans payable is determined using Level 2 and Level 3 inputs and a discounted cash flow approach with an interest rate, property valuation and other assumptions that estimate current market conditions. The carrying amount of the Company's line of credit, exclusive of deferred financing costs, at December 31, 2022 and 2021 approximated its fair value of $84,800 and $82,300, respectively. The Company estimated the fair value of the Company's mortgage loans payable at $179,710 and $193,636 as of December 31, 2022 and 2021, respectively. If the valuation of the Company's properties as of December 31, 2022 were significantly lower, the market interest rate assumption would be higher (due to higher loan-to-value ratios) potentially resulting in a significantly lower estimated fair value for these liabilities.

The fair value of the Company's note to affiliate is determined using Level 2 and Level 3 inputs and a discounted cash flow approach with an interest rate and other assumptions that estimate current market conditions. The Company has estimated the fair value of its note to affiliate at approximately $4,380 and $4,350 as of December 31, 2022 and 2021, respectively. The estimated market interest rate is impacted by a number of factors. Material changes in those factors may cause a material change to the estimated market interest rate, thereby materially affecting the estimated fair value of the note to affiliate. The Company has estimated the fair value of the note to affiliate in the middle of the range of reasonably estimable values.

The following shows certain information about the estimated fair value and the unobservable inputs for the Company's debt obligations as of December 31, 2022 and 2021.


					Range
	Fair Value at December 31, 2022		Primary Valuation Techniques	Significant Unobservable Inputs	Minimum		Maximum		Weighted Average
Line of Credit	$	84,800	Discounted cash flow	Loan to value	51.8	%	51.9	%	51.9	%
				Market interest rate	5.96	%	5.96	%	5.96	%
Mortgage Loans Payable	179,710		Discounted cash flow	Loan to value	21.8	%	55.0	%	45.3	%
				Market interest rate	3.41	%	6.40	%	5.96	%
Note to Affiliate	4,380		Discounted cash flow	Market interest rate	6.50	%	6.50	%	6.50	%


					Range
	Fair Value at December 31, 2021		Primary Valuation Techniques	Significant Unobservable Inputs	Minimum		Maximum		Weighted Average
Line of Credit	$	82,300	Discounted cash flow	Loan to value	51.5	%	51.6	%	51.5	%
				Market interest rate	1.71	%	1.71	%	1.71	%
Mortgage Loans Payable	193,636		Discounted cash flow	Loan to value	30.1	%	57.8	%	46.3	%
				Market interest rate	2.50	%	4.05	%	3.20	%
Note to Affiliate	4,350		Discounted cash flow	Market interest rate	4.50	%	4.50	%	4.50	%

The Company's financial instruments, other than those referred to above, are generally short-term in nature and contain minimal credit risk. These instruments consist of cash and cash equivalents, accounts and other receivables and accounts payable. The carrying amounts of these assets and liabilities in the consolidated balance sheets approximate their fair value.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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