Finance Receivables

Assets representing rights to receive money on demand or at fixed or determinable dates are referred to as finance receivables. Our finance receivables portfolio consists of our Notes receivable and our Net investments in direct financing leases. Operating leases are not included in finance receivables as such amounts are not recognized as an asset in the consolidated financial statements.

Notes Receivable

Our Notes receivable at December 31, 2017 consist of a $28.0 million mezzanine tranche of 10-year commercial mortgage-backed securities on the Cipriani banquet halls in New York, New York (referred to as Cipriani) and a $38.5 million mezzanine loan collateralized by 27 retail stores in Minnesota, Wisconsin, and Iowa leased to Mills Fleet Farm Group LLC (referred to as Mills Fleet). We have and will continue to receive interest-only payments on each of these loans through maturity in July 2024 and October 2018, respectively.

During the three months ended March 31, 2018, we received partial repayments for the Mills Fleet mezzanine loan totaling $2.5 million. As a result, the balances for the receivables at March 31, 2018 were $28.0 million and $36.0 million for Cipriani and Mills Fleet, respectively.

Credit Quality of Finance Receivables

We generally seek investments in facilities that we believe are critical to a tenant’s business and have a low risk of tenant default. At both March 31, 2018 and December 31, 2017, we had no significant finance receivable balances that were past due and we had not established any allowances for credit losses. Additionally, there were no modifications of finance receivables during the three months ended March 31, 2018. We evaluate the credit quality of our finance receivables utilizing an internal five-point credit rating scale, with one representing the highest credit quality and five representing the lowest. The credit quality evaluation of our finance receivables is updated quarterly.

A summary of our finance receivables by internal credit quality rating is as follows (dollars in thousands):



	Number of Tenants/Obligors at		Carrying Value at
Internal Credit Quality Indicator	March 31, 2018	December 31, 2017	March 31, 2018		December 31, 2017
1	—	—	$	—	$	—
2	2	2	14,637		14,386
3	2	2	29,725		29,716
4	2	2	60,074		62,355
5	—	—	—		—
	0		$	104,436	$	106,457