FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 30, 2025

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

The Company determines fair value based on quoted prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. GAAP guidance defines three levels of inputs that may be used to measure fair value:

Level 1 – Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.

Level 3 – Unobservable inputs reflect the entity’s own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.

The determination of where an asset or liability falls in the hierarchy requires significant judgment and considers factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs 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 evaluates its hierarchy disclosures each quarter and, depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter. Changes in the type of inputs may result in a reclassification for certain assets. The Company does not expect that changes in classifications between levels will be frequent.

Items Measured at Fair Value on a Recurring Basis

The following table presents information about the Company’s assets measured at fair value on a recurring basis as of June 30, 2025 and December 31, 2024, aggregated by the level in the fair value hierarchy within which those instruments fall (dollars in thousands):

	Level 1		Level 2		Level 3		Balance as of June 30, 2025
Assets:
Mortgage secured loans receivable	$	—	$	—	$	668,761	$	668,761
Mezzanine loans receivable	—		—		87,683		87,683
Financing receivable	—		—		97,330		97,330
Interest rate derivatives	—		546		—		546
Total assets	$	—	$	546	$	853,774	$	854,320
Liabilities:
Cash flow hedges	$	—	$	1,146	$	—	$	1,146
Total liabilities	$	—	$	1,146	$	—	$	1,146

	Level 1		Level 2		Level 3		Balance as of December 31, 2024
Assets:
Mortgage secured loans receivable	$	—	$	—	$	660,392	$	660,392
Mezzanine loans receivable	—		—		80,612		80,612
Financing receivable	—		—		96,004		96,004
Total	$	—	$	—	$	837,008	$	837,008

The following table details the Company’s assets measured at fair value on a recurring basis using Level 3 inputs (dollars in thousands):

	Investments in Real Estate Secured Loans		Investments in Mezzanine Loans		Investment in Financing Receivable
Balance as of December 31, 2024	$	660,392	$	80,612	$	96,004
Originations	15,100		6,389		—
Accrued interest, net	(75)		73		1,326
Unrealized gain, net	2,646		609		—
Payments	(9,302)		—		—
Balance as of June 30, 2025	$	668,761	$	87,683	$	97,330

Real estate secured and mezzanine loans receivable: The fair value of the secured and mezzanine loans receivables were estimated using an internal valuation model that considered the expected future cash flows of the investment, the underlying collateral value, market interest rates and other credit enhancements. As such, the Company classifies each instrument as Level 3 due to the significant unobservable inputs used in determining market interest rates for investments with similar terms. During the three and six months ended June 30, 2025, the Company recorded a net unrealized gain of $2.0 million and $3.3 million, respectively, on its secured and mezzanine loans receivable, to bring the interest rates in line with market rates. During the three and six months ended June 30, 2024, the Company recorded an unrealized loss of $2.4 million and $3.2 million, respectively, on the Company’s secured and mezzanine loans receivable due to rising interest rates, partially offset by unrealized gains of $0.5 million and $0.7 million, respectively, due to increases in expected cash flows on floating rate loans. Future changes in market interest rates or collateral value could materially impact the estimated discounted cash flows that are used to determine the fair value of the secured and mezzanine loans receivable. As of June 30, 2025 and December 31, 2024, the Company did not have any loans that were 90 days or more past due.

The following table shows the quantitative information about unobservable inputs related to the Level 3 fair value measurements comprising the investments in secured and mezzanine loans receivables as of June 30, 2025:

Type	Book Value as of June 30, 2025		Valuation Technique	Unobservable Inputs	Range
Mortgage secured loans receivable	$	668,761	Discounted cash flow	Discount Rate	8% - 14%
Mezzanine loans receivable	87,683		Discounted cash flow	Discount Rate	12% - 14%

Derivative instruments: The Company estimates the fair value of derivative instruments, including its interest rate caps and cash flow hedges, using the assistance of a third party using inputs that are observable in the market, which include forward yield curves and other relevant information. As of June 30, 2025, the Company had two interest rate caps with £100.0 million in notional value to mitigate the interest rate risk of the variable rate secured revolving credit facilities. Additionally, as of June 30, 2025, the Company had four foreign currency forward contracts with £31.0 million in notional value issued at a weighted average GBP-USD exchange rate of 1.34 that are designated as cash flow hedges.

In connection with the Acquisition, the Company assumed Care REIT’s outstanding interest rate derivatives that were not designated as a hedge in qualifying hedging relationships. During the three months ended June 30, 2025, the Company entered into cash flow hedges to hedge the foreign currency risk of intercompany loans denominated in GBP. The following table summarizes the terms and fair values of the Company’s derivative financial instruments as of June 30, 2025 (dollars in thousands):

Derivative	Notional Amount		Maturity or Settlement Date	Index	Strike Rate			Fair Value as of June 30, 2025
Interest rate cap	£	50,000	August 2025	GBP-SONIA	4.0		%	$	40
Interest rate cap	£	50,000	January 2026	GBP-SONIA	3.0		%	506
Cash flow hedge	£	7,826	September 2025	GBP-USD exchange rate	$	1.34		(293)
Cash flow hedge	£	7,826	December 2025	GBP-USD exchange rate	$	1.34		(290)
Cash flow hedge	£	7,656	March 2026	GBP-USD exchange rate	$	1.34		(281)
Cash flow hedge	£	7,741	June 2026	GBP-USD exchange rate	$	1.34		(282)

The Company recorded a $0.1 million gain in interest expense related to the interest rate caps during both the three and six months ended June 30, 2025.

Financing receivable: The fair value was determined using a widely accepted valuation technique, discounted cash flow analysis, on the expected cash flows. The discount rate used to value the future cash inflows of the financing receivable at June 30, 2025 was 12%.

For the six months ended June 30, 2025, there were no classification changes in assets and liabilities with Level 3 inputs in the fair value hierarchy.

Items Disclosed at Fair Value

Considerable judgment is necessary to estimate the fair value disclosure of financial instruments. The estimates of fair value presented herein are not necessarily indicative of the amounts that could be realized upon disposition of the financial instruments. A summary of the face value, carrying amount and fair value of the Company’s preferred equity investments and the Notes (as defined in Note 8, Debt, below) as of June 30, 2025 and December 31, 2024 is as follows (dollars in thousands):  

		June 30, 2025						December 31, 2024
	Level	Face Value		Carrying Amount		Fair Value		Face Value		Carrying Amount		Fair Value
Financial assets:
Preferred equity investments	3	$	83,782	$	84,456	$	84,456	$	53,782	$	54,199	$	54,199
Financial liabilities:
Senior unsecured notes payable	2	$	400,000	$	397,371	$	381,704	$	400,000	$	396,927	$	381,812

Cash and cash equivalents, accounts and other receivables, accounts payable, and accrued liabilities: The carrying values for these instruments approximate their fair values due to the short-term nature of these instruments.

Preferred equity investments: The fair value of the preferred equity investments was estimated using an internal valuation model that considered the expected future cash flows of the investment, the underlying collateral value, market interest rates and other credit enhancements. The Company utilized discount rates of 11% to 15% in its fair value calculation. As such, the Company classifies these instruments as Level 3.

Senior unsecured notes payable: The fair value of the Notes was determined using third-party quotes derived from orderly trades.

Secured notes payable: The holders of the secured notes payable exercised their option to put the debt to the Company. The carrying value of the notes payable is equal to the redemption price which approximates the fair value.

Unsecured revolving credit facility, secured revolving credit facilities and senior unsecured term loan: The fair values approximate their carrying values as the interest rates are variable and approximate prevailing market interest rates and spreads for similar debt arrangements.