In 2018, the Company originated a $55.7 million senior loan secured by an office property in Houston, TX. As of March 31, 2023, the loan had a risk rating of "5" and was placed on non-accrual status and accounted for under cost-recovery, with an amortized cost and carrying value of $55.0 million and $46.0 million, respectively. On April 28, 2023, the Company acquired the property via a deed-in-lieu of foreclosure. Such acquisition was accounted for as an asset acquisition.


	Fair Value Allocation
Building and building improvements	$	31,096
Land and land improvements	7,592
In-place lease intangibles	9,378
Above-market lease intangibles	576
Below-market lease intangibles	(2,642)
Total	$	46,000

The weighted-average amortization period for the acquired in-place lease intangibles, above-market lease intangibles and below-market lease intangibles acquired during the six months ended June 30, 2023, were 3.6 years, 7.4 years, and 4.7 years, respectively.

The Company’s fair market value estimate was determined primarily using discounted cash flow models and Level 3 inputs, which include estimates of property-specific cash flows over a specific holding period, a discount rate of 9.5%, and a terminal capitalization rate of 8.5%. These inputs are based on the location, type and nature of the property, current sales and lease comparables, anticipated real estate and capital market conditions, and management’s knowledge, experience and judgment.

During June 2023, the Company obtained from a third party a $31.2 million first mortgage loan secured by the office property, which is classified as Mortgage loan payable, net on the Company's consolidated balance sheets. See Note 6 for details of the Mortgage loan payable.


	June 30, 2023
Assets
Cash	$	712
Real estate owned - Building and building improvements	31,096
Real estate owned - Land and land improvements	7,592
Real estate owned	38,688
Accumulated depreciation	(237)
Real estate owned, net	38,451
In-place lease intangibles, net(1)	8,651
Above-market lease intangibles, net(1)	556

Other assets, net(1)	12,856
Total assets	$	61,226
Liabilities
Mortgage loan payable, net(2)	$	30,475
Below-market leases intangibles, net(3)	2,491
Other liabilities(3)	248
Total liabilities	$	33,214

(1)Included within Other assets within the Company's consolidated balance sheet. Other assets, net includes $12.1 million of cash proceeds from the Company's mortgage loan payable escrowed for tenant improvements and leasing costs, and other working capital balances as of June 30, 2023.

(2)During the three and six months ended June 30, 2023, the Company incurred interest expense of $0.1 million, which is included within Interest expense on the Company's consolidated statements of income and comprehensive income

The Company acquired certain legacy tenant leases upon the acquisition of REO. These leases entitle the Company to receive contractual rent payments during the lease periods and tenant reimbursements for certain property operating expenses, including common area costs, insurance, utilities and real estate taxes. The Company elected the practical expedient to not separate the lease and non-lease components of the rent payments and accounts for these leases as operating leases.


	Three Months Ended		Six Months Ended
	June 30, 2023			June 30, 2023
Rental income
Minimum lease payments	$	825		$	825
Variable lease payments	248			248
Total rental income	1,073			1,073
Other operating income	455			455
Revenue from real estate owned operations	1,528			1,528
Rental property operating expenses(1)	884			884
Depreciation and amortization(2)	964			964
Expenses from real estate owned operations	1,848			1,848
Net loss from REO	$	(320)		$	(320)

(1)Excludes $0.1 million of interest expense, which is included within Interest expense on the Company's consolidated statements of income and comprehensive income.


	June 30, 2023
Intangible assets:
In-place lease intangibles	$	9,378
Above-market lease intangibles	576
Total intangible assets	9,954
Accumulated amortization:
In-place lease intangibles	(727)
Above-market lease intangibles	(20)
Total accumulated amortization	(747)
Intangible assets, net	$	9,207

Intangible liabilities:
Below-market lease intangibles	$	2,642
Total intangible liabilities	2,642
Accumulated amortization:
Below-market lease intangibles	(151)
Total accumulated amortization	(151)
Intangible liabilities, net	$	2,491


Year	In-place lease intangibles		Above-market lease intangibles		Below-market lease intangibles
2023 (remaining)	$	2,181	$	60	$	(453)
2024	4,362		120		(842)
2025	2,108		84		(338)
2026	—		69		(237)
2027	—		38		(187)
2028	—		33		(179)

Minimum rental amounts due under leases are generally either subject to scheduled fixed increases or adjustments. The following table presents approximate future minimum rental income under noncancellable operating leases, excluding variable lease revenue of tenant reimbursements, to be received over the next five years and thereafter as of June 30, 2023 (dollars in thousands):

In December 2020, the Company acquired two largely undeveloped commercially-zoned land parcels on the Las Vegas Strip comprising 27 acres (the “Las Vegas land”) pursuant to a negotiated deed-in-lieu of foreclosure. The Company's cost basis in the Las Vegas land was $99.2 million, equal to the estimated fair value of the collateral at the date of acquisition, net of estimated selling costs.

During the three months ended December 31, 2021, the Company sold a 17 acre parcel of the Las Vegas land and retained the remaining 10 acre parcel of Las Vegas land at its estimated fair value at the time of acquisition, net of estimated selling costs, of $60.6 million. On April 4, 2022, the Company sold the remaining 10 acre parcel of Las Vegas land for net cash proceeds of $73.9 million and recognized a gain on sale of real estate owned, net of $13.3 million on the consolidated statements of income and comprehensive income. The Las Vegas land parcels were sold for gains during the years ended December 31, 2022 and 2021. For the six months ended June 30, 2022, operating revenues from Las Vegas land were sufficient to cover the operating expenses and were immaterial to the financial results of the Company.