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Allowance for Credit Losses
 3 Months Ended
Mar. 31, 2022
Credit Loss [Abstract]  
Allowance for Credit Losses Allowance for Credit Losses
Adoption of ASC 326
Under ASC 326 we are required to estimate and record non-cash credit losses related to our historical and any future investments in sales-type leases, lease financing receivables and loans.
During the three months ended March 31, 2022, we recognized a $80.8 million increase in our allowance for credit losses primarily driven by (i) the initial CECL allowance in relation to (a) the Venetian Acquisition and classification of the Venetian Lease as a sales-type lease, (b) the estimated future funding commitments under the Venetian PGFA and (c) the sales-type sub-lease agreements we assumed in connection with the Venetian Acquisition and are required to present gross and (ii) the increase in the reasonable and supportable period, or R&S Period, probability of default, or PD, of our tenants and their parent guarantors as a result of market volatility during the first quarter of 2022. This was partially offset by a decrease in the Long-Term Period PD as a result of a standard annual update made to the Long-Term PD default study we utilize to estimate our CECL allowance.
During the three months ended March 31, 2021, we recognized a $4.4 million decrease in our allowance for credit losses primarily driven by the decrease in the R&S Period PD of our tenants and their parent guarantors as a result of an improvement in their economic outlook due to the reopening of a majority of their gaming operations and relative performance of such operations during the first quarter of 2021.
Subsequent to quarter-end, on April 29, 2022, we closed on the previously announced MGP Transactions in which we entered into the MGM Master Lease. As discussed in Note 3 - Property Transactions we anticipate the MGM Master Lease will be accounted for as a financing receivable under ASC 310, and, accordingly, we will be required to record a material initial and ongoing CECL allowance as required under ASC 326.
As of March 31, 2022 and December 31, 2021, and since our formation date on October 6, 2017, all of our Lease Agreements and loan investments are current in payment of their obligations to us and no investments are on non-accrual status.
The following tables detail the allowance for credit losses as of March 31, 2022 and December 31, 2021:
March 31, 2022
($ In thousands)Amortized Cost
Allowance (1)
Net InvestmentAllowance as a % of Amortized Cost
Investments in leases - sales-type$17,617,877 $(504,178)$17,113,699 2.86 %
Investments in leases - financing receivables2,742,615 (91,982)2,650,633 3.35 %
Investments in loans514,217 (1,089)513,128 0.21 %
Other assets - sales-type sub-leases455,710 (8,754)446,956 1.92 %
Totals$21,330,419 $(606,003)$20,724,416 2.84 %
December 31, 2021
($ In thousands)Amortized Cost
Allowance (1)
Net InvestmentAllowance as a % of Amortized Cost
Investments in leases - sales-type$13,571,516 $(434,852)$13,136,664 3.20 %
Investments in leases - financing receivables2,735,948 (91,124)2,644,824 3.33 %
Investments in loans498,775 (773)498,002 0.15 %
Other assets - sales-type sub-leases280,510 (6,540)273,970 2.33 %
Totals$17,086,749 $(533,289)$16,553,460 3.12 %
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(1) The total allowance excludes the CECL allowance for unfunded commitments, primarily related to the Venetian PGFA. As of March 31, 2022 and December 31, 2021, such allowance is $9.1 million and $1.0 million, respectively, and is recorded in Other liabilities.
The following chart reflects the roll-forward of the allowance for credit losses on our real estate portfolio for the three months ended March 31, 2022 and 2021:
Three Months Ended March 31,
(In thousands)20222021
Beginning Balance December 31,$534,326 $553,879 
Initial allowance from current period investments76,037 — 
Current period change in credit allowance4,783 (4,380)
Charge-offs— — 
Recoveries— — 
Ending Balance March 31,
$615,146 $549,499 
Credit Quality Indicators
We assess the credit quality of our investments through the credit ratings of the senior secured debt of the guarantors of our leases, as we believe that our Lease Agreements have a similar credit profile to a senior secured debt instrument. The credit quality indicators are reviewed by us on a quarterly basis as of quarter-end. In instances where the guarantor of one of our Lease Agreements does not have senior secured debt with a credit rating, we use either a comparable proxy company or the overall corporate credit rating, as applicable. We also use this credit rating to determine the Long-Term Period PD when estimating credit losses for each investment.
The following tables detail the amortized cost basis of our investments by the credit quality indicator we assigned to each lease or loan guarantor as of March 31, 2022 and 2021:
March 31, 2022
(In thousands)Ba2Ba3B1B2B3
N/A(2)
Total
Investments in leases - sales-type and financing receivable, Investments in loans and Other assets (1)
$4,198,118 $949,418 $14,918,185 $870,774 $279,740 $114,183 $21,330,419 
March 31, 2021
(In thousands)Ba2Ba3B1B2B3
N/A(2)
Total
Investments in leases - sales-type and financing receivable, Investments in loans and Other assets (1)
$— $— $15,761,205 $917,138 $281,450 $65,012 $17,024,805 
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(1)Excludes the CECL allowance for unfunded commitments recorded in Other liabilities as such commitments are not currently reflected on our Balance Sheet, rather the CECL allowance is based on our current best estimate of future funding commitments.
(2)We estimate the CECL allowance for the Chelsea Piers Mortgage Loan and Great Wolf Mezzanine Loan using a traditional commercial real estate model based on standardized credit metrics to estimate potential losses.