Fair Value Measurements

9 Months Ended

Sep. 30, 2024

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

A three-level valuation hierarchy exists for disclosure of fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. The three levels are defined as follows:

Level 1 — quoted prices are available in active markets for identical investments as of the measurement date. We do not adjust the quoted price for these investments.

Level 2 — quoted prices are available in markets that are not active or model inputs are based on inputs that are either directly or indirectly observable as of the measurement date.

Level 3 — pricing inputs are unobservable and include instances where there is minimal, if any, market activity for the investment. These inputs require significant judgment or estimation by management or third parties when determining fair value and generally represent anything that does not meet the criteria of Levels 1 and 2. Due to the inherent uncertainty of these estimates, these values may differ materially from the values that would have been used had a ready market for these investments existed.

Certain investments that are measured at fair value using NAV per share as a practical expedient are not required to be categorized in the fair value hierarchy tables. The total fair value of these investments is included in the tables below to permit reconciliation of the fair value hierarchy to amounts presented on our condensed consolidated balance sheets. As of September 30, 2024 and December 31, 2023, none of these investments were expected to be sold at a value materially different than NAV.

Valuation of Assets Measured at Fair Value

The following table details our financial instruments measured at fair value on a recurring basis:

	September 30, 2024
	Fair Value Measurements Using:
in thousands	Level 1		Level 2		Level 3		NAV as a Practical Expedient		Total at Fair Value
Investments in real estate-related securities	$	6,207	$	34,352	$	—	$	—	$	40,559
Investments in commercial loans	—		—		12,972		—		12,972
Investment in affiliated fund	—		—		—		22,869		22,869
Interest rate caps	—		832		—		—		832
Interest rate swap	—		758		—		—		758
Total	$	6,207	$	35,942	$	12,972	$	22,869	$	77,990

	December 31, 2023
	Fair Value Measurements Using:
in thousands	Level 1		Level 2		Level 3		NAV as a Practical Expedient		Total at Fair Value
Investments in real estate-related securities	$	4,729	$	23,301	$	—	$	—	$	28,030
Investments in commercial loans	—		—		34,626		—		34,626
Investment in affiliated fund	—		—		—		27,717		27,717
Interest rate caps	—		3,320		—		—		3,320
Interest rate swap	—		1,498		—		—		1,498
Total	$	4,729	$	28,119	$	34,626	$	27,717	$	95,191

Investments in commercial loan consists of one floating rate mezzanine loan that we originated. The commercial loan is carried at fair value based on significant unobservable inputs. The following table details our investment in the commercial loan:

in thousands	Investments in Commercial Loans
Balance as of December 31, 2023	$	34,626
Net unrealized gain	146
Loan repayment	(21,800)
Balance as of September 30, 2024	$	12,972

The following table shows the significant unobservable inputs related to the Level 3 fair value measurement of our investment in the commercial loan as of September 30, 2024.

Type	Asset Class	Valuation Technique	Unobservable Input	Weighted Average Rate
Commercial loan	Industrial	Discounted cash flow	Discount rate	8.50%

The discount rate above is subject to change based on changes in economic and market conditions both current and anticipated, in addition to changes in use or timing of exit if applicable. These rates are also based on the location, type and nature of each property and related industry publications. Changes in discount rates result in increases or decreases in the fair values of these investments. The discount rates encompass, among other things, uncertainties in the valuation models with respect to terminal capitalization rates and the amount and timing of cash flows. It is not possible for us to predict the effect of future economic or market conditions based on our estimated fair values.

Valuation of Liabilities Not Carried at Fair Value

The following table presents the principal balance and estimated fair value of our liabilities that are not carried at fair value on the condensed consolidated balance sheets:

	September 30, 2024				December 31, 2023
in thousands	Principal Balance		Estimated Fair Value		Principal Balance		Estimated Fair Value
Mortgage notes payable	$	339,294	$	335,089	$	339,034	$	333,605
Total	$	339,294	$	335,089	$	339,034	$	333,605

The fair value of our borrowings is estimated by modeling the cash flows required by our debt agreements and discounting them back to present value using the appropriate discount rate. Additionally, we consider current market rates and conditions by evaluating similar borrowing agreements with comparable loan-to-value ratios and credit profiles. The inputs used in determining the fair value of our borrowings are considered Level 3.