Loans Receivable

9 Months Ended

Sep. 30, 2020

Loans ReceivableLoans receivable are recorded on our Consolidated Balance Sheets in real estate loans receivable, net of allowance for credit losses, or for non-real estate loans receivable, in receivables and other assets, net of allowance for credit losses. Real estate loans receivable consists of mortgage loans and other real estate loans which are primarily collateralized by a first, second or third mortgage lien, a leasehold mortgage on, or an assignment of the partnership interest in, the related properties, corporate guarantees and/or personal guarantees. Non-real estate loans are generally corporate loans with no real estate backing. Interest income on loans is recognized as earned based upon the principal amount outstanding subject to an evaluation of the risk of credit loss. Accrued interest receivable was $12,039,000 and $6,897,000 as of September 30, 2020 and December 31, 2019, respectively, and is included in receivables and other assets on the Consolidated Balance Sheets. The following is a summary of our loans receivable (in thousands):


	September 30, 2020		December 31, 2019
Mortgage loans	$	293,351	$	188,062
Other real estate loans	127,988		124,696
Allowance for credit losses on real estate loans receivable	(6,633)		(42,376)
Real estate loans receivable, net of credit allowance	414,706		270,382
Non-real estate loans	460,411		362,850
Allowance for credit losses on non-real estate loans receivable	(78,262)		(25,996)
Non-real estate loans receivable, net of credit allowance	382,149		336,854
Total loans receivable, net of credit allowance	$	796,855	$	607,236

During the nine months ended September 30, 2020, the real estate collateral associated with one loan was released, therefore, the principal balance of $86,411,000 and related allowance for credit losses of $42,376,000 was reclassified to non-real estate loans.

The following is a summary of our loan activity for the periods presented (in thousands):


	Nine Months Ended
	September 30, 2020		September 30, 2019
Advances on loans receivable:
Investments in new loans	$	194,942	$	36,024
Draws on existing loans	21,365		54,832

Net cash advances on loans receivable	216,307		90,856

Receipts on loans receivable:
Loan payoffs	—		37,686
Principal payments on loans	14,345		19,439


Net cash receipts on loans receivable	14,345		57,125
Net cash advances (receipts) on loans receivable	$	201,962	$	33,731

The allowance for credit loss on loans receivable is maintained at a level believed adequate to absorb potential losses in our loans receivable. The determination of the credit allowance is based on a quarterly evaluation of each of these loans, including general economic conditions and estimated collectability of loan payments. We evaluate the collectability of our loans receivable based on a combination of credit quality indicators, including, but not limited to, payment status, historical loan charge-offs, financial strength of the borrower and guarantors, and nature, extent, and value of the underlying collateral.

A loan is considered to have deteriorated credit quality when, based on current information and events, it is probable that we will be unable to collect all amounts due as scheduled according to the contractual terms of the loan agreement. For those loans we identified as having deteriorated credit quality we determine the amount of credit loss on an individual basis. Placement on non-accrual status may be required. Consistent with this definition, all loans on non-accrual are deemed to have deteriorated credit quality. To the extent circumstances improve and the risk of collectability is diminished, we will return these loans to income accrual status. While a loan is on non-accrual status, any cash receipts are applied against the outstanding principal balance.

For the remaining loans we assess credit loss on a collective pool basis and use our historical loss experience for similar loans to determine the reserve for credit losses. The following is a summary of our loans by credit loss category (in thousands):


	September 30, 2020
Loan category	Years of Origination	Loan Carrying Value		Allowance for Credit Loss		Net Loan Balance		No. of Loans
Deteriorated loans (1)	2007 - 2018	$	249,314	$	(76,695)	$	172,619	7
Collective loan pool	2007 - 2015	129,949		(1,886)		128,063		15
Collective loan pool	2016	124,599		(1,612)		122,987		4
Collective loan pool	2017	124,840		(1,074)		123,766		7
Collective loan pool	2018	17,314		(251)		17,063		1
Collective loan pool	2019	49,274		(684)		48,590		7
Collective loan pool	2020	186,460		(2,693)		183,767		6
Total loans		$	881,750	$	(84,895)	$	796,855	47

(1) During the three months ended September 30, 2020, two loans receivable originated in 2016 to Genesis Healthcare with an aggregate carrying value of $62,753,000 were transferred to the deteriorated loan pool. The carrying value is exclusive of deferred gains of $62,819,000 recorded in accrued expenses and other liabilities on the Consolidated Balance Sheets.

In March 2019, we recognized a provision for loan losses of $18,690,000 to fully reserve for certain Triple-net real estate loans receivable that were no longer deemed collectible. During the quarter ended June 30, 2019, these loans were written off. During the nine months ended September 30, 2020, we recognized a provision for credit losses of $6,898,000 to fully reserve for one Triple-net non-real estate loan receivable and $1,303,000 to fully reserve for one Triple-net real estate loan receivable that were no longer deemed collectible. The following is a summary of the allowance for credit losses on loans receivable for the periods presented (in thousands):


	Nine Months Ended
	September 30, 2020		September 30, 2019
Balance at beginning of period	$	68,372	$	68,372
Adoption of ASU 2016-13	5,212		—
Provision for loan losses	11,351		18,690
Loan write-offs	—		(18,690)
Foreign currency translation	(40)		—

Balance at end of period	$	84,895	$	68,372

The following is a summary of our deteriorated loans (in thousands):


	Nine Months Ended
	September 30, 2020		September 30, 2019
Balance of deteriorated loans at end of period (1)	$	249,314	$	188,043
Allowance for credit losses	(76,695)		(68,372)
Balance of deteriorated loans not reserved	$	172,619	$	119,671
Interest recognized on deteriorated loans (2)	$	13,847	$	12,082

(1) Current year amounts include $10,686,000 and $2,534,000 of loans on non-accrual as of September 30, 2020 and December 31, 2019, respectively. Prior year amounts include $2,534,000 and $2,567,000 as of September 30, 2019 and December 31, 2018, respectively.

(2) Represents cash interest recognized in the period.