Notes Receivable, Net

12 Months Ended

Dec. 31, 2023

Accounts and Financing Receivable, after Allowance for Credit Loss [Abstract]

Notes Receivable, Net

3. Notes Receivable, Net

The Company’s notes receivable, net are generally collateralized either by the underlying properties or the borrowers’ ownership interests in the entities that own the properties, and were as follows (dollars in thousands):

	December 31,			December 31,			December 31, 2023
Description	2023			2022			Number		Maturity Date	Interest Rate
Core Portfolio (a)	$	126,228		$	124,801			6	Apr 2020 - Dec 2027	4.65% - 10.00%
Allowance for credit losses		(1,279	)		(898	)
Notes receivable, net	$	124,949		$	123,903			6

(a)Includes one note receivable from an OP Unit holder, with a balance of $6.0 million at December 31, 2023 and 2022.

Changes in the Company’s CECL allowance were as follows (dollars in thousands):

	Year Ended December 31,
	2023		2022			2021
CECL Allowance beginning of period	$	898	$	5,752		$	1,218
Provision of loan losses		381		(272	)		4,534
Write-offs		—		(4,582	)		—
Total - CECL Allowance	$	1,279	$	898		$	5,752

Due to the lack of comparability across the Structured Financing portfolio, each note was evaluated separately. As a result, the Company did not elect the collateral-dependent practical expedient for four of its notes with a total amortized cost of $121.1 million, inclusive of accrued interest of $18.6 million, for which an allowance for CECL has been recorded aggregating $1.3 million at December 31, 2023. For two notes in this portfolio, aggregating $27.9 million, inclusive of accrued interest of $4.1 million at December 31, 2023, the Company has elected to apply the practical expedient in accordance with ASC 326 and did not establish an allowance for CECL because (i) these notes are collateral-dependent notes, which due to their settlement terms are not expected to be settled in cash but rather by the Company’s possession of the real estate collateral; and (ii) at December 31, 2023, the Company determined that the estimated fair value of the collateral at the expected realization date for these notes was sufficient to cover the carrying value of its investments in these notes receivable.

Default

One Core Portfolio note aggregating $21.6 million including accrued interest (exclusive of default interest and other amounts due on the note that have not been recognized) was in default at December 31, 2023 and December 31, 2022. On April 1, 2020, the note matured and was not repaid. The Company expects to take appropriate actions to recover the amounts due under the note and has issued a reservation of rights letter to the borrowers and guarantor, reserving all of its rights and remedies under the applicable note documents and otherwise. The Company has determined that the collateral for this note was sufficient to cover the loan’s carrying value at December 31, 2023 and December 31, 2022.

During the year ended December 31, 2023, the Company:

•originated a Core Portfolio note for $1.4 million with a stated interest rate of 6.5% and a maturity date of September 30, 2024, collateralized by the venture partner’s interest in 840 N. Michigan Avenue (Note 4).

During the year ended December 31, 2022, the Company:

•through Fund III obtained the remaining venture partner's interest in an entity that held a property, which was collateral for a note with a balance of $5.3 million, accrued interest of $4.7 million, less a CECL reserve of $4.6 million (exclusive of default interest and other amounts due on the loan that have not been recognized), via a foreclosure auction in January 2022. The entity was previously accounted for as an equity method investment until Fund III acquired the venture partner's interest. Fund III now owns 100% of the entity and consolidates it;

•received full payment on a $16.0 million Core Portfolio note during the second quarter, and full payment on a $13.5 million Core Portfolio note and partial payment of $5.7 million of accrued interest on a Core Portfolio note during the third quarter;

•extended the maturity date of one Core Portfolio note of $54.0 million from January 13, 2023 to January 9, 2024; and

•decreased its allowance for CECL by $4.9 million, of which approximately $4.6 million was attributable to the aforementioned Fund III foreclosure.