Notes Receivable, Net

12 Months Ended

Dec. 31, 2024

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

Notes Receivable, Net

3. Notes Receivable, Net

Earnings from these notes and mortgages receivable are reported within the Company’s Structured Financing segment (Note 12). Interest receivable is included in Other assets, net (Note 5). 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, 2024
Description	2024			2023			Number		Maturity Date	Interest Rate
Notes receivable (a)	$	128,588		$	126,228			6	Apr 2020 - Dec 2027	6.00% - 12.00%
Allowance for credit losses		(2,004	)		(1,279	)
Notes receivable, net	$	126,584		$	124,949			6

(a)Included one note receivable from an OP Unit holder, with a balance of $6.0 million as of December 31, 2023. The note was paid off in the first quarter of 2024.

During the year ended December 31, 2024, the Company:

•originated one note receivable of $7.6 million to a related party, which is collateralized by the borrower’s equity interest in the Renaissance Portfolio, 1238 Wisconsin Avenue, and another Georgetown property, bears interest at 12% and had an original maturity date of December 31, 2025. In January 2025, the maturity date was extended to December 31, 2027;

•extended the maturity date of one note receivable of $42.0 million from September 17, 2024 to September 17, 2025; and

•received full payment on a $6.0 million note receivable.

Subsequent to year end, the Company extended the maturity date of one note receivable of $54.0 million from January 9, 2025 to February 25, 2025.

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

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

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

	Year Ended December 31,
	2024		2023
Allowance for credit losses as of beginning of periods	$	1,279	$	898
Provision of loan losses		725		381
Write-offs		—		—
Total credit allowance	$	2,004	$	1,279

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 allowance for credit losses practical expedient for five of its notes with a total amortized cost of $137.5 million, inclusive of accrued interest of $26.8 million, for which an allowance for credit losses has been recorded aggregating $2.0 million as of December 31, 2024.

One note receivable aggregating $21.6 million, including accrued interest (exclusive of default interest and other amounts due on the loan that have not been recognized) was in default at December 31, 2024 and December 31, 2023. On April 1, 2020, the loan matured and was not repaid. The Company expects to take appropriate actions to recover the amounts due under the loan 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 elected to apply the practical expedient in accordance with ASC Topic 326: Financial Instruments - Credit Losses (“ASC 326”) and did not establish an allowance for credit losses because (i) this note is a collateral-dependent note, which due to their settlement terms is not expected to be settled in cash but rather by the Company’s possession of the real estate collateral; and (ii) at December 31, 2024, the Company determined that the estimated fair value of the collateral at the expected realization date for this loan was sufficient to cover the carrying value of its investments in this note receivable.