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Loans Receivable | 3 Months Ended
--- | ---
Mar. 31, 2021
Receivables [Abstract] |
Loans Receivable | Loans Receivable The following table summarizes the Company’s loans receivable (in thousands):
| March 31, 2021 |  | December 31, 2020
Secured loans(1) | $ | 724,389 |  |  | $ | 161,530 |
Mezzanine and other | 44,513 |  |  | 44,347 |
Unamortized discounts, fees, and costs | (14,626) |  |  | (222) |
Reserve for loan losses | (14,134) |  |  | (10,280) |
Loans receivable, net | $ | 740,142 |  |  | $ | 195,375 |
_______________________________________ (1)At March 31, 2021, the Company had $100 million remaining of commitments to fund senior housing redevelopment and capital expenditure projects. At December 31, 2020, the Company had $11 million remaining of commitments to fund senior housing redevelopment and capital expenditure projects. 2021 Loans Receivable Transactions In April 2021, the Company sold two mezzanine loans for carrying value as part of the Discovery SHOP Portfolio disposition (see Note 5). 2020 Loans Receivable Transactions For certain residents that qualify, CCRCs may offer to lend residents the necessary funds to satisfy the entrance fee requirements so that they are able to move into a community while still continuing the process of selling their previous home. The loans are due upon sale of the previous residence. Upon completing the CCRC Acquisition (see Note 3) in January 2020, the Company began consolidating 13 CCRCs, which held approximately $30 million of such notes receivable from various community residents at the time of acquisition. At March 31, 2021 and December 31, 2020, the Company held $24 million and $23 million of such receivables, respectively, which are included in mezzanine and other in the table above. In November 2020, the Company sold one mezzanine loan with a $10 million principal balance for $8 million, resulting in a $2 million loss recognized in impairments and loan loss reserves (recoveries), net. In December 2020, the Company sold one secured loan with a $115 million principal balance for $109 million, resulting in a $6 million loss recognized in impairments and loan loss reserves (recoveries), net. SHOP Seller Financing In conjunction with the sale of 32 SHOP facilities in the Sunrise Senior Housing Portfolio for $664 million in January 2021 (see Note 5), the Company provided the buyer with initial financing of $410 million. The remainder of the sales price was received in cash at the time of sale. Additionally, the Company agreed to provide up to $92 million of additional financing for capital expenditures (up to 65% of the estimated cost of capital expenditures), none of which has been funded as of March 31, 2021. The initial and additional financing is secured by the buyer's equity ownership in each property. In conjunction with the sale of 16 additional SHOP facilities for $230 million in January 2021 (see Note 5), the Company provided the buyer with financing of $150 million. The remainder of the sales price was received in cash at the time of sale. The financing is secured by the buyer's equity ownership in each property. In December 2020, in conjunction with the sale of 4 of the 12 SHOP facilities in the Atria SHOP Portfolio for $94 million (see Note 5), the Company provided the buyer with financing of $61 million. The remainder of the sales price was received in cash at the time of sale. The financing is secured by the buyer's equity ownership in the four properties. During the three months ended March 31, 2021, the Company reduced the consideration and reported gain on sales of real estate and recognized a mark-to-market discount of $16 million for certain transactions with seller financing. The Company’s discount is based on the difference between the stated interest rates (ranging from 3.50% to 4.50%) and corresponding prevailing market rates of approximately 5.25% as of the transaction dates. The discount is recognized as interest income over the term of the discounted loans (ranging from one to three years) using the effective interest rate method. During the three months ended March 31, 2021, the Company recognized $2 million of non-cash interest income related to the amortization of its mark-to-market discounts. The Company did not recognize any non-cash interest income associated with seller financing notes receivable during the three months ended March 31, 2020. Loans Receivable Internal Ratings In connection with the Company’s quarterly review process or upon the occurrence of a significant event, loans receivable are reviewed and assigned an internal rating of Performing, Watch List, or Workout. Loans that are deemed Performing meet all present contractual obligations, and collection and timing of all amounts owed is reasonably assured. Watch List Loans are defined as loans that do not meet the definition of Performing or Workout. Workout Loans are defined as loans in which the Company has determined, based on current information and events, that: (i) it is probable it will be unable to collect all amounts due according to the contractual terms of the agreement, (ii) the borrower is delinquent on making payments under the contractual terms of the agreement, and (iii) the Company has commenced action or anticipates pursuing action in the near term to seek recovery of its investment. The following table summarizes, by year of origination, the Company’s internal ratings for loans receivable, net of unamortized discounts, fees, and costs and reserves for loan losses, as of March 31, 2021 (dollars in thousands):
Investment Type |  | Year of Origination |  | Total
| 2021 |  | 2020 |  | 2019 |  | 2018 |  | 2017 | Prior |
Secured loans |  |  |  |  |  |  |  |  |  |  |  |  |
Risk rating: |  |  |  |  |  |  |  |  |  |  |  |  |
Performing loans |  | $ | 543,310 |  |  | $ | 96,665 |  |  | $ | 63,381 |  |  | $ | — |  |  | $ | — |  | $ | — |  |  | $ | 703,356 |
Watch list loans |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  | — |  |  | — |
Workout loans |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  | — |  |  | — |
Total secured loans |  | $ | 543,310 |  |  | $ | 96,665 |  |  | $ | 63,381 |  |  | $ | — |  |  | $ | — |  | $ | — |  |  | $ | 703,356 |
Mezzanine and other |  |  |  |  |  |  |  |  |  |  |  |  |
Risk rating: |  |  |  |  |  |  |  |  |  |  |  |  |
Performing loans |  | $ | 12,274 |  |  | $ | 12,113 |  |  | $ | 10,535 |  |  | $ | — |  |  | $ | — |  | $ | — |  |  | $ | 34,922 |
Watch list loans |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  | 1,864 |  |  | 1,864 |
Workout loans |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  | — |  |  | — |
Total mezzanine and other |  | $ | 12,274 |  |  | $ | 12,113 |  |  | $ | 10,535 |  |  | $ | — |  |  | $ | — |  | $ | 1,864 |  |  | $ | 36,786 |
Reserve for Loan Losses The Company evaluates the liquidity and creditworthiness of its borrowers on a quarterly basis. The Company’s evaluation considers industry and economic conditions, individual and portfolio property performance, credit enhancements, liquidity, and other factors. The Company’s borrowers furnish property, portfolio, and guarantor/operator-level financial statements, among other information, on a monthly or quarterly basis, which the Company utilizes to calculate the debt service coverages used in its assessment of internal ratings, which is a primary credit quality indicator. Debt service coverage information is evaluated together with other property, portfolio, and operator performance information, including revenue, expense, net operating income, occupancy, rental rates, capital expenditures, and EBITDA (defined as earnings before interest, tax, and depreciation and amortization), along with other liquidity measures. In its assessment of current expected credit losses for loans receivable and unfunded loan commitments, the Company utilizes past payment history of its borrowers, current economic conditions, and forecasted economic conditions through the maturity date of each loan to estimate a probability of default and a resulting loss for each loan receivable. Future economic conditions are based primarily on near-term economic forecasts from the Federal Reserve and reasonable assumptions for long-term economic trends. The following table summarizes the Company’s reserve for loan losses (in thousands):
| March 31, 2021 |  | December 31, 2020
| Secured Loans |  | Mezzanine and Other |  | Total |  | Secured Loans |  | Mezzanine and Other |  | Total
Reserve for loan losses, beginning of period | $ | 3,152 |  |  | $ | 7,128 |  |  | $ | 10,280 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Cumulative-effect of adopting of ASU 2016-13 to beginning retained earnings | — |  |  | — |  |  | — |  |  | 513 |  |  | 907 |  |  | 1,420 |
Provision for expected loan losses | 2,740 |  |  | 1,114 |  |  | 3,854 |  |  | 2,639 |  |  | 6,221 |  |  | 8,860 |
Reserve for loan losses, end of period | $ | 5,892 |  |  | $ | 8,242 |  |  | $ | 14,134 |  |  | $ | 3,152 |  |  | $ | 7,128 |  |  | $ | 10,280 |
Additionally, at March 31, 2021 and December 31, 2020, a liability of $0.4 million and $1 million, respectively, related to expected credit losses for unfunded loan commitments was included in accounts payable, accrued liabilities, and other liabilities. Credit loss expenses and recoveries are recorded in impairments and loan loss reserves (recoveries), net. During the three months ended March 31, 2021 and 2020, the net credit loss expense was $3 million and $8 million, respectively. The change in the provision for expected loan losses during the three months ended March 31, 2021 is primarily due to new seller financing.

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- Definition The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses. + References Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -URI http://asc.fasb.org/subtopic&trid=2196772 + Details
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