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Other Real Estate Related and Other Investments | 12 Months Ended
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Dec. 31, 2023
Investments, All Other Investments [Abstract] |
Other Real Estate Related and Other Investments | OTHER REAL ESTATE RELATED AND OTHER INVESTMENTS As of December 31, 2023 and 2022, the Company’s other real estate related investments, at fair value, consisted of the following (dollar amounts in thousands):
|  |  |  |  |  |  |  | As of December 31, 2023
Investment | Facility Count and Type | Principal Balance as of December 31, 2023 |  | Fair Value as of December 31, 2023 |  | Fair Value as of December 31, 2022 |  | Weighted Average Contractual Interest Rate |  | Maturity Date
Mortgage secured loans receivable | 30 SNF, 3 ALF, 2 Campus & ILF | $ | 165,197 |  |  | $ | 156,769 |  |  | $ | 117,684 |  |  | 8.9 | % | (1), (2) | 5/31/2024 - 6/29/2033
Mezzanine loans receivable | 18 SNF/Campus | 25,000 |  |  | 21,799 |  |  | 38,684 |  |  | 11.0 | % |  | 6/30/2032
Total |  | $ | 190,197 |  |  | $ | 178,568 |  |  | $ | 156,368 |  |  |  |  |
(1)Rates are net of subservicing fee, if applicable. (2)Two mortgage secured loans receivable use term secured overnight financing rate (“SOFR”). Term SOFR used as of December 31, 2023 was 5.35%. Rates are net of subservicing fees. The following table summarizes the Company’s other real estate related investments activity for the years ended December 31, 2023, 2022, and 2021 (dollars in thousands):
|  | For the Year Ended December 31,
|  | 2023 |  | 2022 |  | 2021
Origination of other real estate related investments |  | $ | 53,834 |  |  | $ | 147,150 |  |  | $ | — |
Accrued interest, net |  | 388 |  |  | 1,165 |  |  | 155 |
Unrealized loss on other real estate related investments, net |  | (6,485) |  |  | (7,102) |  |  | — |
Prepayments of other real estate related investments |  | (25,537) |  |  | — |  |  | — |
Net increase in other real estate related investments, at fair value |  | $ | 22,200 |  |  | $ | 141,213 |  |  | $ | 155 |
2023 Other Real Estate Related Investment Transactions On December 15, 2023, a partial payment of $10.5 million was made on one $22.3 million mortgage loan receivable. See below under “2022 Other Real Estate Related Investment Transactions” for further detail. On March 30, 2023, one $15.0 million mezzanine loan was prepaid in full. The $15.0 million mezzanine loan was originated in 2020 for nine skilled nursing facilities secured by membership interests in the borrower, with an annual interest rate of 12%. On November 29, 2023, the Company extended a $6.3 million mortgage loan to an assisted living real estate owner. The mortgage loan is secured by one ALF and bears interest at a rate of 9.9%. The mortgage loan is set to mature on June 1, 2026, with two six-month extension options and may (subject to certain restrictions) be prepaid in whole before the maturity date for an exit fee of 2% of the loan plus unpaid interest payments; provided, however, that no exit fee is payable in connection with the loan being refinanced pursuant to a loan (or loans) provided by Fannie Mae, Freddie Mac, Federal Housing Administration, or a similar governmental authority. The Company elected the fair value option for the mortgage loan. On September 29, 2023, the Company extended a $3.6 million mortgage loan as part of a larger, multi-tranche real estate secured term loan facility to a skilled nursing real estate owner. The secured term loan was structured with an “A” and a “B” tranche (with the payments on the “B” tranche being subordinate to the “A” tranche pursuant to the terms of a written agreement between the lenders). The Company’s $3.6 million secured mortgage loan constituted the entirety of the “B” tranche with its payments subordinated accordingly and bears interest at a rate of 12.0%. The mortgage loan is secured by three SNFs. The mortgage loan is set to mature on September 29, 2026, with two six-month extension options and may (subject to certain restrictions) be prepaid in whole before the maturity date for an exit fee ranging from 0% to 2% of any proposed financing in connection with the loan being refinanced by the U.S. Department of Housing and Urban Development (“HUD”). The Company elected the fair value option for the mortgage loan. On July 17, 2023, the Company extended a $15.7 million mortgage loan to a skilled nursing real estate owner. The mortgage loan is secured by two SNFs and bears interest at a rate of 9.0%. The mortgage loan is set to mature on August 1, 2028, with one five-year extension option and may (subject to certain restrictions) be prepaid in whole before the maturity date for an exit fee ranging from 2% to 3% of the loan plus unpaid interest payments; provided, however, that no exit fee is payable in connection with the loan being refinanced pursuant to a loan (or loans) provided by Fannie Mae, Freddie Mac, Federal Housing Administration, or a similar governmental authority. The Company elected the fair value option for the mortgage loan. On June 29, 2023, the Company extended a $26.0 million mortgage loan to a skilled nursing real estate owner. The mortgage loan is secured by one SNF campus and one ILF and bears interest at a rate of 9.0%. The mortgage loan is set to mature on June 29, 2033 and may (subject to certain restrictions) be prepaid in whole before the maturity date for an exit fee ranging from 0% to 3% of the loan plus unpaid interest payments. The Company elected the fair value option for the mortgage loan. On June 1, 2023, the Company closed on the sale of one ALF. In connection with the sale, the Company provided affiliates of the purchaser of the properties with a $2.0 million mortgage loan which bears interest at a rate of 9.0%. The mortgage loan is secured by the ALF and is set to mature on May 31, 2024. The mortgage loan has a one-year extension option and may be prepaid in whole before the maturity date. The Company elected the fair value option for the mortgage loan. 2022 Other Real Estate Related Investment Transactions In September 2022, the Company extended a $24.9 million term loan as part of a larger, multi-tranche real estate secured term loan facility to a skilled nursing real estate owner. The secured term loan was structured with an “A” and a “B” tranche (with the payments on the “B” tranche being subordinate to the “A” tranche pursuant to the terms of a written agreement between the lenders). The Company’s $24.9 million secured term loan constituted the entirety of the “B” tranche with its payments subordinated accordingly. The secured term loan is primarily secured by four skilled nursing facilities operated by an operator in the Southeast. The “B” tranche secured term loan is set to mature on September 8, 2025, with two one-year extension options and may (subject to certain restrictions) be prepaid in whole or in part before the maturity date for an exit fee ranging from 1% to 3% of the loan plus unpaid interest payments; provided, however, that no exit fee is payable in connection with portions of the loan being refinanced pursuant to a loan (or loans) provided by or insured by the United States Department of Housing and Urban Development, Federal Housing Administration, or a similar governmental authority. The “B” tranche secured term loan provides for an earnout advance of $4.7 million if certain conditions are met. The "B" tranche secured term loan bears interest at a rate based on term SOFR, calculated as a fraction, with the numerator being the difference between (i) the monthly payment of interest of term SOFR plus a 4.50% spread and (ii) the amount of such monthly payment of interest of term SOFR plus a 2.85% spread, and with the denominator being the average daily balance of the outstanding principal amount during the applicable month, with such fraction expressed as a percentage and annualized, with a term SOFR floor of 1.0% and less a subservicing fee of 100% over 9.00%. The “B” tranche secured term loan requires monthly interest payments. The Company elected the fair value option for the “B” tranche secured term loan. In August 2022, the Company extended a $22.3 million term loan as part of a larger, multi-tranche real estate secured term loan facility to a skilled nursing real estate owner. The secured term loan was structured with an “A” and a “B” tranche (with the payments on the “B” tranche being subordinate to the “A” tranche pursuant to the terms of a written agreement between the lenders). The Company’s $22.3 million secured term loan constituted the entirety of the “B” tranche with its payments subordinated accordingly. The secured term loan is primarily secured by five skilled nursing facilities, four of which are operated by an existing operator and one of which is operated by a large, regional skilled nursing operator. The “B” tranche secured term loan is set to mature on August 1, 2025, with two one-year extension options and may (subject to certain restrictions) be prepaid in whole or in part before the maturity date for an exit fee ranging from 2% to 3% of the loan plus unpaid interest payments; provided, however, that no exit fee is payable in connection with portions of the loan being refinanced pursuant to a loan (or loans) provided by or insured by HUD, Federal Housing Administration, or a similar governmental authority. The "B" tranche secured term loan bears interest at a rate based on term secured overnight financing rate, calculated as a fraction, with the numerator being the difference between (i) the monthly payment of interest of term SOFR plus a 4.25% spread and (ii) the amount of such monthly payment of interest of term SOFR plus a 2.75% spread, and with the denominator being the average daily balance of the outstanding principal amount during the applicable month, with such fraction expressed as a percentage and annualized, with a term SOFR floor of 1.0% and less a subservicing fee of 50% over 8.25%. The “B” tranche secured term loan requires monthly interest payments. The Company elected the fair value option for the “B” tranche secured term loan. In December 2023, in accordance with the terms and conditions set forth in the loan agreement, the borrower elected to cause one of the skilled nursing facilities to be released from the loan, and in connection with the same, the borrower partially prepaid the loan in the amount of $10.5 million. In June 2022, the Company extended a $75.0 million term loan to a skilled nursing real estate owner as part of a larger, multi-tranche, senior secured term loan facility. The senior secured term loan was structured with an “A” tranche, a “B” tranche, and a “C” tranche (with the “C” tranche being the most subordinate). The Company’s $75.0 million term loan constituted the entirety of the “C” tranche with its payments subordinated accordingly. The senior secured term loan facility is secured by an 18-facility skilled nursing portfolio in the Mid-Atlantic region, operated by a large, regional skilled nursing operator. In connection with the senior secured term loan facility and the borrower’s acquisition of the skilled nursing portfolio, the Company also extended to the borrower group a $25.0 million mezzanine loan. The “C” tranche of the senior secured term loan bears interest at 8.5%, less a servicing fee equal to the positive difference, if any, between the lesser of the contractual interest payment and actual payment of interest made by the borrower and a hypothetical interest payment at a rate of 8.25%, resulting in an effective interest rate of 8.375%. The “C” tranche senior secured term loan is set to mature on June 30, 2027 and may (subject to certain restrictions) be prepaid in whole or in part before the maturity date for an exit fee ranging from 1% to 3% of the loan plus unpaid interest payments through the end of the month of prepayment; provided, however, that no exit fee is payable in connection with portions of the loan being refinanced pursuant to a loan (or loans) provided by or insured by HUD, Federal Housing Administration, or a similar governmental authority. The mezzanine loan bears interest at 11% and is secured by a pledge of membership interests in an up-tier affiliate of the borrower group. The mezzanine loan is set to mature on June 30, 2032, and may (subject to certain restrictions) be prepaid in whole or in part before the maturity date, commencing on June 30, 2029, for an exit fee ranging from 1% to 3% of the loan plus unpaid interest payments through the date of prepayment. The “C” tranche senior secured term loan and mezzanine loan both require monthly interest payments. The Company elected the fair value option for both the “C” tranche term loan and the mezzanine loan. The fair value option is elected on an instrument by instrument basis and must be applied to an entire instrument and is irrevocable once elected. The Company’s primary purpose in electing the fair value option for these instruments was to align with management’s view of the underlying economics of the loans and the manner in which they are managed. Preferred Equity Investment In December 2023, the Company completed a $1.8 million preferred equity investment in E3 Acquisition, LLC, which owns the borrowers under the $3.6 million mortgage loan noted above under “2023 Other Real Estate Related Investment Transactions.” The preferred equity investment yields a return of 15% calculated on the outstanding carrying value of the investment. The preferred equity investment is expected to be repaid with proceeds from the refinancing of the Company’s $3.6 million mortgage loan with HUD, provided, however, that if the repayment occurs sooner than 15 months from the investment date, the Company will receive the amount had the preferred equity investment remained outstanding for the full 15 months. Other Loans Receivables As of December 31, 2023 and 2022, the Company’s other loans receivable, included in prepaid expenses and other assets, net on the Company’s consolidated balance sheets, consisted of the following (dollars in thousands):
|  |  |  |  |  |  |  | As of December 31, 2023
Investment |  | Principal Balance as of December 31, 2023 |  | Book Value as of December 31, 2023 |  | Book Value as of December 31, 2022 |  | Weighted Average Contractual Interest Rate |  | Maturity Date
Other loans receivable |  | $ | 17,094 |  |  | $ | 17,156 |  |  | $ | 9,600 |  |  | 8.8 | % |  | 6/30/2024 - 5/31/2026
Expected credit loss |  | — |  |  | (2,094) |  |  | (2,094) |  |  |  |  |
Total |  | $ | 17,094 |  |  | $ | 15,062 |  |  | $ | 7,506 |  |  |  |  |
The following table summarizes the Company’s other loans receivable activity for the years ended December 31, 2023, 2022 and 2021 (dollars in thousands):
|  | For the Year Ended December 31,
|  | 2023 |  | 2022 |  | 2021
Origination of loans receivable |  | $ | 8,486 |  |  | $ | 14,500 |  |  | $ | 1,253 |
Principal payments |  | (988) |  |  | (6,307) |  |  | (393) |
Accrued interest, net |  | 58 |  |  | (4) |  |  | (6) |
Provision for loan losses, net |  | — |  |  | (3,844) |  |  | — |
Net increase in other loans receivable |  | $ | 7,556 |  |  | $ | 4,345 |  |  | $ | 854 |
Expected credit losses and recoveries are recorded in provision for loan losses, net in the consolidated statements of operations. During the year ended December 31, 2022, the Company recorded a $4.6 million expected credit loss related to two other loans receivable that have been placed on non-accrual status, including an unfunded loan commitment of $0.4 million, net of a loan loss recovery of $0.8 million related to a loan previously written-off. During the year ended December 31, 2022, the Company fully reserved and wrote-off $2.5 million, related to one other loan receivable, in connection with the sale of six SNFs and one multi-service campus. During the years ended December 31, 2023 and 2021, the Company had no additional expected credit loss and did not consider any loan receivable investments to be impaired. The following table summarizes the interest and other income recognized from the Company’s loans receivable and other investments during the years ended December 31, 2023, 2022 and 2021 (dollar amounts in thousands):
|  | For the Year Ended December 31,
Investment |  | 2023 |  | 2022 |  | 2021
Mortgage secured loans receivable |  | $ | 13,329 |  |  | $ | 4,853 |  |  | $ | — |
Mezzanine loans receivable |  | 3,683 |  |  | 3,489 |  |  | 1,825 |
Preferred equity investments |  | 18 |  |  | — |  |  | — |
Other loans receivable |  | 847 |  |  | 284 |  |  | 331 |
Other |  | 1,294 |  |  | — |  |  | — |
Total |  | $ | 19,171 |  |  | $ | 8,626 |  |  | $ | 2,156 |

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