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FAIR VALUE MEASUREMENTS | 9 Months Ended
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Sep. 30, 2025
Fair Value Disclosures [Abstract] |
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS The Company determines fair value based on quoted prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. GAAP guidance defines three levels of inputs that may be used to measure fair value: Level 1 – Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date. Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability. Level 3 – Unobservable inputs reflect the entity’s own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques. The determination of where an asset or liability falls in the hierarchy requires significant judgment and considers factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company evaluates its hierarchy disclosures each quarter and, depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter. Changes in the type of inputs may result in a reclassification for certain assets. The Company does not expect that changes in classifications between levels will be frequent. Items Measured at Fair Value on a Recurring Basis The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2025 and December 31, 2024, aggregated by the level in the fair value hierarchy within which those instruments fall (dollars in thousands):
| Level 1 |  | Level 2 |  | Level 3 |  | Balance as of September 30, 2025
Assets: |  |  |  |  |  |  |
Mortgage secured loans receivable | $ | — |  |  | $ | — |  |  | $ | 677,562 |  |  | $ | 677,562 |
Mezzanine loans receivable | — |  |  | — |  |  | 87,889 |  |  | 87,889 |
Financing receivable | — |  |  | — |  |  | 98,054 |  |  | 98,054 |
Total assets | $ | — |  |  | $ | — |  |  | $ | 863,505 |  |  | $ | 863,505 |
Liabilities: |  |  |  |  |  |  |
Cash flow hedges | $ | — |  |  | $ | 3,186 |  |  | $ | — |  |  | $ | 3,186 |
Total liabilities | $ | — |  |  | $ | 3,186 |  |  | $ | — |  |  | $ | 3,186 |
| Level 1 |  | Level 2 |  | Level 3 |  | Balance as of December 31, 2024
Assets: |  |  |  |  |  |  |
Mortgage secured loans receivable | $ | — |  |  | $ | — |  |  | $ | 660,392 |  |  | $ | 660,392 |
Mezzanine loans receivable | — |  |  | — |  |  | 80,612 |  |  | 80,612 |
Financing receivable | — |  |  | — |  |  | 96,004 |  |  | 96,004 |
Total | $ | — |  |  | $ | — |  |  | $ | 837,008 |  |  | $ | 837,008 |
The following table details the Company’s assets measured at fair value on a recurring basis using Level 3 inputs (dollars in thousands):
| Investments in Real Estate Secured Loans |  | Investments in Mezzanine Loans |  | Investment in Financing Receivable
Balance as of December 31, 2024 | $ | 660,392 |  |  | $ | 80,612 |  |  | $ | 96,004 |
Originations | 20,065 |  |  | 6,389 |  |  | — |
Accrued interest, net | (40) |  |  | 74 |  |  | 2,050 |
Unrealized gain, net | 6,447 |  |  | 814 |  |  | — |
Payments | (9,302) |  |  | — |  |  | — |
Balance as of September 30, 2025 | $ | 677,562 |  |  | $ | 87,889 |  |  | $ | 98,054 |
Real estate secured and mezzanine loans receivable, at fair value: The fair value of the secured and mezzanine loans receivables were estimated using an internal valuation model that considered the expected future cash flows of the investment, the underlying collateral value, market interest rates and other credit enhancements. As such, the Company classifies each instrument as Level 3 due to the significant unobservable inputs used in determining market interest rates for investments with similar terms. During the three and nine months ended September 30, 2025, the Company recorded a net unrealized gain of $4.0 million and $7.3 million, respectively, on its secured and mezzanine loans receivable, to bring the interest rates in line with market rates. During the three months ended September 30, 2024, the Company recorded unrealized gains of $5.9 million, which were partially offset by unrealized losses of $4.1 million, on its secured and mezzanine loans receivable to bring the interest rates in line with market rates. During the nine months ended September 30, 2024, the Company recorded unrealized losses on its secured and mezzanine loans receivable of $7.3 million, which were partially offset by unrealized gains of $6.6 million, to bring the interest rates in line with market rates. Future changes in market interest rates or collateral value could materially impact the estimated discounted cash flows that are used to determine the fair value of the secured and mezzanine loans receivable. As of September 30, 2025 and December 31, 2024, the Company did not have any loans that were 90 days or more past due. The following table shows the quantitative information about unobservable inputs related to the Level 3 fair value measurements comprising the investments in secured and mezzanine loans receivables as of September 30, 2025:
Type | Book Value as of September 30, 2025 |  | Valuation Technique |  | Unobservable Inputs |  | Range
Mortgage secured loans receivable | $ | 677,562 |  |  | Discounted cash flow |  | Discount Rate |  | 8% - 13%
Mezzanine loans receivable | 87,889 |  |  | Discounted cash flow |  | Discount Rate |  | 12% - 14%
Derivative instruments: The Company estimates the fair value of derivative instruments, including its interest rate caps, swaps and foreign currency forwards, using the assistance of a third party using inputs that are observable in the market, which include forward yield curves and other relevant information. In connection with the Acquisition, the Company assumed Care REIT’s two outstanding interest rate caps with an aggregate £100.0 million in notional value to mitigate the interest rate risk of the variable rate secured revolving credit facilities. The interest rate derivatives were not designated as a hedge in qualifying hedging relationships. In July 2025, the Company paid off its variable rate secured revolving credit facilities and terminated the interest rate cap instruments associated with them. See Note 8, Debt, for additional information. The Company recorded a $0.3 million loss and a $0.2 million net gain in interest expense related to the interest rate caps during the three and nine months ended September 30, 2025, respectively. In June 2025, the Company entered into four foreign currency forward contracts with £31.0 million in notional value issued at a weighted average GBP-USD exchange rate of 1.34 that are designated as cash flow hedges. The Company entered into cash flow hedges to hedge the foreign currency risk of intercompany loans denominated in GBP. On July 10, 2025, the Company entered into two interest rate swaps, with a notional amount of $250.0 million each, to hedge the variable cash flows associated with the Term Loan Facility (as defined below). The interest rate swaps convert the Term Loan Facility’s Term SOFR rate to an effective fixed interest rate of 3.5%. The Company’s objective in using interest rate derivatives is to change variable interest rates to fixed interest rates by using interest rate swaps. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the term of the agreements without exchange of the underlying notional amount. The following table summarizes the terms and fair values of the Company’s derivative financial instruments as of September 30, 2025:
Derivative |  |  |  | Notional Amount (in thousands) |  | Maturity or Settlement Date |  | Index |  | Strike Rate |  | Fair Value as of September 30, 2025 (in thousands)
Cash flow hedge |  |  |  | £ | 7,826 |  |  | December 2025 |  | GBP-USD exchange rate |  | $ | 1.34 |  |  | $ | (62) |
Cash flow hedge |  |  |  | £ | 7,656 |  |  | March 2026 |  | GBP-USD exchange rate |  | $ | 1.34 |  |  | (53) |
Cash flow hedge |  |  |  | £ | 7,741 |  |  | June 2026 |  | GBP-USD exchange rate |  | $ | 1.34 |  |  | (49) |
Interest rate swap |  |  |  | $ | 250,000 |  |  | June 2028 |  | USD-SOFR |  | 3.5 | % |  | 1,511 |
Interest rate swap |  |  |  | $ | 250,000 |  |  | June 2028 |  | USD-SOFR |  | 3.5 | % |  | 1,511 |
The table below presents the effect of cash flow hedge accounting on accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2025 (dollars in thousands):
|  |  |  | Gain (loss) recognized in Other Comprehensive Income (Loss) |  | Gain (loss) reclassified from Accumulated Other Comprehensive Income (Loss) into Income |  | Income Statement Location
|  |  |  | For the three months ended September 30, 2025 |  | For the nine months ended September 30, 2025 |  | For the three months ended September 30, 2025 |  | For the nine months ended September 30, 2025 |  |
Cash flow hedge |  |  |  | $ | (946) |  |  | $ | 200 |  |  | $ | (37) |  |  | $ | (37) |  |  | Gain/loss on foreign currency transaction
Interest rate swap |  |  |  | 1,987 |  |  | 1,987 |  |  | 1,035 |  |  | 1,035 |  |  | Interest expense
|  |  |  | $ | 1,041 |  |  | $ | 2,187 |  |  | $ | 998 |  |  | $ | 998 |  |  |
The Company estimates that an additional $0.2 million will be reclassified from accumulated other comprehensive income as a net decrease to interest expense and $0.2 million will be reclassified from accumulated other comprehensive income to loss on foreign currency transactions over the next 12 months. Financing receivable: The fair value was determined using a widely accepted valuation technique, discounted cash flow analysis, on the expected cash flows. The discount rate used to value the future cash inflows of the financing receivable at September 30, 2025 was 12%. For the nine months ended September 30, 2025, there were no classification changes in assets and liabilities with Level 3 inputs in the fair value hierarchy. Items Disclosed at Fair Value Considerable judgment is necessary to estimate the fair value disclosure of financial instruments. The estimates of fair value presented herein are not necessarily indicative of the amounts that could be realized upon disposition of the financial instruments. A summary of the face value, carrying amount and fair value of the Company’s preferred equity investments and the Notes (as defined in Note 8, Debt, below) as of September 30, 2025 and December 31, 2024 is as follows (dollars in thousands):
|  |  | September 30, 2025 |  | December 31, 2024
| Level |  | Face Value |  | Carrying Amount |  | Fair Value |  | Face Value |  | Carrying Amount |  | Fair Value
Financial assets: |  |  |  |  |  |  |  |  |  |  |  |  |
Preferred equity investments | 3 |  | $ | 83,782 |  |  | $ | 84,494 |  |  | $ | 84,494 |  |  | $ | 53,782 |  |  | $ | 54,199 |  |  | $ | 54,199 |
Financial liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |
Senior unsecured notes payable | 2 |  | $ | 400,000 |  |  | $ | 397,594 |  |  | $ | 389,700 |  |  | $ | 400,000 |  |  | $ | 396,927 |  |  | $ | 381,812 |
Cash and cash equivalents, accounts and other receivables, accounts payable, and accrued liabilities: The carrying values for these instruments approximate their fair values due to the short-term nature of these instruments. Preferred equity investments: The fair value of the preferred equity investments was estimated using an internal valuation model that considered the expected future cash flows of the investment, the underlying collateral value, market interest rates and other credit enhancements. The Company utilized discount rates of 11% to 15% in its fair value calculation. As such, the Company classifies these instruments as Level 3. Loan receivable, at amortized cost: The carrying value of the loan receivable at amortized cost approximates fair value due to the short-term nature of this instrument. Senior unsecured notes payable: The fair value of the Notes was determined using third-party quotes derived from orderly trades. Unsecured revolving credit facility and senior unsecured term loan: The fair values approximate their carrying values as the interest rates are variable and approximate prevailing market interest rates and spreads for similar debt arrangements.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (bbb)(1) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 2: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 107 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-107 Reference 3: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 100 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-100 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (c)(3) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2E -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2E Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (e) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (g) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Topic 940 -SubTopic 820 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147478119/940-820-50-1 + Details
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