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Notes Receivable, Net | 9 Months Ended
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Sep. 30, 2020
Accounts And Notes Receivable Net [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):
|  | September 30, |  |  | December 31, |  |  | September 30, 2020 |
Description |  | 2020 |  |  | 2019 |  |  | Number |  |  | Maturity Date |  | Interest Rate |
Core Portfolio (a, b) |  | $ | 96,794 |  |  | $ | 76,467 |  |  |  | 6 |  |  | Apr 2020 - Dec 2027 |  | 4.7% - 9% |
Fund II |  |  | 33,608 |  |  |  | 33,170 |  |  |  | 1 |  |  | Dec 2020 |  | 1.75% |
Fund III |  |  | 5,306 |  |  |  | 5,306 |  |  |  | 1 |  |  | Jul 2020 |  | 18.0% |
Total notes receivable |  |  | 135,708 |  |  |  | 114,943 |  |  |  |  |  |  |  |  |  |  |
Credit loss reserves |  |  | (910 | ) |  |  | — |  |  |  |  |  |  |  |  |  |  |
Notes receivable, net |  | $ | 134,798 |  |  | $ | 114,943 |  |  |  | 8 |  |  |  |  |  |  |
| (a) | Includes two notes receivable from OP Unit holders, with balances totaling $6.5 million at September 30, 2020 and December 31, 2019.
| (b) | Balance at December 31, 2019 includes $38.7 million for the Brandywine Note Receivable, which was collateralized by the remaining 24.78% undivided interest in Town Center (Note 4).
During the nine months ended September 30, 2020, the Company:
| • | exchanged its Brandywine Note Receivable of $38.7 million plus accrued interest of $2.0 million for the remaining 24.78% undivided interest in Town Center (Note 4);
| • | recorded credit loss reserves of $0.4 million upon the adoption of ASC 326 (Note 1);
| • | increased the balance of a Fund II note receivable by the interest accrued of $0.4 million;
| • | made a Core loan for $54.0 million with an interest rate of 9% structured as a redeemable preferred equity investment in a property at 850 Third Avenue in Brooklyn, New York;
| • | issued a new Core note for $5.0 million with an interest rate of 8% collateralized by our partner’s 50% share of the LUF Portfolio (Note 4) in Washington, D.C.; and
| • | recorded additional credit loss reserves of $0.5 million related to new transactions and recent market volatility.
One Core note aggregating $21.6 million including accrued interest (exclusive of default interest and other amounts due on the loan) was in default at September 30, 2020 and December 31, 2019. 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 loan documents and otherwise. In addition, one Fund III note receivable aggregating $10.0 million, including accrued interest (exclusive of default interest and other amounts due on the loan) matured on July 1, 2020 and was not repaid. The Company is evaluating its rights and remedies in light of the default. The Company believes that the collateral and/or personal assets of the obligors on each loan is sufficient to cover all indebtedness to which it is owed on the loans. During the year ended December 31, 2019, the Company:
| • | redeemed its $15.3 million Fund IV investment plus accrued interest of $10.0 million;
| • | provided seller financing to the buyer in the amount of $13.5 million with an effective interest rate of 5.1%, collateralized by Pacesetter Park, in connection with the sale of the property (Note 2);
| • | funded an additional $4.3 million on a Core note receivable from an OP Unit holder;
| • | increased the balance of a Fund II note receivable by the interest accrued of $0.4 million;
| • | stopped accruing interest on one Fund III loan, due to the estimated market value of the collateral. The note had $4.7 million of accrued interest at each of December 31, 2018 and December 31, 2019 and was guaranteed by a third party; and
| • | modified one Core loan to defer $0.4 million of interest until maturity. Subsequent to modification, the first mortgage, which aggregated $20.8 million including accrued interest, was in default as of December 31, 2019.
The Company monitors the credit quality of its notes receivable on a quarterly basis and considers indicators of credit quality such as loan payment activity, the estimated fair value of the underlying collateral, the seniority of the Company’s loan in relation to other debt secured by the collateral and the prospects of the borrower. Earnings from these notes and mortgages receivable are reported within the Company’s Structured Financing segment (Note 12). The Company’s estimated reserve for credit losses related to its Structured Financing segment has been computed for its amortized cost basis in the portfolio, including accrued interest (Note 5), factoring historical loss experience in the United Sates for similar loans, as adjusted for current conditions, as well as the Company’s expectations related to future economic conditions. Due to the lack of comparability across the Structured Financing portfolio, each loan was evaluated separately. As a result, for non-collateral dependent loans with a total amortized cost of $92.5 million, inclusive of accrued interest of $8.7 million, credit loss reserves have been recorded aggregating $0.9 million at September 30, 2020. For certain loans in this portfolio, aggregating $55.7 million, inclusive of accrued interest of $3.8 million, at September 30, 2020, there has been no credit loss reserve established because (i) these loans are collateral-dependent loans, 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 September 30, 2020, the Company believes that the collateral for these three loans was sufficient to cover its investment.

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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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