Mortgage Notes Receivable

9 Months Ended

Sep. 30, 2018

Receivables [Abstract]

Mortgage Notes Receivable

Mortgage Notes Receivable, Net

As of September 30, 2018, the Company owned eight mortgage notes receivable with a weighted-average interest rate of 6.2% and weighted-average years to maturity of 11.9 years. The following table details the mortgage notes receivable as of September 30, 2018 (dollar amounts in thousands):

Outstanding Balance		Net Carrying Value		Interest Rate Range				Maturity Date Range
$	21,878	$	18,757	5.9	%	–	6.8%	December 2026	–	January 2033

The Company’s mortgage notes receivable are comprised primarily of fully-amortizing or nearly fully-amortizing first mortgage loans. The Company has one mortgage note receivable where the Company does not receive monthly payments of principal and interest but rather the interest is capitalized into the outstanding balance that is due at maturity. The mortgage notes receivable are primarily on commercial real estate, each leased to a single tenant. Therefore, the Company’s monitoring of the credit quality of its mortgage notes receivable is focused primarily on an analysis of the tenant, including review of tenant quality and ratings, trends in the tenant’s industry and general economic conditions and an analysis of measures of collateral coverage, such as an estimate of the loan-to-value ratio (principal amount outstanding divided by the estimated value of the property) and its remaining term until maturity.

During the three months ended September 30, 2018, the Company decided to sell its mortgage notes receivable and classified them as held for sale. Mortgage notes receivable held for sale are carried at the lower of cost or estimated fair value. The carrying value of seven of the eight mortgage notes receivable, totaling $17.3 million, exceeded the fair value, totaling $16.4 million, resulting in a valuation allowance of $0.9 million, which is included in other income, net in the accompanying consolidated statements of operations. See Note 8 – Fair Value Measures for a discussion of the Company’s fair value measurements regarding mortgage notes receivable. Prior to September 30, 2018, the Company classified its mortgage notes receivable as long-term investments, as the Company intended to hold the mortgage notes receivable for the foreseeable future or until maturity, and were carried on the Company’s consolidated balance sheets at amortized cost, net of any allowance for mortgage notes receivable losses.

The following table summarizes the scheduled aggregate principal payments due to the Company on the mortgage notes receivable subsequent to September 30, 2018 (in thousands):

	Outstanding Balance
Due within one year	$	976
Due after one year through five years	4,673
Due after five years through 10 years	7,145
Due after 10 years(1)	12,793
Total	$	25,587

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(1) Includes additional $3.7 million of interest that will be capitalized into the outstanding balance of the mortgage note receivable subsequent to September 30, 2018.