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FAIR VALUE MEASUREMENTS
6 Months Ended
Jun. 30, 2023
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 measured at fair value on a recurring basis as of June 30, 2023 and December 31, 2022, aggregated by the level in the fair value hierarchy within which those instruments fall (dollars in thousands):
Level 1Level 2Level 3
Balance as of June 30, 2023
Assets:
Mortgage secured loans receivable$— $— $144,192 $144,192 
Mezzanine loans receivable— — 22,630 22,630 
Total$— $— $166,822 $166,822 
Level 1Level 2Level 3
Balance as of December 31, 2022
Assets:
Mortgage secured loans receivable$— $— $117,684 $117,684 
Mezzanine loans receivable— — 38,684 38,684 
Total$— $— $156,368 $156,368 

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 LoansInvestments in Mezzanine Loans
Balance at December 31, 2022
$117,684 $38,684 
Loan originations28,243 — 
Accrued interest, net(21)(163)
Unrealized losses on other real estate related investments, net(1,714)(891)
Repayments— (15,000)
Balance as of June 30, 2023
$144,192 $22,630 
Real estate secured and mezzanine loans receivable: 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 months ended June 30, 2023, the Company recorded an unrealized loss of $1.9 million related to three mortgage loans and one mezzanine loan receivable due to rising interest rates and a $0.3 million loss due to a loan origination fee paid. During the six months ended June 30, 2023, the Company recorded an unrealized loss of $2.8 million related to three mortgage loans and one mezzanine loan receivable due to rising interest rates, partially offset by a reversal of a previously recognized unrealized loss of $0.5 million related to the repayment of one mezzanine loan receivable. 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 June 30, 2023 and December 31, 2022, 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 June 30, 2023:
Type
Book Value as of June 30, 2023
Valuation TechniqueUnobservable InputsRange
Mortgage secured loans receivable$144,192 Discounted cash flowDiscount Rate
10% - 14%
Mezzanine loan receivable22,630 Discounted cash flowDiscount Rate
12% - 14%
For the six months ended June 30, 2023, 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 Notes (as defined in Note 7, Debt, below) as of June 30, 2023 and December 31, 2022 using Level 2 inputs is as follows (dollars in thousands):  
 June 30, 2023December 31, 2022
 LevelFace
Value
Carrying
Amount
Fair
Value
Face
Value
Carrying
Amount
Fair
Value
Financial liabilities:
Senior unsecured notes payable2$400,000 $395,594 $346,588 $400,000 $395,150 $345,036 

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.

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 for similar debt arrangements.