Real Estate Assets, Net

9 Months Ended

Sep. 30, 2023

Real Estate Assets, NetThe Company acquires real estate assets either through direct purchases of properties or through conversions of mortgage loans in its portfolio when a mortgage loan is foreclosed upon and the Company takes title to the property on the foreclosure date or the borrower surrenders the deed in lieu of foreclosure.

Property Held-for-Sale

As of September 30, 2023 and December 31, 2022, the Company’s net investments in real estate owned properties was $4.0 million and $6.3 million, respectively, all of which related to properties held-for-sale. REO property is considered held-for-sale if the REO is expected to be actively marketed for sale. Also, included in the properties held-for-sale balance for the periods as of September 30, 2023 and December 31, 2022, was $0.2 million and $0.3 million, respectively, for properties undergoing renovation or which are otherwise in the process of being brought to market. As of September 30, 2023 and December 31, 2022, the Company had a total of 25 and 39 real estate owned properties, respectively. For the three and nine months ended September 30, 2023 and 2022, the majority of the additions to REO held-for-sale were acquired through foreclosure or deed in lieu of foreclosure, and reclassified out of the mortgage loan portfolio.

The following table presents the activity in the Company’s carrying value of property held-for-sale for the three and nine months ended September 30, 2023 and 2022 ($ in thousands):


	Three months ended September 30,						Nine months ended September 30,
	2023			2022			2023			2022
Property Held-for-Sale	Count	Amount		Count	Amount		Count	Amount		Count	Amount
Balance at beginning of period	28	$	3,745	37	$	7,434	39	$	6,333	31	$	6,063
Net transfers from mortgage loans	4	1,339		8	1,099		5	1,348		18	3,332
Purchases	—	—		1	27		—	—		1	27
Adjustments to record at lower of cost or fair value	—	(249)		—	22		—	(1,045)		—	(78)
Disposals	(7)	(795)		(9)	(2,508)		(19)	(2,596)		(13)	(3,270)
Balance at end of period	25	$	4,040	37	$	6,074	25	$	4,040	37	$	6,074

Dispositions

During the three and nine months ended September 30, 2023, the Company sold seven and 19 REO properties, respectively, realizing a net gain of approximately $0.1 million during both the three and nine months ended September 30, 2023. Comparatively, for the three and nine months ended September 30, 2022, the Company sold nine and 13 REO properties, respectively, realizing net gains of approximately $0.8 million during both periods. These amounts are included in Other income on the Company's consolidated statements of operations. During the three and nine months ended September 30, 2023, the Company recorded expense of lower of cost or net realizable value adjustments in real estate operating expense of $0.2 million and $1.0 million, respectively. Comparatively, during the three and nine months ended September 30, 2022, the Company recorded a recovery of lower of cost or net realizable value adjustments in real estate operating expense of $22 thousand and an expense of lower of cost or net realizable value adjustments in real estate operating expense of $0.1 million, respectively. These amounts are included in Other expense on the Company's consolidated statements of operations.