As of December 31, 2023, assets and liabilities related to REO consisted of five properties: a multifamily property in Arlington Heights, IL; and four office properties located in Orange, CA, San Mateo, CA, Manhattan, NY, and Houston, TX. During the year ended December 31, 2023, the Company acquired via foreclosure in August 2023 and subsequently sold in November 2023 a multifamily property under development in Los Angeles, CA.

In 2021, the Company originated a $80.0 million senior loan secured by a multifamily property in Arlington Heights, IL. As of September 30, 2023, the loan had a risk rating of "4" with an amortized cost and carrying value of $79.7 million and $76.3 million, respectively. The loan was placed on non-accrual status and accounted for under cost-recovery during the fourth quarter of 2023. On December 28, 2023, the Company acquired the property through a foreclosure. The acquisition was accounted for as an asset acquisition. The Company recognized a realized loss on REO conversion of $8.5 million.

In 2019, the Company originated a $76.5 million senior loan secured by an office property in Orange, CA. As of September 30, 2023, the loan had a risk rating of "5", was on non-accrual status and accounted for under cost-recovery with an amortized cost and carrying value of $60.3 million and $24.3 million, respectively. On December 28, 2023, the Company acquired the property through a deed-in-lieu of foreclosure. This acquisition was accounted for as an asset acquisition. The Company recognized a realized loss on REO conversion of $40.4 million.

In 2019, the Company originated a $75.8 million senior loan secured by an office property in San Mateo, CA. As of September 30, 2023, the loan had a risk rating of "5" with an amortized cost and carrying value of $61.9 million and $32.6 million, respectively. The loan was placed on non-accrual status and accounted for under cost-recovery during the fourth quarter of 2023. On December 27, 2023, the Company acquired the property through a deed-in-lieu of foreclosure. This acquisition was accounted for as an asset acquisition. The Company recognized a realized loss on REO conversion of $42.4 million.

In 2019, the Company originated a $54.0 million senior loan secured by an office property in Manhattan, NY. As of September 30, 2023, the loan had a risk rating of "5", was on non-accrual status and accounted for under cost-recovery with an amortized cost and carrying value of $52.6 million and $44.3 million, respectively. On December 15, 2023, the Company acquired the property through a deed-in-lieu of foreclosure. This acquisition was accounted for as an asset acquisition. The Company recognized a realized loss on REO conversion of $14.8 million.

In 2022, the Company originated a $97.0 million senior loan secured by a multifamily property under development in Los Angeles, CA. As of June 30, 2023, the loan had a risk rating of "4" and was on non-accrual status, with an amortized cost and carrying value of $77.1 million and $71.1 million, respectively. On August 17, 2023, the Company acquired the property via foreclosure. This acquisition was accounted for as an asset acquisition.

In 2018, the Company originated a $55.7 million senior loan secured by an office property in Houston, TX. As of March 31, 2023, the loan had a risk rating of "5", was on non-accrual status and accounted for under cost-recovery, with an amortized cost and carrying value of $55.0 million and $46.0 million, respectively. On April 28, 2023, the Company acquired the property through a deed-in-lieu of foreclosure. This acquisition was accounted for as an asset acquisition.

The Company allocated the fair value of the assets and liabilities acquired during the year ended December 31, 2023, as of the acquisition date (dollars in thousands):


	Fair Value Allocation
Building and building improvements	$	103,293
Land and land improvements	91,484
Construction in progress	47,091
In-place lease intangibles	27,594
Above-market lease intangibles	3,982
Below-market lease intangibles	(4,311)
Total	$	269,133

The Company’s fair market value estimate was determined primarily using discounted cash flow models and Level 3 inputs, which include estimates of property-specific cash flows over a specific holding period, a discount rate range of 6.8% – 11.8%, and terminal capitalization rates ranging between 5.0% – 10.0%. These inputs are based on the location, type and nature of the property, costs-to-complete, expected time required to lease and stabilize the property, current sales and lease comparables, anticipated real estate and capital market conditions, and management’s knowledge, experience, and judgment.

During the three months ended December 31, 2023, the Company sold the Los Angeles, CA multifamily property under development for net cash proceeds of $75.4 million and recognized a gain on sale of real estate owned, net of $7.0 million on the consolidated statements of income and comprehensive income.

During June 2023, the Company obtained from a third party a $31.2 million first mortgage loan secured by the Houston, TX office property, which is classified as Mortgage loan payable, net on the Company's consolidated balance sheets. See Note 6 for details of the Mortgage loan payable.


	December 31, 2023
Assets
Cash	$	532
Real estate owned - Building and building improvements	103,293
Real estate owned - Land and land improvements	67,472

Real estate owned - Tenant improvements	4,299
Real estate owned	175,064
Accumulated depreciation	(1,007)
Real estate owned, net	174,057
In-place lease intangibles, net(1)	25,036
Above-market lease intangibles, net(1)	3,902
Leasing commissions, net(1)	533
Other assets, net(1)	12,384
Total assets	$	216,444
Liabilities
Mortgage loan payable, net(2)	$	30,551
Below-market lease intangibles, net(3)	3,707
Other liabilities(3)	3,214
Total liabilities	$	37,472

(1)Included within Other assets within the Company's consolidated balance sheet. Other assets, net includes $11.3 million of cash proceeds from the Company's mortgage loan payable escrowed for tenant improvements and leasing costs, and other working capital balances as of December 31, 2023.

(2)During the three months and year ended December 31, 2023, the Company incurred interest expense of $0.6 million and $1.4 million, respectively, which is included within Interest expense on the Company's consolidated statements of income and comprehensive income.

The Company acquired certain legacy tenant leases upon the acquisition of REO. These leases entitle the Company to receive contractual rent payments during the lease periods and tenant reimbursements for certain property operating expenses, including common area costs, insurance, utilities and real estate taxes. The Company elected the practical expedient to not separate the lease and non-lease components of the rent payments and accounts for these leases as operating leases.


	Three Months Ended		Twelve Months Ended
	December 31, 2023			December 31, 2023
Rental income
Minimum lease payments	$	2,381		$	5,292
Variable lease payments	403			1,047
Total rental income	2,784			6,339
Other operating income	1,489			1,490
Revenue from real estate owned operations	4,273			7,829
Rental property operating expenses(1)	1,367			3,955
Depreciation and amortization(2)	1,219			3,577
Expenses from real estate owned operations	2,586			7,532
Net income from REO	$	1,687		$	297

(1)Excludes $0.6 million and $1.4 million of interest expense incurred during the three months and year ended December 31, 2023, respectively, which is included within Interest expense on the Company's consolidated statements of income and comprehensive income.

For the year ended December 31, 2023, the Company's capital expenditures were $5.4 million, as shown on the Company's consolidated statements of cash flows. Substantially all of the Company's real estate-related investing activity related to capital expenditures for its REO assets.


	December 31, 2023
Intangible assets:
In-place lease intangibles	$	27,594
Above-market lease intangibles	3,982
Leasing commissions	545
Total intangible assets	32,121
Accumulated amortization:
In-place lease intangibles	(2,558)
Above-market lease intangibles	(80)
Leasing commissions	(12)
Total accumulated amortization	(2,650)
Intangible assets, net	$	29,471

Intangible liabilities:
Below-market lease intangibles	$	4,311
Total intangible liabilities	4,311
Accumulated amortization:
Below-market lease intangibles	(604)
Total accumulated amortization	(604)
Intangible liabilities, net	$	3,707


Year	In-place lease intangibles	Above-market lease intangibles	Leasing commissions	Below-market lease intangibles
2024	8,995	958	61	(1,211)
2025	4,077	877	64	(704)
2026	2,797	626	64	(496)
2027	1,672	484	64	(300)
2028	1,430	426	64	(293)

The weighted-average amortization period for the acquired in-place lease intangibles, above-market lease intangibles, leasing commissions, and below-market lease intangibles acquired during the year ended December 31, 2023, were 7.1 years, 6.2 years, 8.4 years, and 5.8 years, respectively.

Minimum rental amounts due under tenant leases are generally subject either to scheduled fixed increases or adjustments. The following table presents approximate future minimum rental income under noncancellable operating leases, excluding variable lease revenue of tenant reimbursements, to be received over the next five years and thereafter as of December 31, 2023 and excludes leases at the Company's multifamily property as they are short term, generally 12 months or less (dollars in thousands):

In October 2022, the Company acquired an office property in Dallas, TX pursuant to a negotiated deed-in-lieu of foreclosure. The Company's cost basis in the office property was $76.5 million, equal to the estimated fair value of the collateral at the date of acquisition, net of estimated selling costs. During the period of ownership, the Company funded $2.1 million of capital expenditures related to tenant improvements for the property. On November 21, 2022, the Company sold the office property for gross proceeds of $78.6 million. Operating revenues and expenses related to the office property are reflected within Other income, net on the consolidated statements of income and comprehensive income and were immaterial to the financial results of the Company.

In December 2020, the Company acquired two largely undeveloped commercially-zoned land parcels on the Las Vegas Strip comprising 27 acres (the “Las Vegas land”) pursuant to a negotiated deed-in-lieu of foreclosure. The Company's cost basis in the Las Vegas land was $99.2 million, equal to the estimated fair value of the collateral at the date of acquisition, net of estimated selling costs.

During the three months ended December 31, 2021, the Company sold a 17-acre parcel of the Las Vegas land and retained the remaining 10-acre parcel of Las Vegas land at its estimated fair value at the time of acquisition, net of estimated selling costs, of $60.6 million. On April 4, 2022, the Company sold the remaining 10-acre parcel of Las Vegas land for net cash proceeds of $73.9 million and recognized a gain on sale of real estate owned, net, of $13.3 million on the consolidated statements of income and comprehensive income. The Las Vegas land parcels were sold for gains during the years ended December 31, 2022 and 2021. For the year ended December 31, 2022, operating revenues from Las Vegas land were sufficient to cover the operating expenses and were immaterial to the financial results of the Company.