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Notes Receivable

12 Months Ended

Dec. 31, 2023

7. Notes Receivable

Notes receivable consists of mezzanine loans and working capital loans. The following table summarizes our investments in notes receivable at December 31, 2023 (dollar amounts in thousands):


Interest				Type of	Gross				Type of
Rate	IRR		Maturity	Loan	Investment			# of loans	Property
4.0%	—		2024	Working capital	$	13,531		1	SNF
5.0%	—		2025	Working capital		732		1	ALF
7.5%	—		2027	Working capital		550		1	ALF
8.0%	11.0	%	2027	Mezzanine		25,000		1	ALF
8.8%	12.0	%	2028	Mezzanine		17,000		1	ALF
6.5%	—		2030	Working capital		138		1	SNF
7.3%	—		2030	Working capital		500		1	ALF
7.3%	—		2030	Working capital		957		1	ALF
7.0%	—		2031	Working capital		2,693		1	ALF
					$	61,101	⁽¹⁾	9

(1)	Excludes the impact of credit loss reserve.

The following table is a summary of our notes receivable components at December 31, 2023 and 2022 (in thousands):


	At December 31,
	2023		2022
Mezzanine loans	$	42,000	$	36,815
Working capital loans		19,101		22,157
Notes receivable credit loss reserve		(611)		(589)
Total	$	60,490	$	58,383

The following table summarizes our notes receivable activity for the years ended December 31, 2023, 2022 and 2021 (in thousands):


	Year Ended December 31,
		2023			2022			2021
Advances under notes receivable	$	20,377	⁽¹⁾	$	37,192	⁽²⁾	$	16,353	⁽³⁾
Interest reserve withheld		—			—			353
Principal payments received under notes receivable		(14,687)	⁽⁴⁾		(6,843)			(2,694)
Write-off of notes receivable		(3,561)	⁽⁵⁾		—			—
Provision for credit losses		(22)			(303)			(140)
Net increase in notes receivable	$	2,107		$	30,046		$	13,872

(1)	During 2023, we originated a mezzanine loan to recapitalize an existing 130-unit ILF/ALF/MC in Georgia and construction of 89 additional units. The loan term is five years at an initial yield of 8.75% and an IRR of 12.0%.

(2)

During 2022, we originated a $25,000 mezzanine loan for the recapitalization of five ALFs located in Oregon and Montana. The mezzanine loan has a term of approximately five years, with two one-year extension options and bears interest at 8% with an IRR of 11%. The five communities have a total of 621 units and include independent living, assisted living and memory care.

(3)

During 2021, we originated a $4,355 mezzanine loan and withheld a $353 interest reserve. The mezzanine loan has a three-year term with two 12-month extensions. The initial rate is 8.0% for the first 18 months increasing to 10.5% thereafter with an 10.5% IRR. Additionally, we provided HMG Healthcare, LLC with a $25,000 secured working capital loan to facilitate the transition of the 11 properties from Senior Care and Abri Health and funded $9,900 under this working capital loan.

(4)

During 2023, we received $4,545, which includes a prepayment fee and the exit IRR totaling $190 from a mezzanine loan prepayment. The mezzanine loan was on a 136-unit ILF in Oregon. Additionally, another $7,461 mezzanine loan was effectively prepaid through converting it as part of our $51,111 investment in a participating interest in an existing mortgage loan that is secured by a 203-unit ALF, ILF and MC located in Georgia. We recorded $1,380 of interest income in connection with the effective prepayment of the mezzanine loan.

(5)	During 2023, we wrote-off an uncollectible working capital note.