| Fair Value Measurements |
15. | Fair Value Measurements |
In accordance with the accounting guidance regarding the fair value option for financial assets and financial liabilities, entities are permitted to choose to measure certain financial assets and liabilities at fair value, with the change in unrealized gains and losses reported in earnings. We did not elect the fair value option for any of our financial assets and financial liabilities. The carrying amount of cash and cash equivalents approximates their fair value because of the short-term maturity of these instruments. We do not invest our cash in auction rate securities. The carrying value and estimated fair value of our financial instruments as of June 30, 2025 and December 31, 2024 were as follows (in thousands): | | | | | | | | | | | | | | | | At June 30, 2025 | | At December 31, 2024 | | | | Carrying | | Fair | | Carrying | | Fair | | | | Value | | Value | | Value | | Value | | Financing receivables, net of credit loss reserve | | $ | 357,824 | | $ | 364,596 | (1) | $ | 357,867 | | $ | 363,228 | (1) | Mortgage loans receivable, net of credit loss reserve | | | 353,253 | | | 423,947 | (2) | | 312,583 | | | 386,871 | (2) | Notes receivable, net of credit loss reserve | | | 43,694 | | | 50,455 | (3) | | 47,240 | | | 53,549 | (3) | Revolving line of credit | | | 168,550 | | | 168,550 | (4) | | 144,350 | | | 144,350 | (4) | Term loans, net of debt issue costs | | | 99,883 | | | 100,000 | (4) | | 99,808 | | | 100,000 | (4) | Senior unsecured notes, net of debt issue costs | | | 428,024 | | | 400,459 | (5) | | 440,442 | | | 402,394 | (5) |
| (1) | Our investment in financing receivables is classified as Level 3. The fair value is determined using a widely accepted valuation technique, discounted cash flow analysis on the expected cash flows. The discount rate used to value our future cash inflows of the financing receivables at both June 30, 2025 and December 31, 2024 was 7.6% and 7.7%, respectively. |
| (2) | Our investment in mortgage loans receivable is classified as Level 3. The fair value is determined using a widely accepted valuation technique, discounted cash flow analysis on the expected cash flows. The discount rate is determined using our assumption on market conditions adjusted for market and credit risk and current returns on our investments. The discount rate used to value our future cash inflows of the mortgage loans receivable at June 30, 2025 and December 31, 2024 was 9.5% and 10.0%, respectively. |
| (3) | Our investments in notes receivable are classified as Level 3. The discount rate is determined using our assumption on market conditions adjusted for market and credit risk and current returns on our investments. The discount rate used to value our future cash flows of the notes receivable at June 30, 2025 and December 31, 2024 was 8.1% and 7.6%, respectively. |
| (4) | Our revolving line of credit and term loans bear interest at a variable interest rate. The estimated fair value of our revolving line of credit and term loans approximated their carrying values at June 30, 2025 and December 31, 2024 upon prevailing market interest rates for similar debt arrangements. |
| (5) | Our obligation under our senior unsecured notes is classified as Level 3 and thus the fair value is determined using a widely accepted valuation technique, discounted cash flow analysis on the expected cash flows. The discount rate is measured based upon management’s estimates of rates currently prevailing for comparable loans available to us, and instruments of comparable maturities. At June 30, 2025, the discount rate used to value our future cash outflow of our senior unsecured notes was 5.8% for those maturing before 2030 and 6.0% for those maturing at or beyond 2030. At December 31, 2024, the discount rate used to value our future cash outflow of our senior unsecured notes was 6.25% for those maturing before year 2030 and 6.5% for those maturing at or beyond year 2030. |
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