| Fair Value of Financial Instruments |
8. Fair Value of Financial Instruments The following tables present the Company’s investment assets carried at fair value on a recurring basis on the Consolidated Balance Sheets by their level in the fair value hierarchy as of December 31, 2025 and 2024 ($ in thousands):
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December 31, 2025 |
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Level 1 |
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Level 2 |
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Level 3 |
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Financial Assets: |
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Commercial real estate loan investments |
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$ |
— |
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|
$ |
— |
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|
$ |
2,177,027 |
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Investments in real estate-related assets: |
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|
|
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|
|
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Mortgage servicing rights |
|
|
— |
|
|
|
— |
|
|
|
74,848 |
|
Residential bridge loans |
|
|
— |
|
|
|
— |
|
|
|
27,735 |
|
Tax liens |
|
|
— |
|
|
|
— |
|
|
|
368,943 |
|
Total investments in real estate-related assets: |
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— |
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— |
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471,526 |
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Total |
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$ |
— |
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$ |
— |
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$ |
2,648,553 |
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December 31, 2024 |
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Level 1 |
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Level 2 |
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Level 3 |
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Financial Assets: |
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Commercial real estate loan investments |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
370,401 |
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Investments in real estate-related assets: |
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|
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|
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|
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Mortgage servicing rights |
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— |
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|
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— |
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|
|
9,835 |
|
Residential bridge loans |
|
|
— |
|
|
|
— |
|
|
|
2,750 |
|
Tax liens |
|
|
— |
|
|
|
— |
|
|
|
68,082 |
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Total investments in real estate-related assets: |
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— |
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|
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— |
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80,667 |
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Total |
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$ |
— |
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|
$ |
— |
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|
$ |
451,068 |
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The following table summarizes changes in investments during the period from June 4, 2024 (Date of Formation) through December 31, 2025 ($ in thousands):
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Commercial Real
Estate Loan
Investments |
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Mortgage Servicing Rights |
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Residential Bridge Loans |
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|
Tax Liens |
|
Balance at June 4, 2024 (Date of Formation) |
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$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
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Loan originations and fundings |
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370,401 |
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|
|
9,604 |
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|
2,750 |
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|
97,965 |
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Repayments |
|
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— |
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|
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— |
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— |
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(29,883 |
) |
Return of capital |
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— |
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(75 |
) |
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— |
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|
— |
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Net realized loss on investments |
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— |
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— |
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— |
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— |
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Net unrealized gain on investments |
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— |
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306 |
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— |
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— |
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Balance at December 31, 2024 |
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$ |
370,401 |
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|
$ |
9,835 |
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|
$ |
2,750 |
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|
$ |
68,082 |
|
Loan originations and fundings |
|
|
1,829,737 |
|
|
|
74,202 |
|
|
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37,657 |
|
|
|
540,440 |
|
Repayments |
|
|
(23,111 |
) |
|
|
— |
|
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(12,672 |
) |
|
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(237,860 |
) |
Return of capital |
|
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— |
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(4,373 |
) |
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— |
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|
— |
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Net realized loss on investments |
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— |
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— |
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— |
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(1,791 |
) |
Net unrealized gain (loss) on investments |
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— |
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(4,816 |
) |
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— |
|
|
|
72 |
|
Balance at December 31, 2025 |
|
$ |
2,177,027 |
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|
$ |
74,848 |
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|
$ |
27,735 |
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$ |
368,943 |
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The key unobservable inputs used in determining the fair value of the Company’s investments as of December 31, 2025 were as follows:
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Level 3 Asset Category |
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Fair
Value |
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|
Valuation
Technique |
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Significant
Unobservable
Inputs |
|
Range of
Inputs |
|
|
Impact to
Valuation from
an Increase in
Input |
Commercial real estate loan investments |
|
$ |
2,177,027 |
|
|
Discounted cash flow |
|
Discount rate |
|
4.10% - 12.84% |
|
|
Decrease |
Investments in real estate-related assets: |
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|
|
|
|
|
|
|
|
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Mortgage servicing rights |
|
$ |
74,848 |
|
|
NAV |
|
NAV |
|
$ |
74,848 |
|
|
Increase |
Residential bridge loans |
|
$ |
27,735 |
|
|
Discounted cash flow |
|
Discount rate |
|
10.00% |
|
|
Decrease |
Tax liens |
|
$ |
368,943 |
|
|
Yield analysis |
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Yield |
|
5.20% - 17.02% |
|
|
Increase |
The key unobservable inputs used in determining the fair value of the Company’s investments as of December 31, 2024 were as follows:
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Level 3 Asset Category |
|
Fair
Value |
|
|
Valuation
Technique |
|
Significant
Unobservable
Inputs |
|
Range of
Inputs |
|
|
Impact to
Valuation from
an Increase in
Input |
Commercial real estate loan investments |
|
$ |
370,401 |
|
|
Discounted cash flow |
|
Discount rate |
|
5.44% - 9.78% |
|
|
Decrease |
Investments in real estate-related assets: |
|
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|
|
|
|
|
|
|
|
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|
Mortgage servicing rights |
|
$ |
9,835 |
|
|
NAV |
|
NAV |
|
$ |
9,835 |
|
|
Increase |
Residential bridge loans |
|
$ |
2,750 |
|
|
Discounted cash flow |
|
Discount rate |
|
10.00% |
|
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Decrease |
Tax liens |
|
$ |
68,082 |
|
|
Yield analysis |
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Yield |
|
7.72% - 19.92% |
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|
Increase |
|