| Net Investment in Sales-type Leases and Ground Lease Receivables |
Note 4—Net Investment in Sales-type Leases and Ground Lease Receivables The Company classifies certain of its Ground Leases as sales-type leases and records the leases within “Net investment in sales-type leases” on the Company’s consolidated balance sheets and records interest income in “Interest income from sales-type leases” in the Company’s consolidated statements of operations. In addition, the Company may enter into transactions whereby it acquires land and enters into Ground Leases directly with the seller. These Ground Leases qualify as sales-type leases and, as such, do not qualify for sale leaseback accounting and are accounted for as financing receivables in accordance with ASC 310 - Receivables and are included in “Ground Lease receivables” on the Company’s consolidated balance sheets. The Company records interest income from Ground Lease receivables in “Interest income from sales-type leases” in the Company’s consolidated statements of operations. In June 2026, the Company formed a joint venture with a Brookfield affiliate on a portfolio of Ground Leases (the “Brookfield JV”). The Company contributed seven Ground Leases to the Brookfield JV and Brookfield acquired a 49% noncontrolling interest in the venture for cash at a gross valuation of $348.0 million, or $170.5 million. The Company maintains control of the Brookfield JV and is responsible for the day-to-day operations of the venture and the management of its assets. The Company determined the Brookfield JV is a VIE under ASC 810 for which the Company is the primary beneficiary and consolidates the Brookfield JV in its consolidated financial statements. The contributions from Brookfield are accounted for as “noncontrolling interests” in the Company’s consolidated financial statements. The Company has a series of call options it can exercise beginning after seven years from the Brookfield JV inception date under which it can acquire Brookfield’s noncontrolling interest in the Brookfield JV at pre-determined prices. In May 2023, the Company entered into a joint venture with a sovereign wealth fund, which was and is an existing shareholder, focused on new acquisitions for certain Ground Lease investments. The Company committed approximately $275 million for a 55% controlling interest in the joint venture and the sovereign wealth fund committed approximately $225 million for a 45% noncontrolling interest in the joint venture. Each party’s commitment is discretionary. The joint venture is a voting interest entity and the Company consolidates the joint venture in its financial statements due to its controlling interest. The Company receives a management fee, measured on an asset-by-asset basis, equal to 25 basis points on invested equity for such asset for the first five years following its acquisition, and 15 basis points on invested equity thereafter. The Company will also receive a promote of 15% over a 9% internal rate of return, subject to a 1.275x multiple on invested capital. Since formation through August 30, 2024, the joint venture acquired nine Ground Leases for an aggregate purchase price of $170.4 million, of which $101.2 million had been funded as of August 30, 2024. On August 30, 2024, the Company acquired its partners’ share of the outstanding commitment for all existing Ground Leases in the venture for $48.3 million. The excess of the purchase price and related transaction costs over the carrying value of $46.0 million was recorded as a reduction to additional paid-in capital in the Company’s consolidated statement of changes in equity. The venture remains in place, and the partner's participation right in certain qualifying Ground Lease investment opportunities expired on September 30, 2024. The Company’s net investment in sales-type leases were comprised of the following ($ in thousands): | | | | | | | | | September 30, 2026 | | December 31, 2025 | Total undiscounted cash flows(1) | | $ | 36,370,600 | | $ | 34,314,838 | Unguaranteed estimated residual value(1) | | | 3,137,498 | | | 3,099,768 | Present value discount | | | (35,763,747) | | | (33,840,181) | Allowance for credit losses | | | (12,045) | | | (10,750) | Net investment in sales-type leases | | $ | 3,732,306 | | $ | 3,563,675 |
| (1) | As of September 30, 2026, total discounted cash flows were approximately $3,709 million and the discounted unguaranteed estimated residual value was $35.0 million. As of December 31, 2025, total discounted cash flows were approximately $3,541 million and the discounted unguaranteed estimated residual value was $33.7 million. |
The following table presents a rollforward of the Company’s net investment in sales-type leases and Ground Lease receivables for the nine months ended September 30, 2026 and 2025 ($ in thousands): | | | | | | | | | | | | Net Investment in | | Ground Lease | | | | | | Sales-type Leases | | Receivables | | Total | Nine Months Ended September 30, 2026 | | | | | | | | | | Beginning balance | | $ | 3,563,675 | | $ | 2,003,931 | | $ | 5,567,606 | Origination/acquisition/fundings(1) | | | 118,650 | | | 173,401 | | | 292,051 | Accretion | | | 51,276 | | | 29,773 | | | 81,049 | (Provision for) recovery of credit losses | | | (1,295) | | | (723) | | | (2,018) | Ending balance(2) | | $ | 3,732,306 | | $ | 2,206,382 | | $ | 5,938,688 |
| | | | | | | | | | | | Net Investment in | | Ground Lease | | | | | | Sales-type Leases | | Receivables | | Total | Nine Months Ended September 30, 2025 | | | | | | | | | | Beginning balance | | $ | 3,454,953 | | $ | 1,833,398 | | $ | 5,288,351 | Origination/acquisition/fundings(1) | | | 25,770 | | | 103,303 | | | 129,073 | Accretion | | | 48,697 | | | 26,646 | | | 75,343 | (Provision for) recovery of credit losses | | | (2,145) | | | (2,328) | | | (4,473) | Ending balance(2) | | $ | 3,527,275 | | $ | 1,961,019 | | $ | 5,488,294 |
| (1) | The net investment in sales-type leases is initially measured at the present value of the fixed and determinable lease payments, including any guaranteed or unguaranteed estimated residual value of the asset at the end of the lease, discounted at the rate implicit in the lease. For newly originated or acquired Ground Leases, the Company’s estimate of residual value equals the fair value of the land at lease commencement. |
| (2) | As of September 30, 2026 and December 31, 2025, all of the Company’s net investment in sales-type leases and Ground Lease receivables were current in their payment status. As of September 30, 2026, the Company’s weighted average accrual rate for its net investment in sales-type leases and Ground Lease receivables was 5.4% and 5.8%, respectively. As of September 30, 2026, the weighted average remaining life of the Company’s 61 Ground Lease receivables was 95.8 years. |
Allowance for Credit Losses—Changes in the Company’s allowance for credit losses on net investment in sales-type leases for the three and nine months ended September 30, 2026 and 2025 were as follows ($ in thousands): | | | | | | | | | | | | | | | Net investment in sales-type leases | | | Stabilized | | Development | | Unfunded | | | Three Months Ended September 30, 2026 | | Properties | | Properties | | Commitments | | Total | Allowance for credit losses at beginning of period | | $ | 10,490 | | $ | 648 | | $ | 50 | | $ | 11,188 | Provision for (recovery of) credit losses(1) | | | 821 | | | 86 | | | (1) | | | 906 | Allowance for credit losses at end of period(2) | | $ | 11,311 | | $ | 734 | | $ | 49 | | $ | 12,094 | | | | | | | | | | | | | | Three Months Ended September 30, 2025 | | | | | | | | | Allowance for credit losses at beginning of period | | $ | 7,833 | | $ | 497 | | $ | 30 | | $ | 8,360 | Provision for (recovery of) credit losses(1) | | | 607 | | | 29 | | | — | | | 636 | Allowance for credit losses at end of period(2) | | $ | 8,440 | | $ | 526 | | $ | 30 | | $ | 8,996 | | | | | | | | | | | | | | Nine Months Ended September 30, 2026 | | | | | | | | | Allowance for credit losses at beginning of period | | $ | 10,214 | | $ | 536 | | $ | 32 | | $ | 10,782 | Provision for (recovery of) credit losses(1) | | | 1,097 | | | 198 | | | 17 | | | 1,312 | Allowance for credit losses at end of period(2) | | $ | 11,311 | | $ | 734 | | $ | 49 | | $ | 12,094 | | | | | | | | | | | | | | Nine Months Ended September 30, 2025 | | | | | | | | | Allowance for credit losses at beginning of period | | $ | 6,385 | | $ | 436 | | $ | — | | $ | 6,821 | Provision for (recovery of) credit losses(1) | | | 2,055 | | | 90 | | | 30 | | | 2,175 | Allowance for credit losses at end of period(2) | | $ | 8,440 | | $ | 526 | | $ | 30 | | $ | 8,996 |
| (1) | During the three months ended September 30, 2026 and 2025, the Company recorded provisions for credit losses on net investment in sales-type leases of $0.9 million and $0.6 million, respectively. The provision for credit losses for the three months ended September 30, 2026 was due primarily to growth in the carrying value of the portfolio during the period and a worsening macroeconomic forecast since June 30, 2026. The provision for credit losses for the three months ended September 30, 2025 was due primarily to then current market conditions, including an increase in the Ground Lease cost to value ratio on the Company’s portfolio of Ground Leases since June 30, 2025, and growth in the carrying value of the portfolio during the period. During the nine months ended September 30, 2026 and 2025, the Company recorded provisions for credit losses on net investment in sales-type leases of $1.3 million and $2.2 million, respectively. The provision for credit losses for the nine months ended September 30, 2026 was due primarily to growth in the carrying value of the portfolio during the period and a worsening macroeconomic forecast since December 31, 2025, which was partially offset by a decrease in the Ground Lease cost to value ratio on the Company’s portfolio of Ground Leases since December 31, 2025. The provision for credit losses for the nine months ended September 30, 2025 was due primarily to then current market conditions, including an increase in the Ground Lease cost to value ratio on the Company’s portfolio of Ground Leases since December 31, 2024, and growth in the carrying value of the portfolio during the period. |
| (2) | Allowance for credit losses on unfunded commitments is recorded in “Accounts payable and accrued expenses” on the Company’s consolidated balance sheets. |
Changes in the Company’s allowance for credit losses on Ground Lease receivables for the three and nine months ended September 30, 2026 and 2025 were as follows ($ in thousands): | | | | | | | | | | | | | | | Ground Lease receivables | | | Stabilized | | Development | | Unfunded | | | Three Months Ended September 30, 2026 | | Properties | | Properties | | Commitments | | Total | Allowance for credit losses at beginning of period | | $ | 3,704 | | $ | 1,430 | | $ | 101 | | $ | 5,235 | Provision for (recovery of) credit losses(1) | | | 290 | | | 171 | | | (51) | | | 410 | Allowance for credit losses at end of period(2) | | $ | 3,994 | | $ | 1,601 | | $ | 50 | | $ | 5,645 | | | | | | | | | | | | | | Three Months Ended September 30, 2025 | | | | | | | | | Allowance for credit losses at beginning of period | | $ | 4,423 | | $ | 1,167 | | $ | 44 | | $ | 5,634 | Provision for (recovery of) credit losses(1) | | | 297 | | | 105 | | | (12) | | | 390 | Allowance for credit losses at end of period(2) | | $ | 4,720 | | $ | 1,272 | | $ | 32 | | $ | 6,024 | | | | | Nine Months Ended September 30, 2026 | | | | | | | | | Allowance for credit losses at beginning of period | | $ | 3,587 | | $ | 1,285 | | $ | 84 | | $ | 4,956 | Provision for (recovery of) credit losses(1) | | | 407 | | | 316 | | | (34) | | | 689 | Allowance for credit losses at end of period(2) | | $ | 3,994 | | $ | 1,601 | | $ | 50 | | $ | 5,645 | | | | | | | | | | | | | | Nine Months Ended September 30, 2025 | | | | | | | | | Allowance for credit losses at beginning of period | | $ | 2,652 | | $ | 1,012 | | $ | 37 | | $ | 3,701 | Provision for (recovery of) credit losses(1) | | | 2,068 | | | 260 | | | (5) | | | 2,323 | Allowance for credit losses at end of period(2) | | $ | 4,720 | | $ | 1,272 | | $ | 32 | | $ | 6,024 |
| (1) | During the three months ended September 30, 2026 and 2025, the Company recorded provisions for credit losses on Ground Lease receivables of $0.4 million and $0.4 million, respectively. The provision for credit losses for the three months ended September 30, 2026 was due primarily to growth in the carrying value of the portfolio during the period and a worsening macroeconomic forecast since June 30, 2026. The provision for credit losses for the three months ended September 30, 2025 was due primarily to then current market conditions, including an increase in the Ground Lease cost to value ratio on the Company’s portfolio of Ground Leases since June 30, 2025, and growth in the carrying value of the portfolio during the period. During the nine months ended September 30, 2026 and 2025, the Company recorded provisions for credit losses on Ground Lease receivables of $0.7 million and $2.3 million, respectively. The provision for credit losses for the nine months ended September 30, 2026 was due primarily to growth in the carrying value of the portfolio during the period and a worsening macroeconomic forecast since December 31, 2025, which was partially offset by a decrease in the Ground Lease cost to value ratio on the Company’s portfolio of Ground Leases since December 31, 2025. The provision for credit losses for the nine months ended September 30, 2025 was due primarily to then current market conditions, including an increase in the Ground Lease cost to value ratio on the Company’s portfolio of Ground Leases since December 31, 2024. |
| (2) | Allowance for credit losses on unfunded commitments is recorded in “Accounts payable and accrued expenses” on the Company’s consolidated balance sheets. |
The Company’s amortized cost basis in net investment in sales-type leases and Ground Lease receivables, presented by year of origination and by stabilized or development status, was as follows as of September 30, 2026 ($ in thousands): | | | | | | | | | | | | | | | | | | | | | | | | Year of Origination | | | | | | 2026 | | 2025 | | 2024 | | 2023 | | 2022 | | Prior to 2022 | | Total | Net investment in sales-type leases | | | | | | | | | | | | | | | | | | | | | | Stabilized properties | | $ | — | | $ | 23,262 | | $ | 37,069 | | $ | 52,065 | | $ | 673,762 | | $ | 2,483,296 | | $ | 3,269,454 | Development properties | | | 82,561 | | | 58,678 | | | 116,808 | | | 22,830 | | | 39,729 | | | 154,291 | | | 474,897 | Total | | $ | 82,561 | | $ | 81,940 | | $ | 153,877 | | $ | 74,895 | | $ | 713,491 | | $ | 2,637,587 | | $ | 3,744,351 |
| | | | | | | | | | | | | | | | | | | | | | | | Year of Origination | | | | | | 2026 | | 2025 | | 2024 | | 2023 | | 2022 | | Prior to 2022 | | Total | Ground Lease receivables | | | | | | | | | | | | | | | | | | | | | | Stabilized properties | | $ | 29,606 | | $ | 38,638 | | $ | — | | $ | 20,278 | | $ | 161,225 | | $ | 900,114 | | $ | 1,149,861 | Development properties | | | 52,663 | | | 122,083 | | | 132,560 | | | 25,253 | | | 648,334 | | | 81,223 | | | 1,062,116 | Total | | $ | 82,269 | | $ | 160,721 | | $ | 132,560 | | $ | 45,531 | | $ | 809,559 | | $ | 981,337 | | $ | 2,211,977 |
The Company’s amortized cost basis in net investment in sales-type leases and Ground Lease receivables, presented by year of origination and by stabilized or development status, was as follows as of December 31, 2025 ($ in thousands): | | | | | | | | | | | | | | | | | | | | | | | | Year of Origination | | | | | | 2025 | | 2024 | | 2023 | | 2022 | | 2021 | | Prior to 2021 | | Total | Net investment in sales-type leases | | | | | | | | | | | | | | | | | | | | | | Stabilized properties | | $ | 22,955 | | $ | 36,488 | | $ | 51,253 | | $ | 665,105 | | $ | 1,119,446 | | $ | 1,329,290 | | $ | 3,224,537 | Development properties | | | 21,606 | | | 114,401 | | | 22,498 | | | 39,194 | | | 123,669 | | | 28,520 | | | 349,888 | Total | | $ | 44,561 | | $ | 150,889 | | $ | 73,751 | | $ | 704,299 | | $ | 1,243,115 | | $ | 1,357,810 | | $ | 3,574,425 |
| | | | | | | | | | | | | | | | | | | | | | | | Year of Origination | | | | | | 2025 | | 2024 | | 2023 | | 2022 | | 2021 | | Prior to 2021 | | Total | Ground Lease receivables | | | | | | | | | | | | | | | | | | | | | | Stabilized properties | | $ | 38,076 | | $ | — | | $ | 19,950 | | $ | 158,930 | | $ | 204,531 | | $ | 655,451 | | $ | 1,076,938 | Development properties | | | 58,861 | | | 128,497 | | | 24,890 | | | 639,514 | | | 80,103 | | | — | | | 931,865 | Total | | $ | 96,937 | | $ | 128,497 | | $ | 44,840 | | $ | 798,444 | | $ | 284,634 | | $ | 655,451 | | $ | 2,008,803 |
Future Minimum Lease Payments under Sales-type Leases—Future minimum lease payments to be collected under sales-type leases accounted for under ASC 842 - Leases, excluding lease payments that are not fixed and determinable, in effect as of September 30, 2026, are as follows by year ($ in thousands): | | | | | | | | | | | | | | | | | | | | | Fixed Bumps | | | | | | Fixed Bumps | | | | | with | | | | | | with Inflation | | Fixed | | Percentage | | | | | | Adjustments | | Bumps | | Rent | | Total | 2026 (remaining three months) | | $ | 29,618 | | $ | 2,306 | | $ | 424 | | $ | 32,348 | 2027 | | | 121,024 | | | 9,320 | | | 1,695 | | | 132,039 | 2028 | | | 123,836 | | | 9,595 | | | 1,746 | | | 135,177 | 2029 | | | 125,647 | | | 9,785 | | | 1,753 | | | 137,185 | 2030 | | | 128,961 | | | 11,005 | | | 1,753 | | | 141,719 | Thereafter | | | 31,994,215 | | | 3,513,757 | | | 284,160 | | | 35,792,132 | Total undiscounted cash flows | | $ | 32,523,301 | | $ | 3,555,768 | | $ | 291,531 | | $ | 36,370,600 |
During the three and nine months ended September 30, 2026 and 2025, the Company recognized interest income from sales-type leases in its consolidated statements of operations as follows ($ in thousands): | | | | | | | | | | | | Net Investment | | Ground | | | | | | in Sales-type | | Lease | | | | Three Months Ended September 30, 2026 | | Leases | | Receivables | | Total | Cash | | $ | 31,509 | | $ | 19,910 | | $ | 51,419 | Non-cash | | | 17,180 | | | 10,168 | | | 27,348 | Total interest income from sales-type leases | | $ | 48,689 | | $ | 30,078 | | $ | 78,767 |
| | | | | | | | | | | | Net Investment | | Ground | | | | | | in Sales-type | | Lease | | | | Three Months Ended September 30, 2025 | | Leases | | Receivables | | Total | Cash | | $ | 29,000 | | $ | 17,592 | | $ | 46,592 | Non-cash | | | 16,655 | | | 9,182 | | | 25,837 | Total interest income from sales-type leases | | $ | 45,655 | | $ | 26,774 | | $ | 72,429 |
| | | | | | | | | | | | Net Investment | | Ground | | | | | | in Sales-type | | Lease | | | | Nine Months Ended September 30, 2026 | | Leases | | Receivables | | Total | Cash | | $ | 91,740 | | $ | 57,914 | | $ | 149,654 | Non-cash | | | 51,276 | | | 29,773 | | | 81,049 | Total interest income from sales-type leases | | $ | 143,016 | | $ | 87,687 | | $ | 230,703 |
| | | | | | | | | | | | Net Investment | | Ground | | | | | | in Sales-type | | Lease | | | | Nine Months Ended September 30, 2025 | | Leases | | Receivables | | Total | Cash | | $ | 86,627 | | $ | 50,765 | | $ | 137,392 | Non-cash | | | 48,697 | | | 26,646 | | | 75,343 | Total interest income from sales-type leases | | $ | 135,324 | | $ | 77,411 | | $ | 212,735 |
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