Finance Receivables |
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| Receivables [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Finance Receivables | Finance Receivables Assets representing rights to receive money on demand or at fixed or determinable dates are referred to as finance receivables. Our finance receivables portfolio consists of our Net investments in finance leases and loans receivable (net of allowance for credit losses). Operating leases are not included in finance receivables. Finance Receivables Net investments in finance leases and loans receivable are summarized as follows (in thousands):
__________ (a)Amounts are net of allowance for credit losses, as disclosed below under Net Investments in Direct Financing Leases. (b)These investments are accounted for as loans receivable in accordance with ASC 310, Receivables and ASC 842, Leases. Maturity dates reflect the current lease maturity dates. Amounts are net of allowance for credit losses of $6.2 million and $0.8 million as of June 30, 2024 and December 31, 2023, respectively. (c)These investments are assessed for credit loss allowances but no such allowances were recorded as of June 30, 2024 or December 31, 2023. (d)Amounts are net of allowance for credit losses of $2.1 million as of December 31, 2023. No such allowance was recorded as of June 30, 2024. During the six months ended June 30, 2024, the U.S. dollar strengthened against the euro, resulting in a $15.0 million decrease in the carrying value of Net investments in finance leases and loans receivable from December 31, 2023 to June 30, 2024. Income from finance leases and loans receivable is summarized as follows (in thousands):
Net Investments in Direct Financing Leases Net investments in direct financing leases is summarized as follows (in thousands):
__________ (a)During the six months ended June 30, 2024 and 2023, we recorded a net release of allowance for credit losses of $8.4 million and $3.6 million, respectively, on our net investments in direct financing leases due to changes in expected economic conditions, which was included within Other gains and (losses) in our consolidated statements of income. In addition, during the six months ended June 30, 2024, we reduced the allowance for credit losses balance by $17.0 million, in connection with the reclassification of certain properties from Net investments in finance leases and loans receivable to Land, buildings and improvements — net lease and other, as described below. During the six months ended June 30, 2024, we reclassified 14 properties with an aggregate carrying value of $105.5 million from Net investments in finance leases and loans receivable to Land, buildings and improvements — net lease and other in connection with changes in lease classifications due to extensions of the underlying leases or entering into a new lease. In addition, during the six months ended June 30, 2024, we sold one property accounted for as a direct financing lease that had a net carrying value of $5.8 million. Loans Receivable During the six months ended June 30, 2024, we entered into the following sale-leaseback, which was deemed to be a loan receivable in accordance with ASC 310, Receivables and ASC 842, Leases (dollars in thousands):
__________ (a)Amount reflects the applicable exchange rate on the date of transaction. In March 2024, a secured loan receivable was repaid to us for $24.0 million. In connection with this repayment, we recorded a release of allowance for credit losses of $2.1 million since the loan principal was fully repaid. In addition, we collected $1.4 million of unpaid interest related to a prior year upon repayment of this secured loan receivable, which was included in Income from finance leases and loans receivable on the consolidated statements of income for the six months ended June 30, 2024. In June 2024, in connection with a property disposition, we provided financing to the buyer of $15.0 million with an interest rate of 15.0%, maturing in August 2024. This secured loan receivable is included Net investments in finance leases and loans receivable on our consolidated balance sheets. Net Investments in Sales-Type Leases During the six months ended June 30, 2024, we completed the sale of a portfolio of 78 net-lease self-storage properties located in the United States, which was accounted for as net investments in sales-type leases and included in Net investments in finance leases and loans receivable in the consolidated balance sheets. As a result, the carrying value of Net investments in finance leases and loans receivable decreased by $451.4 million from December 31, 2023 to June 30, 2024 (Note 14). The tenant had previously provided notice of its intention to exercise its option to repurchase the properties during the first quarter of 2023. We recognized an aggregate Gain on sale of real estate, net, of $176.2 million during the six months ended June 30, 2023 related to this transaction. During the six months ended June 30, 2024, we completed the sale of a portfolio of 70 net-lease office properties located in Andalusia, Spain, to the tenant occupying the properties, which was accounted for as net investments in sales-type leases and included in Net investments in finance leases and loans receivable in the consolidated balance sheets. As a result, the carrying value of Net investments in finance leases and loans receivable decreased by $359.3 million from December 31, 2023 to June 30, 2024 (Note 14). We had previously entered into an agreement to sell the portfolio to the tenant occupying the properties during the fourth quarter of 2023. We recognized an aggregate Gain on sale of real estate, net, of $59.1 million during the three months ended December 31, 2023 related to this transaction. Prior to the reclassifications of certain properties to net investments in sales-type leases, earnings from such investments were recognized in Lease revenues in the consolidated financial statements. Net investments in sales-type leases is summarized as follows (in thousands):
__________ (a)Includes estimated purchase price and total rents owed. Credit Quality of Finance Receivables We generally invest in facilities that we believe are critical to a tenant’s business and therefore have a lower risk of tenant default. At both June 30, 2024 and December 31, 2023, no material balances of our finance receivables were past due. Other than the lease extensions and new lease noted under Net Investments in Direct Financing Leases above, there were no material modifications of finance receivables during the six months ended June 30, 2024. We evaluate the credit quality of our finance receivables utilizing an internal five-point credit rating scale, with one representing the highest credit quality and five representing the lowest. A credit quality of one through three indicates a range of investment grade to stable. A credit quality of four through five indicates a range of inclusion on the watch list to risk of default. The credit quality evaluation of our finance receivables is updated quarterly. A summary of our finance receivables by internal credit quality rating, excluding our allowance for credit losses, is as follows (dollars in thousands):
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