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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                    

Commission file number

1-10524

UDR, Inc.

(Exact name of registrant as specified in its charter)

Maryland

54-0857512

(State or other jurisdiction of

(I.R.S. Employer

incorporation of organization)

Identification No.)

1745 Shea Center Drive, Suite 200, Highlands Ranch, Colorado 80129

(Address of principal executive offices) (zip code)

(720283-6120

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01

UDR

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

Accelerated Filer

Non-Accelerated Filer

Smaller Reporting Company

Emerging Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

The number of shares of UDR, Inc.’s common stock, $0.01 par value, outstanding as of April 25, 2022 was 318,401,109.

UDR, INC.

INDEX

PAGE

PART I — FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Consolidated Balance Sheets as of March 31, 2022 (unaudited) and December 31, 2021 (audited)

3

Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021 (unaudited)

4

Consolidated Statements of Comprehensive Income/(Loss) for the three months ended March 31, 2022 and 2021 (unaudited)

5

Consolidated Statements of Changes in Equity for the three months ended March 31, 2022 and 2021 (unaudited)

6

Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 (unaudited)

7

Notes to Consolidated Financial Statements (unaudited)

9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

39

Item 3. Quantitative and Qualitative Disclosures About Market Risk

53

Item 4. Controls and Procedures

53

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

54

Item 1A. Risk Factors

54

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

70

Item 3. Defaults Upon Senior Securities

71

Item 4. Mine Safety Disclosures

71

Item 5. Other Information

71

Item 6. Exhibits

72

Signatures

73

Exhibit 31.1

Exhibit 31.2

Exhibit 32.1

Exhibit 32.2

UDR, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

March 31, 

December 31, 

    

2022

    

2021

(unaudited)

(audited)

ASSETS

Real estate owned:

 

  

 

  

Real estate held for investment

$

14,374,944

$

14,352,234

Less: accumulated depreciation

 

(5,288,902)

 

(5,136,589)

Real estate held for investment, net

 

9,086,042

 

9,215,645

Real estate under development (net of accumulated depreciation of $951 and $507, respectively)

 

457,160

 

388,062

Total real estate owned, net of accumulated depreciation

 

9,543,202

 

9,603,707

Cash and cash equivalents

 

895

 

967

Restricted cash

 

26,032

 

27,451

Notes receivable, net

 

26,577

 

26,860

Investment in and advances to unconsolidated joint ventures, net

 

669,343

 

702,461

Operating lease right-of-use assets

196,578

197,463

Other assets

 

222,337

 

216,311

Total assets

$

10,684,964

$

10,775,220

LIABILITIES AND EQUITY

 

  

 

  

Liabilities:

 

  

 

  

Secured debt, net

$

1,056,110

$

1,057,380

Unsecured debt, net

 

4,422,900

 

4,355,407

Operating lease liabilities

191,689

192,488

Real estate taxes payable

 

32,908

 

33,095

Accrued interest payable

 

25,700

 

45,980

Security deposits and prepaid rent

 

53,021

 

55,441

Distributions payable

 

130,369

 

124,729

Accounts payable, accrued expenses, and other liabilities

 

117,240

 

136,954

Total liabilities

 

6,029,937

 

6,001,474

Commitments and contingencies (Note 13)

 

  

 

  

Redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership

 

1,262,144

 

1,299,442

Equity:

 

  

 

  

Preferred stock, no par value; 50,000,000 shares authorized at March 31, 2022 and December 31, 2021:

 

  

 

  

8.00% Series E Cumulative Convertible; 2,695,363 and 2,695,363 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

 

44,764

 

44,764

Series F; 12,455,650 and 12,582,575 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

 

1

 

1

Common stock, $0.01 par value; 450,000,000 shares authorized at March 31, 2022 and December 31, 2021:

 

  

 

  

318,401,530 and 318,149,635 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

 

3,184

 

3,181

Additional paid-in capital

 

6,891,707

 

6,884,269

Distributions in excess of net income

 

(3,549,788)

 

(3,485,080)

Accumulated other comprehensive income/(loss), net

 

2,805

 

(4,261)

Total stockholders’ equity

 

3,392,673

 

3,442,874

Noncontrolling interests

 

210

 

31,430

Total equity

 

3,392,883

 

3,474,304

Total liabilities and equity

$

10,684,964

$

10,775,220

See accompanying notes to consolidated financial statements.

3

UDR, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

Three Months Ended

March 31, 

    

2022

2021

REVENUES:

    

  

    

  

Rental income

$

356,181

$

299,826

Joint venture management and other fees

 

1,085

 

1,615

Total revenues

 

357,266

 

301,441

OPERATING EXPENSES:

 

  

 

  

Property operating and maintenance

 

58,484

 

51,381

Real estate taxes and insurance

 

53,764

 

47,387

Property management

 

11,576

 

8,995

Other operating expenses

 

4,712

 

4,435

Real estate depreciation and amortization

 

163,622

 

144,088

General and administrative

 

14,908

 

12,736

Casualty-related charges/(recoveries), net

 

(765)

 

5,577

Other depreciation and amortization

 

3,075

 

2,601

Total operating expenses

309,376

 

277,200

Gain/(loss) on sale of real estate owned

50,829

Operating income

 

47,890

 

75,070

Income/(loss) from unconsolidated entities

 

5,412

 

4,922

Interest expense

 

(35,916)

 

(78,156)

Interest income and other income/(expense), net

 

(2,440)

 

2,057

Income/(loss) before income taxes

 

14,946

 

3,893

Tax (provision)/benefit, net

 

(343)

 

(619)

Net income/(loss)

 

14,603

 

3,274

Net (income)/loss attributable to redeemable noncontrolling interests in the Operating Partnership and DownREIT Partnership

 

(879)

 

(154)

Net (income)/loss attributable to noncontrolling interests

 

(19)

 

(16)

Net income/(loss) attributable to UDR, Inc.

 

13,705

 

3,104

Distributions to preferred stockholders — Series E (Convertible)

 

(1,092)

 

(1,056)

Net income/(loss) attributable to common stockholders

$

12,613

$

2,048

Income/(loss) per weighted average common share:

 

  

 

  

Basic

$

0.04

$

0.01

Diluted

$

0.04

$

0.01

Weighted average number of common shares outstanding:

 

  

 

  

Basic

 

318,009

 

296,537

Diluted

 

319,680

 

297,026

See accompanying notes to consolidated financial statements.

4

UDR, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

(In thousands)

(Unaudited)

Three Months Ended

March 31, 

2022

2021

Net income/(loss)

$

14,603

$

3,274

Other comprehensive income/(loss), including portion attributable to noncontrolling interests:

 

  

 

  

Other comprehensive income/(loss) - derivative instruments:

 

  

 

  

Unrealized holding gain/(loss)

 

7,193

 

127

(Gain)/loss reclassified into earnings from other comprehensive income/(loss)

 

387

 

446

Other comprehensive income/(loss), including portion attributable to noncontrolling interests

 

7,580

 

573

Comprehensive income/(loss)

 

22,183

 

3,847

Comprehensive (income)/loss attributable to noncontrolling interests

 

(1,412)

 

(213)

Comprehensive income/(loss) attributable to UDR, Inc.

$

20,771

$

3,634

See accompanying notes to consolidated financial statements.

5

UDR, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands, except per share data)

(Unaudited)

    

    

    

    

Distributions

Accumulated Other Comprehensive

Preferred

Common

Paid-in

in Excess of

Income/(Loss),

Noncontrolling

Stock

Stock

Capital

Net Income

net

Interests

Total

Balance at December 31, 2021

44,765

3,181

6,884,269

(3,485,080)

(4,261)

31,430

3,474,304

Net income/(loss) attributable to UDR, Inc.

13,705

13,705

Long Term Incentive Plan Unit grants/(vestings), net

(31,220)

(31,220)

Other comprehensive income/(loss)

7,066

7,066

Issuance/(forfeiture) of common and restricted shares, net

1

(1,041)

(1,040)

Issuance of common shares through public offering, net

(99)

(99)

Adjustment for conversion of noncontrolling interest of unitholders in the Operating Partnership and DownREIT Partnership

2

8,578

8,580

Common stock distributions declared ($0.38 per share)

(121,068)

(121,068)

Preferred stock distributions declared-Series E ($0.4114 per share)

(1,092)

(1,092)

Adjustment to reflect redemption value of redeemable noncontrolling interests

43,747

43,747

Balance at March 31, 2022

$

44,765

$

3,184

$

6,891,707

$

(3,549,788)

$

2,805

$

210

$

3,392,883

    

    

    

    

Distributions

    

Accumulated Other Comprehensive

    

    

Preferred

Common

Paid-in

in Excess of

Income/(Loss),

Noncontrolling

Stock

Stock

Capital

Net Income

net

Interests

Total

Balance at December 31, 2020

$

44,765

$

2,966

$

5,881,383

$

(2,685,770)

$

(9,144)

$

24,391

$

3,258,591

Net income/(loss) attributable to UDR, Inc.

 

 

 

 

3,104

 

 

 

3,104

Net income/(loss) attributable to noncontrolling interests

 

 

 

 

 

 

8

 

8

Redemption of noncontrolling interests in consolidated real estate

(125)

(125)

Long Term Incentive Plan Unit grants/(vestings), net

 

 

 

 

 

 

(9,601)

 

(9,601)

Other comprehensive income/(loss)

 

 

 

 

 

530

 

 

530

Issuance/(forfeiture) of common and restricted shares, net

 

 

1

 

(197)

 

 

 

 

(196)

Adjustment for conversion of noncontrolling interest of unitholders in the Operating Partnership and DownREIT Partnership

 

 

1

 

4,496

 

 

 

 

4,497

Common stock distributions declared ($0.3625 per share)

 

 

 

 

(107,651)

 

 

 

(107,651)

Preferred stock distributions declared-Series E ($0.3925 per share)

 

 

 

 

(1,056)

 

 

 

(1,056)

Adjustment to reflect redemption value of redeemable noncontrolling interests

 

 

 

 

(131,700)

 

 

 

(131,700)

Balance at March 31, 2021

$

44,765

$

2,968

$

5,885,682

$

(2,923,073)

$

(8,614)

$

14,673

$

3,016,401

See accompanying notes to consolidated financial statements.

6

UDR, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, except for share data)

(Unaudited)

Three Months Ended March 31, 

    

2022

    

2021

Operating Activities

  

 

  

Net income/(loss)

$

14,603

$

3,274

Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:

 

  

 

  

Depreciation and amortization

 

166,697

 

146,689

(Gain)/loss on sale of real estate owned

 

 

(50,829)

(Income)/loss from unconsolidated entities

 

(5,412)

 

(4,922)

Return on investment in unconsolidated joint ventures and partnerships

 

12,352

 

1,094

Amortization of share-based compensation

 

6,371

 

4,912

Loss on extinguishment of debt, net

41,950

Other

 

6,422

 

2,766

Changes in operating assets and liabilities:

 

 

  

(Increase)/decrease in operating assets

 

4,979

 

18

Increase/(decrease) in operating liabilities

 

(44,992)

 

(21,347)

Net cash provided by/(used in) operating activities

 

161,020

 

123,605

Investing Activities

 

  

 

  

Acquisition of real estate assets

 

 

(23,693)

Proceeds from sales of real estate investments, net

 

 

154,857

Development of real estate assets

 

(56,755)

 

(32,683)

Capital expenditures and other major improvements — real estate assets

 

(34,615)

 

(28,424)

Capital expenditures — non-real estate assets

 

(9,677)

 

(3,041)

Investment in unconsolidated joint ventures and partnerships

 

(48,233)

 

(48,604)

Distributions received from unconsolidated joint ventures and partnerships

 

68,185

 

32,648

Purchase deposits on pending acquisitions

(6,000)

(12,821)

Repayment/(issuance) of notes receivable, net

 

284

 

2,800

Net cash provided by/(used in) investing activities

 

(86,811)

 

41,039

Financing Activities

 

  

 

  

Payments on secured debt

 

(280)

 

(270)

Payments on unsecured debt

(300,000)

Net proceeds from the issuance of unsecured debt

 

 

298,776

Net proceeds/(repayment) of commercial paper

 

60,000

 

20,000

Net proceeds/(repayment) of revolving bank debt

 

7,648

 

(10,210)

Proceeds from the issuance of common shares through public offering, net

 

(99)

 

Distributions paid to redeemable noncontrolling interests

 

(7,862)

 

(8,517)

Distributions paid to preferred stockholders

 

(1,050)

 

(1,045)

Distributions paid to common stockholders

 

(115,405)

 

(106,833)

Payment of prepayment and extinguishment costs

(40,769)

Other

 

(18,652)

 

(5,347)

Net cash provided by/(used in) financing activities

 

(75,700)

 

(154,215)

Net increase/(decrease) in cash, cash equivalents, and restricted cash

 

(1,491)

 

10,429

Cash, cash equivalents, and restricted cash, beginning of year

 

28,418

 

24,171

Cash, cash equivalents, and restricted cash, end of period

$

26,927

$

34,600

Supplemental Information:

 

  

 

  

Interest paid during the period, net of amounts capitalized

$

55,126

$

56,281

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases

3,126

3,126

Cash paid/(refunds received) for income taxes

 

222

 

(36)

Non-cash transactions:

 

  

 

  

Secured debt assumed upon acquisition of real estate assets

$

$

58,464

Redeemable long-term incentive plan units

37,383

14,578

Development costs and capital expenditures incurred, but not yet paid

 

43,571

 

31,628

Conversion of Operating Partnership and DownREIT Partnership noncontrolling interests to common stock (142,984 shares in 2022 and 116,997 shares in 2021)

 

8,580

 

4,497

Distribution of equity securities from unconsolidated real estate technology investments

6,508

Dividends declared, but not yet paid

 

130,369

 

116,693

7

Three Months Ended March 31, 

    

2022

    

2021

The following reconciles cash, cash equivalents, and restricted cash to amounts as shown above:

Cash, cash equivalents, and restricted cash, beginning of year:

Cash and cash equivalents

$

967

$

1,409

Restricted cash

27,451

22,762

Total cash, cash equivalents, and restricted cash as shown above

$

28,418

$

24,171

Cash, cash equivalents, and restricted cash, end of period:

Cash and cash equivalents

$

895

$

1,172

Restricted cash

26,032

33,428

Total cash, cash equivalents, and restricted cash as shown above

$

26,927

$

34,600

See accompanying notes to consolidated financial statements.

8

Table of Contents

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

1. BASIS OF PRESENTATION

Organization and Formation

UDR, Inc. (“UDR,” the “Company,” “we,” or “our”) is a self-administered real estate investment trust, or REIT, that owns, operates, acquires, renovates, develops, redevelops, and manages apartment communities in targeted markets located in the United States. At March 31, 2022, our consolidated apartment portfolio consisted of 160 communities with a total of 53,503 apartment homes located in 21 markets. In addition, the Company has an ownership interest in 6,489 completed or to-be-completed apartment homes through unconsolidated joint ventures or partnerships, including 3,652 apartment homes owned by entities in which we hold preferred equity investments.

Basis of Presentation

The accompanying consolidated financial statements of UDR include its wholly-owned and/or controlled subsidiaries (see Note 4, Variable Interest Entities, for further discussion). All significant intercompany accounts and transactions have been eliminated in consolidation.

The accompanying consolidated financial statements include the accounts of UDR and its subsidiaries, including United Dominion Realty, L.P. (the “Operating Partnership” or the “OP”) and UDR Lighthouse DownREIT L.P. (the “DownREIT Partnership”). As of March 31, 2022, there were 186.2 million units in the Operating Partnership (“OP Units”) outstanding, of which 176.3 million OP Units (including 0.1 million of general partnership units), or 94.7%, were owned by UDR and 9.9 million OP Units, or 5.3%, were owned by outside limited partners. As of March 31, 2022, there were 32.4 million units in the DownREIT Partnership (“DownREIT Units”) outstanding, of which 20.8 million, or 64.2%, were owned by UDR and its subsidiaries and 11.6 million, or 35.8%, were owned by outside limited partners. The consolidated financial statements of UDR include the noncontrolling interests of the unitholders in the Operating Partnership and DownREIT Partnership.

The accompanying interim unaudited consolidated financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted according to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments and eliminations necessary for the fair presentation of our financial position as of March 31, 2022, and results of operations for the three months ended March 31, 2022 and 2021, have been included. Such adjustments are normal and recurring in nature. The interim results presented are not necessarily indicative of results that can be expected for a full year. The accompanying interim unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes for the year ended December 31, 2021 appearing in UDR’s Annual Report on Form 10-K, filed with the SEC on February 15, 2022.

The accompanying interim unaudited consolidated financial statements are presented in accordance with U.S. generally accepted accounting principles (“GAAP”). GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the dates of the interim unaudited consolidated financial statements and the amounts of revenues and expenses during the reporting periods. Actual amounts realized or paid could differ from those estimates. All significant intercompany accounts and transactions have been eliminated in consolidation.

The Company evaluated subsequent events through the date its financial statements were issued. No significant recognized or non-recognized subsequent events were noted other than those noted in Note 13, Commitments and Contingencies.

9

Table of Contents

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

MARCH 31, 2022

2. SIGNIFICANT ACCOUNTING POLICIES

Recent Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the first quarter of 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur. The ASU has not had a material impact on the consolidated financial statements and the Company does not expect the ASU to have a material impact on the consolidated financial statements on a prospective basis.

Principles of Consolidation

The Company accounts for subsidiary partnerships, joint ventures and other similar entities in which it holds an ownership interest in accordance with the consolidation guidance. The Company first evaluates whether each entity is a variable interest entity (“VIE”). Under the VIE model, the Company consolidates an entity when it has control to direct the activities of the VIE and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. Under the voting model, the Company consolidates an entity when it controls the entity through ownership of a majority voting interest.

Real Estate Sales Gain Recognition

For sale transactions resulting in a transfer of a controlling financial interest of a property, the Company generally derecognizes the related assets and liabilities from its Consolidated Balance Sheets and records the gain or loss in the period in which the transfer of control occurs. If control of the property has not transferred to the counterparty, the criteria for derecognition are not met and the Company will continue to recognize the related assets and liabilities on its Consolidated Balance Sheets.

Sale transactions to entities in which the Company sells a controlling financial interest in a property but retains a noncontrolling interest are accounted for as partial sales. Partial sales resulting in a change in control are accounted for at fair value and a full gain or loss is recognized. Therefore, the Company will record a gain or loss on the partial interest sold, and the initial measurement of our retained interest will be accounted for at fair value.

Sales of real estate to joint ventures or other noncontrolled investees are also accounted for at fair value and the Company will record a full gain or loss in the period the property is contributed.

To the extent that the Company acquires a controlling financial interest in a property that it previously accounted for as an equity method investment, the Company will not remeasure its previously held interest if the acquisition is treated as an asset acquisition. The Company will include the carrying amount of its previously held equity method interest along with the consideration paid and transaction costs incurred in determining the amounts to allocate to the related assets and liabilities acquired on its Consolidated Balance Sheets. When treated as an asset acquisition, the Company will not recognize a gain or loss on consolidation of a property.

Allowance for Credit Losses

The Company accounts for allowance for credit losses under the current expected credit loss (“CECL”) impairment model for its financial assets, including trade and other receivables, held-to-maturity debt securities, loans and other financial instruments, and presents the net amount of the financial instrument expected to be collected. The CECL impairment model excludes operating lease receivables. The CECL impairment model requires an estimate of expected credit losses, measured over the contractual life of an instrument, that considers forecasts of future economic

10

Table of Contents

UDR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

MARCH 31, 2022

conditions in addition to information about past events and current conditions. Based on this model, we analyze the following criteria, as applicable in developing allowances for credit losses: historical loss information, the borrower’s ability to make scheduled payments, the remaining time to maturity, the value of underlying collateral, projected future performance of the borrower and macroeconomic trends.

The Company measures credit losses of financial assets on a collective (pool) basis when similar risk characteristics exist. If the Company determines that a financial asset does not share risk characteristics with the Company’s other financial assets, the Company evaluates the financial asset for expected credit losses on an individual basis. Allowance for credit losses are recorded as a direct reduction from an asset’s amortized cost basis. Credit losses and recoveries are recorded in Interest income and other income/(expense), net on the Consolidated Statements of Operations. Recoveries of financial assets previously written off are recorded when received. For the three months ended March 31, 2022 and 2021, the Company recorded net credit recoveries of less than $0.1 million and less than $0.1 million, respectively, on the Consolidated Statements of Operations.

The Company has made the optional election provided by the standard not to measure allowance for credit losses for accrued interest receivables as the Company writes off any uncollectible accrued interest receivables in a timely manner. The Company periodically evaluates the collectability of its accrued interest receivables. A write-off is recorded when the Company concludes that all or a portion of its accrued interest receivable balance is no longer collectible.

Notes Receivable

Notes receivable relate to financing arrangements which are typically secured by assets of the borrower that may include real estate assets. Certain of the loans we extend may include characteristics such as options to purchase the project within a specific time window following expected project completion. These characteristics can cause the loans to fall under the definition of a VIE, and thus trigger consolidation consideration. We consider the facts and circumstances pertinent to each loan, including the relative amount of financing we are contributing to the overall project cost, decision making rights or control we hold, and our rights to expected residual gains or our obligations to absorb expected residual losses from the project. If we are deemed to be the primary beneficiary of a VIE due to holding a controlling financial interest, the majority of decision making control, or by other means, consolidation of the VIE would be required. The Company has concluded that it is not the primary beneficiary of the borrowing entities of the existing loans.

Additionally, we analyze each loan arrangement that involves real estate development to consider whether the loan qualifies for accounting as a loan or as an investment in a real estate development project. The Company has evaluated its real estate loans, where appropriate, for accounting treatment as loans versus real estate development projects, as required by ASC 310-10. For each loan, the Company has concluded that the characteristics and the facts and circumstances indicate that loan accounting treatment is appropriate.

The following table summarizes our Notes receivable, net as of March 31, 2022 and December 31, 2021 (dollars in thousands):

Interest rate at

Balance Outstanding

    

March 31, 

    

March 31, 

    

December 31, 

2022

2022

2021

Note due May 2022 (a)

N/A

$

$

2,760