Debt and Preferred Equity Investments (Tables)

3 Months Ended

Mar. 31, 2013

Debt and Preferred Equity Investments

Summary of debt investments

As of March 31, 2013 and December 31, 2012, we held the following debt investments with an aggregate weighted average current yield of approximately 11.1% at March 31, 2013 (in thousands):

Loan Type	March 31, 2013 Senior Financing		March 31, 2013 Carrying Value, Net of Discounts			December 31, 2012 Carrying Value, Net of Discounts			Initial Maturity Date
Other Loan	$	399,500	$	15,000		$	—		March 2015
Mezzanine Loan	205,000		66,936			66,544			February 2016
Mortgage/Mezzanine Loan	168,567		46,511			46,496			May 2016
Mezzanine Loan	177,000		15,644			15,906			May 2016
Junior Participation	133,000		49,000			49,000			June 2016
Mezzanine Loan	165,000		71,119			71,067			November 2016
Mortgage/Mezzanine Loan(1)	1,109,000		73,292			115,804			March 2017
Other Loan	15,000		3,500			3,500			September 2021
Mortgage(2)	—		218,270			218,068			—
Total fixed rate	$	2,372,067	$	559,272		$	586,385
Junior Participation(3)	$	60,250	$	10,875		$	10,875		June 2013
Mezzanine Loan(4)	75,000		7,650			7,650			July 2013
Mezzanine Loan(5)	—		30,000			—			December 2013
Mortgage/Mezzanine Loan(6)	330,000		132,000			132,000			July 2014
Mezzanine Loan(7)	62,500		37,500			37,500			July 2014
Mezzanine Loan	170,000		60,000			60,000			August 2014
Mortgage	—		15,000			15,000			September 2014
Mortgage/Mezzanine Loan(8)	—		50,439			47,679			February 2015
Mezzanine Loan(9)	92,711		56,289			56,289			December 2015
Mezzanine Loan(10)	775,000		75,000			—			March 2016
Mezzanine Loan	55,000		35,000			35,000			July 2016
Mezzanine Loan(11)	81,000		35,202			34,940			October 2016
Total floating rate	$	1,701,461	$	544,955		$	436,933
Total	4,073,528		1,104,227			1,023,318
Loan loss reserve(3)	—		(7,000		)	(7,000		)
	$	4,073,528	$	1,097,227		$	1,016,318

(1) Interest is added to the principal balance for this accrual only loan. In January 2013, we sold 50% of the mezzanine loan for $57.8 million and recognized additional income of $12.9 million, which is included in investment and preferred equity income on the consolidated statements of income. The unaccrued interest during the period in which the loan was on non-accrual status is being accrued as of January 2013.

(2) In November 2012, we acquired this non-performing loan with an original balance of $219.0 million, which accrues interest at its default rate. This loan matured in June 2012.

(3) Loan loss reserves are specifically allocated to investments.  Our reserves reflect management’s judgment of the probability and severity of losses based on Level 3 data.  We cannot be certain that our judgment will prove to be correct or that reserves will be adequate over time to protect against potential future losses.

(4) In November 2011, we entered into a loan participation agreement in the amount of $7.4 million on a $15.0 million mortgage. Due to our continued involvement with the loan, the portion that was participated out has been recorded in other assets and other liabilities in the accompanying consolidated balance sheet.

(5) In February 2013, we entered into a loan participation agreement in the amount of $30.0 million on a $100.0 million mortgage. The note has two one-year extension options.

(6) As part of the restructuring and refinancing of the related senior mortgage in July 2012, our outstanding investment in the amount of $49.9 million was repaid in full at maturity and we also entered into a loan participation in the amount of $182.0 million on the $462.0 million outstanding senior mortgage which maturity was extended to July 2014. In September 2012, we sold $50.0 million of our interest in the senior mortgage to a third party.

(7) In November 2012, we entered into a loan participation agreement in the amount of $5.0 million on a $37.5 million mortgage. As a result of the transfer not meeting the conditions for sale accounting, the portion that was participated out has been recorded in other liabilities in the accompanying consolidated balance sheet.

(8) As of March 31, 2013, we were committed to fund an additional $8.3 million in connection with this loan.

(9) As of March 31, 2013, we were committed to fund an additional $28.7 million in connection with this loan.

(10) In March 2013, we originated a $150.0 million junior mezzanine loan and simultaneously sold one-half of our interest at par.

(11) As of March 31, 2013, we were committed to fund an additional $14.8 million in connection with this loan.

Summary of preferred equity investments

As of March 31, 2013 and December 31, 2012, we held the following preferred equity investments, with an aggregate weighted average current yield of approximately 11.4% at March 31, 2013 (in thousands):

Type	March 31, 2013 SeniorFinancing		March 31, 2013 Carrying Value, Net of Discounts		December 31, 2012 Carrying Value, Net of Discounts		InitialMandatory Redemption
Preferred equity(1)(2)	$	480,000	$	103,437	$	100,831	July 2014
Preferred equity	70,000		10,000		10,000		October 2014
Preferred equity(1)(3)	57,087		20,238		19,136		April 2016
Preferred equity(1)	926,260		212,932		210,918		July 2016
	$	1,533,347	$	346,607	$	340,885

(1) The difference between the pay and accrual rates is included as an addition to the principal balance outstanding.

(2) This investment was classified as held for sale at June 30, 2009, but as held-to-maturity for all periods subsequent to June 30, 2009.  The reserve previously taken against this loan is being accreted up to the face amount through the maturity date. In connection with a recapitalization of the investment, our mezzanine loan was converted to preferred equity in 2011. We also made an additional $50.0 million junior preferred equity loan.  This junior preferred equity loan was repaid at par in February 2012.

(3) As of March 31, 2013, we are committed to fund an additional $5.7 million on this loan.

Rollforward of total allowance for loan loss reserves

The following table is a rollforward of our total loan loss reserves at March 31, 2013 and December 31, 2012 (in thousands):

	March 31,2013		December 31, 2012
Balance at beginning of year	$	7,000	$	50,175
Expensed	—		3,000
Recoveries	—		(2,436		)
Charge-offs and reclassifications	—		(43,739		)
Balance at end of period	$	7,000	$	7,000

Summary of impaired loans, which may include non-accrual loans

The following table presents impaired loans, which may include non-accrual loans, as of March 31, 2013 and December 31, 2012, respectively (in thousands):

	March 31, 2013						December 31, 2012
	Unpaid Principal Balance		Recorded Investment		Allowance Allocated		Unpaid Principal Balance		Recorded Investment		Allowance Allocated
With no related allowance recorded:
Commercial real estate	$	—	$	—	$	—	$	—	$	—	$	—
With an allowance recorded:
Commercial real estate	10,750		10,750		7,000		10,750		10,750		7,000
Total	$	10,750	$	10,750	$	7,000	$	10,750	$	10,750	$	7,000

Summary of average recorded investment in impaired loans, including non-accrual loans and the related investment and preferred equity income recognized

The following table presents the average recorded investment in impaired loans, which may include non-accrual loans and the related investment and preferred equity income recognized during the three months ended March 31, 2013 and 2012, respectively (in thousands):

	Three Months Ended March 31,
	2013		2012
Average recorded investment in impaired loans	$	10,864	$	79,937
Investment and preferred equity income recognized	227		1,562