Debt and Preferred Equity Investments (Tables)

6 Months Ended

Jun. 30, 2013

Debt and Preferred Equity Investments

Summary of debt investments

As of June 30, 2013 and December 31, 2012, we held the following debt investments with an aggregate weighted average current yield of approximately 11.2% at June 30, 2013 (in thousands):

Loan Type	June 30, 2013 Senior Financing		June 30, 2013 Carrying Value, Net of Discounts and Deferred Origination Fees			December 31, 2012 Carrying Value, Net of Discounts and Deferred Origination Fees			Initial Maturity Date
Other Loan	$	398,500	$	14,820		$	—		March 2015
Mezzanine Loan	205,000		67,170			66,307			February 2016
Mortgage/Mezzanine Loan	167,966		44,358			44,013			May 2016
Mezzanine Loan	177,000		15,436			15,906			May 2016
Junior Participation	133,000		49,000			49,000			June 2016
Mezzanine Loan	165,000		71,073			70,967			November 2016
Mortgage/Mezzanine Loan(1)	1,109,000		75,602			115,804			March 2017
Other Loan	15,000		3,500			3,500			September 2021
Mortgage(2)	—		—			218,068			—
Total fixed rate	$	2,370,466	$	340,959		$	583,565
Mezzanine Loan(3)	—		29,826			—			December 2013
Junior Participation(4)(13)	57,750		10,863			10,869			February 2014
Junior Participation(5)	78,200		23,057			—			February 2014
Mortgage/Mezzanine Loan(6)	330,000		131,470			131,231			July 2014
Mezzanine Loan(7)	62,500		37,359			37,288			July 2014
Mezzanine Loan	180,000		59,812			59,739			August 2014
Mortgage	—		14,817			14,745			September 2014
Mortgage/Mezzanine Loan(8)	—		51,227			47,253			February 2015
Mezzanine Loan(9)	92,711		27,734			55,336			December 2015
Mezzanine Loan(10)	775,000		72,358			—			March 2016
Mezzanine Loan(11)	160,000		22,503			7,624			June 2016
Mezzanine Loan	87,300		25,572			34,761			July 2016
Mezzanine Loan(12)	83,933		35,563			34,444			October 2016
Total floating rate	$	1,907,394	$	542,161		$	433,290
Total	4,277,860		883,120			1,016,855
Loan loss reserve(13)	—		(7,000		)	(7,000		)
	$	4,277,860	$	876,120		$	1,009,855

(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 accreted as of January 2013.
(2)	In November 2012, we acquired this non-performing loan with an original balance of $219.0 million, which accrued interest at its default rate. In connection with the repayment of the loan in May 2013, we recognized additional income of $6.4 million, which is included in investment and preferred equity income on our consolidated statements of income.
(3)	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.
(4)	This loan matured in June 2013 and was extended to February 2014. The loan has an additional four-month extension option.
(5)	As of June 30, 2013, we were committed to fund an additional $1.7 million in connection with this loan.
(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 sheets.
(8)	As of June 30, 2013, we were committed to fund an additional $7.1 million in connection with this loan.
(9)	We funded $56.3 million at origination. In June 2013, we sold 50% of our interest in the $85 million mezzanine loan. As of June 30, 2013, we were committed to fund an additional $13.6 million in connection with our share of 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)	In November 2011, we entered into a loan participation agreement in the amount of $7.4 million on a $15.0 million mortgage. As part of the refinancing of the related senior mortgage in June 2013, we originated a $30.0 million mezzanine loan and our outstanding investment in the amount of $15.0 million, including the participated interest, was repaid in full. Following the refinancing, we entered into a loan participation agreement in the amount of $7.4 million on this $30.0 million mezzanine loan. 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 sheets.
(12)	As of June 30, 2013, we were committed to fund an additional $14.1 million in connection with this loan.
(13)	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.

Summary of preferred equity investments

As of June 30, 2013 and December 31, 2012, we held the following preferred equity investments, with an aggregate weighted average current yield of approximately 10.2% at June 30, 2013 (in thousands):

Type	June 30, 2013 SeniorFinancing		June 30, 2013 Carrying Value, Net of Discounts and Deferred Origination Fees		December 31, 2012 Carrying Value, Net of Discounts and Deferred Origination Fees		InitialMandatory Redemption
Preferred equity	$	70,000	$	9,934	$	9,927	October 2014
Preferred equity(1)(2)	525,000		105,360		99,768		July 2015
Preferred equity(1)(3)	55,986		22,213		18,925		April 2016
Preferred equity(1)	926,260		213,794		209,959		July 2016
	$	1,577,246	$	351,301	$	338,579

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

(2) The reserve previously taken against this loan is being accreted up to the face amount through the maturity date. In June 2013, the redemption date was extended from July 2014 to July 2015.

(3) As of June 30, 2013, we were committed to fund an additional $3.6 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 June 30, 2013 and December 31, 2012 (in thousands):

	June 30,2013		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 June 30, 2013 and December 31, 2012, respectively (in thousands):

	June 30, 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 and six months ended June 30, 2013 and 2012, respectively (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Average recorded investment in impaired loans	$	10,876	$	69,932	$	10,870	$	74,935
Investment and preferred equity income recognized	261		2,333		487		3,895