Commitments and Contingencies

Business Risks and Uncertainties—The Company's business continues to be adversely impacted by the recent economic recession and illiquidity and volatility in the credit and commercial real estate markets. These economic conditions resulted in increased non-performing loans and real estate owned as well as higher financing costs and limited access to the unsecured debt markets. Since the beginning of the crisis, the Company has significantly curtailed asset originations and has focused primarily on repositioning and redeveloping nonperforming assets in order to maximize their value, generating liquidity, retiring debt and decreasing leverage with the objective of preserving shareholder value.

The Company saw signs of an economic recovery during the past two years, including some improvements in the commercial real estate market and capital markets. These improving conditions enabled the Company to issue $275.0 million of 9.0% senior unsecured notes in the current quarter and to execute the 2012 and 2011 Secured Credit Facilities in the first quarters of 2012 and 2011, respectively. While the Company has benefited from improving conditions, volatility within the capital markets and commercial real estate market continues to have an adverse effect on the Company's operations, as primarily evidenced by still elevated levels of non-performing assets and higher costs of capital. Further, continued improvement in the Company's financial condition and its ability to generate sufficient liquidity are dependent in part on a sustained economic recovery, which cannot be predicted with certainty.

As of June 30, 2012, the Company's debt maturities and minimum amortization requirements due in the next 12 months include $970.9 million of unsecured debt and $699.9 million of secured debt. The Company has met the minimum required amortization payments due through December 31, 2012 on its secured facilities and expects to primarily use proceeds from repayments and sales of a portion of the $3.79 billion of collateral pledged under the Company's secured debt to meet the amortization and maturities due under such debt during the first half of 2013.

As of June 30, 2012, the Company had $463.0 million of refinancing proceeds in restricted cash, reserved for the repayment of indebtedness, and $243.8 million of available cash, totaling $706.9 million, which is sufficient to repay the $469.2 million of remaining debt maturities in 2012. The Company's other capital sources to meet its remaining $501.7 million of unsecured debt maturities in the next 12 months will primarily include debt refinancings, proceeds from unencumbered asset sales and loan repayments from borrowers, and may include equity capital raising transactions. As of June 30, 2012, the Company had unencumbered assets, excluding cash and other assets, with a carrying value of approximately $2.40 billion.

Based on the dynamic nature of the Company's assets and its liquidity plan and the time frame in which the Company needs to generate liquidity, the specific assets, nature of the transactions, timing and amount of asset sales and refinancing transactions could vary and are subject to factors outside its control and cannot be predicted with certainty. The Company may also encounter difficulty in finding buyers of assets or executing capital raising strategies on acceptable terms in a timely manner, which could impact its ability to make scheduled repayments on its outstanding debt.

The Company may adjust its plans in response to changes in its expectations and changes in market conditions. In addition, although there have been early signs of improvement in the commercial real estate and credit markets during the past two years, such markets remain volatile and it is not possible for the Company to predict whether these trends will continue in the future or to quantify the impact of these or other trends on its financial results. If the Company fails to repay its obligations as they become due, it would be an event of default under the relevant debt instruments, which could result in a cross-default and acceleration of the Company's other outstanding debt obligations, all of which would have a material adverse effect on the Company.

Unfunded Commitments—As of June 30, 2012, the maximum amount of fundings the Company may be required to make under each category, assuming all performance hurdles and milestones are met under the Performance-Based Commitments, that it approves all Discretionary Fundings and that 100% of its capital committed to Strategic Investments is drawn down, are as follows ($ in thousands):



	Loans		Net Lease Assets		Strategic Investments		Total
Performance-Based Commitments	$	44,038	$	17,259	$	—	$	61,297
Discretionary Fundings	127,948		—		—		127,948
Other	—		—		25,090		25,090
Total	$	171,986	$	17,259	$	25,090	$	214,335

Legal Proceedings—The Company and/or one or more of its subsidiaries is party to various pending litigation matters that are considered ordinary routine litigation incidental to the Company's business as a finance and investment company focused on the commercial real estate industry, including loan foreclosure and foreclosure-related proceedings.

On June 4, 2012, the Company reached an agreement in principle with the plaintiffs' Court-appointed representatives in the previously reported Citiline class action to settle the litigation. Settlement payments will be primarily funded by the Company's insurance carriers, with the Company contributing $2.0 million to the settlement, which is included in "Other expense" on the Consolidated Statements of Operations for the three and six months ended June 30, 2012. See "Part II. Item 1. Legal Proceedings", for further details and for other disclosures related to legal proceedings.

The Company evaluates, on a quarterly basis, developments in legal proceedings that could require a liability to be accrued and/or disclosed. Based on its current knowledge, and after consultation with legal counsel, the Company believes it is not a party to, nor is any of its properties the subject of, any pending legal proceeding that would have a material adverse effect on the Company's consolidated financial condition.