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 direct financing leases and loans receivable. Operating leases are not included in finance receivables as such amounts are not recognized as an asset in the consolidated financial statements. Our loans receivable are included in Other assets, net in the consolidated financial statements. Earnings from our loans receivable are included in Other interest income in the consolidated financial statements.

Net Investments in Direct Financing Leases

On February 10, 2016, we entered into a net lease financing transaction for an industrial facility in Houston, Texas for $4.2 million. In connection with this business combination, we expensed acquisition-related costs and fees of $0.3 million, which are included in Acquisition expenses in the consolidated financial statements.

Loans Receivable

127 West 23^rd Manager, LLC — On February 3, 2015, we provided financing of $12.6 million to a subsidiary of 127 West 23^rd Manager, LLC for the acquisition of a building in New York, New York that is intended to be developed as a hotel. The loan has an interest rate of 7% and was scheduled to mature on February 3, 2016. In connection with this transaction, during the three months ended March 31, 2015, we expensed acquisition-related costs and fees of $0.1 million, which are included in Acquisition expenses in the consolidated financial statements. On February 1, 2016, the loan was extended to August 1, 2016. At March 31, 2016, the balance of the loan receivable remained $12.6 million.

1185 Broadway LLC — On January 8, 2015, we provided a mezzanine loan of $30.0 million to a subsidiary of 1185 Broadway LLC for the development of a hotel on a parcel of land in New York, New York. The mezzanine loan is collateralized by an equity interest in a subsidiary of 1185 Broadway LLC. It has an interest rate of 10% and was scheduled to mature on January 8, 2016. In connection with this transaction, during the three months ended March 31, 2015, we expensed acquisition-related costs and fees of $0.3 million, which are included in Acquisition expenses in the consolidated financial statements. On January 4, 2016, the loan was extended to July 8, 2016. The agreement also contains rights to certain fees upon maturity and an equity interest in the underlying entity that has been recorded in Other assets, net in the consolidated financial statements. At March 31, 2016, the balance of the loan receivable including interest thereon was $31.5 million.

China Alliance Properties Limited — On December 14, 2010, we provided financing of $40.0 million to China Alliance Properties Limited, a subsidiary of Shanghai Forte Land Co., Ltd. The financing was provided through a collateralized loan that was guaranteed by Shanghai Forte Land Co., Ltd.’s parent company, Fosun International Limited. It had an interest rate of 11% and was repaid in full to us on December 11, 2015.

Credit Quality of Finance Receivables

We generally seek investments in facilities that we believe are critical to a tenant’s business and that we believe have a low risk of tenant default. At both March 31, 2016 and December 31, 2015, none of the balances of our finance receivables were past due and we had not established any allowances for credit losses. Additionally, there were no modifications of finance receivables during the three months ended March 31, 2016. 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. The credit quality evaluation of our finance receivables was last updated in the first quarter of 2016.

A summary of our finance receivables by internal credit quality rating is as follows (dollars in thousands):



	Number of Tenants / Obligors at		Carrying Value at
Internal Credit Quality Indicator	March 31, 2016	December 31, 2015	March 31, 2016		December 31, 2015
1	—	—	$	—	$	—
2	1	1	2,264		2,264
3	10	10	430,054		429,212
4	5	4	112,661		108,132
5	—	—	—		—
			$	544,979	$	539,608

At March 31, 2016 and December 31, 2015, Other assets, net included $0.4 million and $0.3 million, respectively, of accounts receivable related to amounts billed under our direct financing leases.