LNR PROPERTY LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

	December 31,
	2011		2010
ASSETS
Cash and cash equivalents	$	172,165	142,847
Restricted cash	4,638		25,826
Investment securities, at fair value	36,127		22,221
Mortgage loans held for sale, at fair value	107,435		—
Mortgage loans held for investment	1,349		1,451
Land held for investment	82,621		39,880
Investments in unconsolidated entities	149,503		195,667
Derivative assets	9,727		41
Intangible assets - servicing rights ($146,555 and $157,047 at fair value)	159,903		175,680
Goodwill	237,538		237,538
Other assets	51,963		40,562
Variable interest entity assets, at fair value	78,938,712		142,443,685
Total assets	$	79,951,681	143,325,398

LIABILITIES AND EQUITY
Liabilities:
Accounts payable	$	8,171	4,140
Accrued expenses and other liabilities	96,422		130,122
Derivative liabilities	2,715		23,796
Debts payable ($3,914 and $12,398 at fair value)	320,836		366,069
Repurchase agreements	72,116		—
Variable interest entity liabilities, at fair value	78,714,179		142,197,352
Total liabilities	79,214,439		142,721,479
Commitments and contingent liabilities

LNR Property LLC Members’ equity:
Members’ equity	506,050		501,656
Retained earnings	208,848		65,825
Accumulated other comprehensive earnings	6,070		2,456
Members’ equity	720,968		569,937
Noncontrolling interests	16,274		33,982
Total equity	737,242		603,919
Total liabilities and equity	$	79,951,681	143,325,398

See accompanying notes to consolidated financial statements.

LNR PROPERTY LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands)

	Year Ended December 31, 2011			Period from July 29, 2010 to December 31, 2010
Revenues
Management and servicing fees	$	220,461		59,229
Rental income	389			64
Total revenues	220,850			59,293

Costs and expenses
General and administrative	155,925			56,742
Cost of rental operations	1,460			353
Depreciation and amortization	8,076			2,861
Interest	20,835			17,131
Impairment of long-lived assets	240			—
Impairment losses on investment securities	849			18
Loss on early extinguishment of debt	2,197			—
Other expense, net	1,111			925
Total costs and expenses	190,693			78,030

Other income
Income of consolidated VIEs, net	97,089			50,995
Equity in earnings and impairments of unconsolidated entities	22,314			7,130
Change in fair value of servicing rights	(10,492		)	(16,836	)
Change in fair value of investment securities	(734		)	—
Change in fair value of mortgage loans held for sale	1,667			—
(Loss) gain on derivative financial instruments	(15,778		)	348
Interest income	4,196			1,344
Gain on sales of real estate	2,544			148
Foreign currency (loss) gain, net	(87		)	114
Other income, net	3,989			2,297
Total other income	104,708			45,540

Income from continuing operations before income taxes	134,865			26,803
Income tax benefit	(40,363		)	(33,672	)
Income from continuing operations	175,228			60,475

Discontinued operations (See Note 19)
Income from consolidated fund, net of tax	47,256			15,190
Gain on sale of interest in consolidated fund, net of tax	113			—
Income from discontinued operations	47,369			15,190

Net income	222,597			75,665
Net income attributable to noncontrolling interests	5,658			9,840
Net income attributable to members	$	216,939		65,825

See accompanying notes to consolidated financial statements.

LNR PROPERTY LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF MEMBERS’ EQUITY

(In thousands)

	Contributed Capital		Retained Earnings		Share Based Compensation		Accumulated Other Comprehensive Earnings		Total Members’ Equity		Non Controlling Interests		Total Equity
Balance at July 29, 2010	$	—	—		—		—		—		—		—
Issuance of member units for cash	416,500		—		—		—		416,500		—		416,500
Conversion of debt to member units	84,000		—		—		—		84,000		—		84,000
Fair value of equity awards reissued at recapitalization	—		—		475		—		475		—		475
Fair value of noncontrolling interests at recapitalization	—		—		—		—		—		41,140		41,140
Net income	—		65,825		—		—		65,825		9,840		75,665
Distributions to noncontrolling interests	—		—		—		—		—		(23,076	)	(23,076	)
Contributions from noncontrolling interests	—		—		—		—		—		5,600		5,600
Forfeiture of interest	—		—		—		—		—		(567	)	(567	)
Change in accumulated other comprehensive earnings, net	—		—		—		2,456		2,456		1,045		3,501
Amortization of share based compensation awards	—		—		681		—		681		—		681
Balance at December 31, 2010	$	500,500	65,825		1,156		2,456		569,937		33,982		603,919

Net income	—		216,939		—		—		216,939		5,658		222,597
Permitted tax distributions	—		(73,916	)	—		—		(73,916	)	—		(73,916	)
Distributions to noncontrolling interests	—		—		—		—		—		(30,969	)	(30,969	)
Contributions from noncontrolling interests	—		—		—		—		—		45,701		45,701
Deconsolidation of consolidated fund	—		—		—		(96	)	(96	)	(37,981	)	(38,077	)
Share-based compensation award distributions	—		—		(2,722	)	—		(2,722	)	—		(2,722	)
Retention of share-based compensation amounts by consolidated fund	—		—		(1,013	)	—		(1,013	)	1,013		—
Forfeiture of interest	—		—		—		—		—		(189	)	(189	)
Change in accumulated other comprehensive earnings, net	—		—		—		3,710		3,710		(941	)	2,769
Amortization of share based compensation awards	—		—		8,129		—		8,129		—		8,129
Balance at December 31, 2011	$	500,500	208,848		5,550		6,070		720,968		16,274		737,242

See accompanying notes to consolidated financial statements.

LNR PROPERTY LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Year Ended December 31, 2011			Period from July 29, 2010 to December 31, 2010
Cash flows from operating activities:
Net income	$	222,597		75,665
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	2,704			884
Accretion of discount on investment securities and mortgage loans	(266		)	(99	)
Accretion of discount on debt facilities	2,929			4,163
Amortization of share-based compensation awards	8,129			681
Amortization of intangibles and deferred items	7,019			1,667
Change in fair value of servicing rights	10,492			16,836
Change in fair value of assets and liabilities of consolidated VIEs	12,006			10,588
Change in fair value of investment securities	734			—
Equity in earnings of unconsolidated entities	(22,314		)	(7,130	)
Distributions of earnings from unconsolidated entities	22,283			6,824
Interest received on investment securities in excess of income recognized	1,037			753
Loss on early extinguishment of debt	2,197			—
Loss (gain) on foreign currency translation	49			(85	)
Impairment of long-lived assets and investment securities	1,311			18
Gains on sales of real estate	(2,544		)	(148	)
Gains on sales of investment securities	(891		)	(3,075	)
Gain on sale of interest in consolidated fund	(113		)	—
Loss on settlement of litigation	1,036			—
Change in fair value of derivative financial instruments	9,442			(7,453	)
Change in fair value of mortgage loans held for sale	(1,667		)	—
Origination of mortgage loans held for sale, net of principal collections	(105,768		)	—
Changes in assets and liabilities:
(Increase) decrease in other assets	(2,094		)	7,288
Decrease in accounts payable and accrued liabilities	(33,655		)	(50,902	)
Net cash provided by operating activities	134,653			56,475

Cash flows from investing activities:
Purchases of furniture, fixtures and equipment	(1,414		)	(16	)
Land held for investment:
Additions	(19,789		)	(3,582	)
Proceeds from reimbursements of development costs	—			9,110
Sales proceeds	15,227			4,553
Investments in unconsolidated entities	(6,216		)	(12,269	)
Proceeds from sales of interests in unconsolidated entities	—			80
Distributions of capital from unconsolidated entities	41,844			11,349
Proceeds from principal collections on mortgage loans held for investment	103			6,684
Purchases of available-for-sale investment securities	(26,645		)	(5,615	)
Proceeds from sales of and principal collections on available-for-sale investment securities	1,365			8,363
Payments for purchases and terminations of derivative financial instruments	(40,209		)	—
Decrease in restricted cash	21,184			7,043
Decrease in cash resulting from deconsolidation of fund	(89		)	—
Net cash (used in) provided by investing activities	(14,639		)	25,700

See accompanying notes to consolidated financial statements.

LNR PROPERTY LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued

(In thousands)

	Year Ended December 31, 2011			Period from July 29, 2010 to December 31, 2010
Cash flows from financing activities:
Capital contributions	—			416,500
Permitted tax distributions	(73,916		)	—
Distributions for share-based compensation awards	(2,721		)	—
Distributions to noncontrolling interests	(30,969		)	(23,076	)
Proceeds from contributions of noncontrolling interests	31,150			5,600
Proceeds from loans sold under agreements to repurchase	72,231			—
Payments on credit facilities	(48,698		)	(426,680	)
Repurchases of senior notes	(8,705		)	(64,395	)
Payment of investee debt pursuant to guarantee	(10,844		)	—
Issuance costs for debt and repurchase agreements	(6,085		)	—
Repayment of debt of consolidated VIEs	(84,035		)	(8,207	)
Issuance of debt of consolidated VIEs	61,133			70,137
Proceeds from consolidated VIEs	11,071			—
Net cash used in financing activities	(90,388		)	(30,121	)
Effect of exchange rate changes on cash	(308		)	408
Net change in cash and cash equivalents	29,318			52,462
Cash and cash equivalents at beginning of period	142,847			90,385
Cash and cash equivalents at end of period	$	172,165		142,847

Supplemental disclosure of cash flow information:
Cash paid for interest	$	21,057		16,084
Cash paid for income taxes	2,680			5,333
Cash received from income tax refunds	7,637			6,373
Supplemental disclosure of non-cash investing and financing activities:

Land acquired via assumption of debt obligation	15,534			—
Senior credit facility repaid with new credit facility	317,759			—
Debt issuance costs funded with new credit facility	7,241			—
Retention of share-based compensation amounts by consolidated fund	1,013
Transfer of securities from held-to-maturity to available-for-sale	—			1,150
Consolidation of VIEs
Variable interest entity assets	7,497,067			—
Variable interest entity liabilities	7,482,516			—
Variable interest entity noncontrolling interest	14,551			—
Deconsolidation of VIEs
Variable interest entity assets	54,551,088			—
Variable interest entity liabilities	54,551,088			—
Deconsolidation of fund
Investment securities	37,893			—
Other assets	10			—
Accrued expenses and other liabilities	28			—
Noncontrolling interest	37,981			—
Accumulated other comprehensive earnings	96			—

See accompanying notes to consolidated financial statements.

LNR PROPERTY LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Organization, Business and Significant Accounting Policies

Description of Business

LNR Property LLC (collectively with its subsidiaries referred to as the “Company”) was originally organized as a corporation under the laws of Delaware as LNR Property Corporation (“LNRPC”) and was subsequently converted to a limited liability company after completion of a comprehensive balance sheet recapitalization (the “Recapitalization”) on July 29, 2010. In order to effectuate the Recapitalization on July 29, 2010, the Board of Directors of LNR Property Holdings Ltd. (collectively with its subsidiaries referred to as the “Predecessor”), the former parent of LNRPC, approved a plan whereby a group of five investors (the “Lead Investors”) acquired all of the outstanding shares of the LNRPC from its direct parent, Riley Holdco Corp (“Holdco”), in exchange for the conversion of Holdco’s debt to equity of $84.0 million and a new equity issuance by LNRPC for $416.5 million in cash. These amounts, in addition to a $0.5 million reissuance of equity awards, reflect total consideration for the Recapitalization of $501.0 million. In connection with the Recapitalization, we elected push down accounting, pursuant to which the acquisition method of accounting was applied. See further discussion in Note 2.

The Lead Investors and their ownerships interests as of December 31, 2011 and 2010 were as follows:

Investor	Economic Interest		Voting Interest
VNO LNR Holdco LLC (a Vornado affiliate)	26.174	%	26.75	%
iStar Marlin LLC (an iStar affiliate)	23.976	%	24.50	%
CBR I LLC (a Cerberus affiliate)	18.042	%	18.44	%
Aozora Investments LLC (an Aozora affiliate)	16.723	%	14.90	%
Opps VIIb LProp, L.P. (an Oaktree affiliate)	15.085	%	15.42	%

The Lead Investors have extensive experience in owning and managing commercial real estate. VNO LNR Holdco LLC is an affiliate of Vornado Realty Trust (“Vornado”), a publicly traded real estate investment trust which is one of the largest owners and managers of commercial real estate in the United States. iStar Marlin LLC is an affiliate of iStar Financial Inc. (“iStar”), a publicly traded finance company focused on the commercial real estate industry. CBR I LLC is a fund managed by Cerberus Capital Management, L.P. (“Cerberus”), one of the world’s leading private investment firms. Aozora Investments LLC is an entity managed by Aozora Bank, Ltd. (“Aozora”), a Japanese bank. Opps VIIb LProp, L.P. is an affiliate of Oaktree Capital Management (“Oaktree”), an investment firm which specializes in less efficient markets and alternative investments.

The accompanying consolidated financial statements and notes thereto present separately the results of operations for the period from July 29, 2010 to December 31, 2010 (the “2010 Stub Period”), and the year ended December 31, 2011 (“Fiscal 2011”).

We operate fee based businesses comprised of (i) our servicing business that is primarily related to managing and working out problem assets, (ii) our finance business that is focused on selectively acquiring and managing real estate finance investments, including unrated, investment grade and non-investment grade rated commercial mortgage backed securities (“CMBS”), non-investment grade rated notes, preferred interests of resecuritization transactions and high yielding real estate loans, either directly or through ventures in which we hold an interest, and (iii) our real estate asset management business which is involved in acquiring, developing, repositioning, managing and selling commercial, multi-family residential and residential land, either directly or through ventures in which we hold an interest.

Basis of Presentation and Consolidation

The accompanying consolidated financial statements include our accounts, those of our wholly owned subsidiaries and certain other entities we are required to consolidate. We consolidate the assets, liabilities, and results of operations of entities (corporations, partnerships and variable interest entities) in accordance with ASC Topic 810, “Consolidation.”

Entities not deemed to be variable interest entities (“VIEs”) are consolidated if we own a majority of the voting securities or interests or hold the general partnership interest, except in those instances in which the minority voting interest owner effectively participates through substantive participative rights. Substantive participative rights include the ability to select, terminate and set compensation of the investee’s management, if applicable, and the ability to participate in capital and operating decisions of the investee, including budgets, in the ordinary course of business.

We invest in entities with varying structures, many of which do not have voting securities or interests, such as general partnerships, limited partnerships, and limited liability companies. In many of these structures, control of the entity rests with the general partners or managing members, while other members hold passive interests. The general partner or managing member may hold anywhere from a relatively small percentage of the total financial interests to a majority of the financial interests. For entities not deemed to be VIEs, where we serve as the sole general partner or managing member, we are considered to have the controlling financial interest and therefore the entity is consolidated, regardless of our financial interest percentage, unless there are other limited partners or investing members that effectively participate through substantive participative rights. In those circumstances where we, as majority controlling interest owner, cannot cause the entity to take actions that are significant in the ordinary course of business, because such actions could be vetoed by the minority controlling interest owner, we do not consolidate the entity.

VIEs are entities that, by design, either (1) lack sufficient equity to permit the entity to finance its activities without additional subordinated financial support from other parties, or (2) have equity investors that do not have the ability to make significant decisions relating to the entity’s operations through voting rights, or do not have the obligation to absorb the expected losses, or do not have the right to receive the residual returns of the entity.

The most common type of VIE is a special purpose entity (“SPE”). SPEs are commonly used in securitization transactions in order to isolate certain assets and distribute the cash flows from those assets to investors. SPEs are an important part of the financial markets, including the mortgage- and asset-backed securities and commercial paper markets, as they provide market liquidity by facilitating investors’ access to specific portfolios of assets and risks. SPEs may be organized as trusts, partnerships or corporations and are typically established for a single, discrete purpose. SPEs are not typically operating entities and usually have a limited life and no employees. The basic SPE structure involves a company selling assets to the SPE; the SPE funds the purchase of those assets by issuing securities to investors. The legal documents that govern the transaction specify how the cash earned on the assets must be allocated to the SPE’s investors and other parties that have rights to those cash flows. SPEs are generally structured to insulate investors from claims on the SPE’s assets by creditors of other entities, including the creditors of the seller of the assets.

The primary beneficiary of a VIE is required to consolidate the VIE. The primary beneficiary is the party that has both (1) the power to direct the activities of an entity that most significantly impact the VIE’s economic performance; and (2) through its interest in the VIE, the obligation to absorb losses or the right to receive benefits from the VIE that could be potentially significant to the VIE. For further details regarding our interests in VIEs, see Notes 9 and 21.

When we consolidate entities other than SPEs, the ownership interests of any minority parties are reflected as noncontrolling interests. When we consolidate SPEs, beneficial interests payable to third

Concentration of Credit Risk

The Company maintains all of its cash accounts with Bank of America, N.A. These accounts are noninterest bearing and are therefore fully insured by the Federal Deposit Insurance Corporation through December 31, 2012 in accordance with Section 343 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Investment Securities

Investment securities consist principally of CMBS and the retained interests of resecuritization transactions. Those securities for which the intent and ability to hold to maturity exists are designated as held-to-maturity, while all others are classified as available-for-sale.

Securities classified as available-for-sale are recorded at fair value. While certain of our available-for-sale securities are hedged for changes in fair value due to movements in interest rates through the use of interest rate swaps, these hedges are not in qualifying fair value hedging relationships. Changes in fair value of unimpaired available-for-sale securities for which the fair value option is not elected are reported in members’ equity, net of the related tax effects, as a component of accumulated other comprehensive earnings until realized. Changes in fair value of available-for-sale securities for which the fair value option is elected are reflected in earnings.

If any available-for-sale investments for which we have not elected the fair value option have unrealized losses and we intend to sell or it is more likely than not that we will be required to sell the security prior to the recovery of amortized cost, the other than temporary impairment (“OTTI”) is recognized in our consolidated statements of earnings. If we do not have the intent to sell a security or it is not more likely than not that we will be required to sell the security, and the security is not accounted for under the cost recovery method or fair value option, the amount of OTTI is segregated into two components: (1) the portion representing a credit loss, which is reflected in our consolidated statements of earnings; and (2) the portion relating to other factors, which is reflected within accumulated other comprehensive earnings. In these instances, the credit impairment is measured as the excess of the amortized cost basis of the security over the current period’s estimate of cash flows discounted at the rate last used to accrete the beneficial interest.

Unrealized losses are considered to be other than temporary if (a) the present value of the currently estimated total cash flows related to the security is less than the present value of the previous period’s estimated total cash flows of that security and the decline in the present value is due to adverse changes in the projected cash flows; or (b) we are unable to hold the security until recovery of its amortized cost basis. For these securities, total OTTI is the amount by which the fair value of the security has declined below its amortized cost.

We account for interest income on securities for which the fair value option is not elected using a level yield method. In doing so, if the projected timing and/or amount of projected cash flows on a particular security become subject to significant uncertainty, the security is accounted for using the cost recovery method. Under the cost recovery method, we record no interest income and apply all cash received to reduce the amortized cost of such securities until such time as we are able to project cash flows with greater certainty, or the investment balance is reduced to zero. Interest income on securities for which the fair value option is elected is recognized based on contractual rates. See further discussion of revenue recognition under the Revenue and Income Recognition section.

In order to recognize a portion of OTTI as a non-credit loss in OCI, management must be able to estimate future cash flows. Because securities on cost recovery inherently contain cash flows that cannot be reliably estimated, whether the uncertainty arises from timing or amount, we are unable to assert that a portion of an OTTI is a non-credit loss. In these instances, an impairment loss equal to the difference between amortized cost and fair value of the security at the date on which the security is placed on cost

recovery is recognized in our consolidated statements of earnings. Any subsequent decline in the fair value of a debt security placed on cost recovery will result in an additional OTTI in the consolidated statements of earnings.

Fair Value Option

The guidance in ASC Topic 825, “Financial Instruments,” provides a fair value option election that allows entities to make an irrevocable election of fair value as the initial and subsequent measurement attribute for certain eligible financial assets and liabilities. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. The decision to elect the fair value option is determined on an instrument by instrument basis and must be applied to an entire instrument and is irrevocable once elected. Assets and liabilities measured at fair value pursuant to this guidance are required to be reported separately in our consolidated balance sheets from those instruments using another accounting method. We have elected the fair value option for eligible financial assets and liabilities of our consolidated VIEs, mortgage loans held for sale, purchased investment securities issued from VIEs we expect to consolidate in the future, and the securitized financial assets and liabilities of Madison Square Company LLC (“Madison”). The fair value elections were made to mitigate accounting mismatches between the carrying value of these financial instruments and related assets or liabilities measured at fair value including derivative instruments not designated in qualifying hedging relationships.

Fair Value

We measure all assets acquired, liabilities assumed, and noncontrolling interests included in an acquisition which is subject to the acquisition method of accounting at fair value. We also measure our available-for-sale CMBS, derivative assets and liabilities, domestic servicing rights intangible and any assets or liabilities where we have elected the fair value option at fair value. When actively quoted observable prices are not available, we either use implied pricing from similar assets and liabilities or valuation models based on net present value of estimated future cash flows, adjusted as appropriate for liquidity, credit, market and/or other risk factors.

As discussed above, we measure the assets and liabilities of consolidated VIEs at fair value pursuant to our election of the fair value option. The VIEs in which we invest are “static”; that is, no reinvestment is permitted, and there is no active management of the underlying assets. In determining the fair value of the assets and liabilities of the VIE, we maximize the use of observable inputs over unobservable inputs. We also acknowledge that our principal market for selling CMBS assets is the securitization market where the market participant is considered to be a CMBS trust or a collateralized debt obligation (“CDO”). This methodology results in the fair value of the assets of a static CMBS trust being equal to the fair value of its liabilities.

Mortgage Loans

Loans for which we have the intent and ability to hold for the foreseeable future or until maturity or payoff are reflected in mortgage loans held for investment on our consolidated balance sheets and are recorded at their outstanding principal amount adjusted for any charge offs, allowances, deferred fees or costs, and any unamortized premiums or discounts. Unaccreted discounts or premiums are accreted to income utilizing a methodology that results in a level yield.

We provide an allowance for credit losses for mortgage loans held for investment that are considered to be impaired. The allowance for losses is based on our evaluation of various factors, including our historical loss experience, fair value of the collateral, operating performance of the collateral, strength of the borrower, and other factors, and is charged to earnings. Realized credit losses on loans are deducted from the allowance when they occur. Any loan recoveries are recorded as an increase to the allowance for losses when received. We do not accrue interest on impaired loans where, in the judgment of

management, collection of interest according to the contractual terms of the loan documents is considered doubtful. Among the factors we consider in making an evaluation of the amount of interest that is collectable are the financial condition of the borrower, the status of the underlying collateral and anticipated future events. For impaired non-accrual loans, interest is recognized on a cash basis. Loan acquisition costs, such as costs incurred in conducting our due diligence, are capitalized and amortized to earnings over the life of the loan using the effective interest method.

Loans for which we have the intent to sell or securitize are recorded as mortgage loans held for sale on our consolidated balance sheets. We have elected the fair value option for all mortgage loans held for sale, resulting in the loans being carried at fair value with changes in fair value reflected in earnings. Fair value of our held for sale mortgage loan portfolio is determined using a whole-loan pricing methodology. Interest income on mortgage loans held for sale is recognized based on contractual rates.

Land Held for Investment

Land held for investment is recorded at cost. We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is measured by comparing the carrying amount of an asset to the undiscounted future net cash flows expected to be generated by the asset. If such carrying amounts exceed the expected undiscounted future net cash flows, we adjust the carrying amount of the asset to its estimated fair value. For land under development or repositioning, fair value is determined using discounted expected future cash flows.

Debt Issuance Costs

We incur structuring fees and other costs in connection with the issuance of our debt facilities, including mortgage loans sold under agreements to repurchase. Such costs are deferred when incurred and amortized to interest expense over the term of the underlying debt or commitment period using either the effective interest method or the straight-line method in those cases where such method approximates the effective interest method.

Investments in Unconsolidated Entities

Investments in which we maintain an interest in excess of 20%, but not more than 50%, and/or have significant influence over the investee are accounted for in accordance with the equity method of accounting. Differences, if any, between our carrying value and the underlying equity in the net assets of the investee are accounted for as if the investee were a consolidated subsidiary. All other investments in unconsolidated entities are accounted for pursuant to the cost method of accounting. We assess our ability to recover the carrying amounts of our investments in unconsolidated entities whenever events or changes in circumstances indicate that the carrying amount of the investments may not be recoverable. If the fair value of the investment is less than the carrying value and the decline in value is considered to be other than temporary, a write-down is recorded through equity in earnings and impairments of unconsolidated entities. Because no active market exists for the investees’ ownership interests, the determination of fair value is based on valuation methodologies, including discounted cash flows, and the ability of the investee to sustain an earnings capacity that justifies the carrying amount of the investment.

Goodwill and Intangible Assets

We allocate the purchase price of acquired real estate assets and assumed liabilities in accordance with the provisions of ASC Topic 805. Goodwill is not amortized, but rather tested for impairment annually during the fourth quarter of each fiscal year, or more frequently if events or changes in circumstances indicate potential impairment. Goodwill at December 31, 2011 and 2010 represents the excess of the consideration paid in connection with the Recapitalization over the fair value of net assets acquired.

In September 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-08, “Testing Goodwill for Impairment,” which provides entities the option of performing a qualitative assessment of whether it is more likely than not that the fair value of a reporting unit is less than its carrying value including goodwill. If the qualitative assessment determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying value including goodwill, then no impairment is determined to exist for the reporting unit at the date of assessment. However, if the qualitative assessment determines that it is more likely than not that the fair value of the reporting unit is less than its carrying value including goodwill, the entity must compare the fair value of that reporting unit with its carrying value, including goodwill. If the carrying value of a reporting unit exceeds its fair value, goodwill is considered impaired with the impairment loss equal to the amount by which the carrying value of the goodwill exceeds the implied fair value of that goodwill. ASU No 2011-08 was effective for annual periods beginning after December 15, 2011 with early adoption permitted. We elected to early adopt ASU No. 2011-08, and performed a qualitative assessment in connection with our Fiscal 2011 goodwill impairment test.

In connection with the Recapitalization, we were required to determine the fair value of all identifiable intangible assets. Special servicing rights of both our domestic and European servicing operations were identified. The fair value measurement method was elected for subsequent measurement of the domestic servicing asset. We also elected the fair value measurement method for subsequent measurement of any newly purchased domestic servicing intangible assets after the Recapitalization date. Election of this method is necessary to conform to our election of the fair value approach for measuring the assets and liabilities of the VIEs consolidated pursuant to ASC Topic 810. The amortization method was elected for subsequent measurement of the European servicing asset. This asset is amortized in proportion to and over the period of estimated net servicing income, and is tested for potential impairment whenever events or changes in circumstances suggest that its carrying value may not be fully recoverable.

For purposes of testing our European servicing intangible for impairment, we first determine whether facts and circumstances exist that would suggest the carrying value of the intangible is not recoverable. If so, we then compare the fair value of the servicing intangible with its carrying value. The estimated fair value of the intangible is determined using discounted cash flow modeling techniques which require management to make estimates regarding future net servicing cash flows, taking into consideration historical and forecasted loan defeasance rates, delinquency rates and anticipated maturity defaults. If the carrying value of the intangible exceeds its fair value, the intangible is considered impaired and an impairment loss is recognized for the amount by which carrying value exceeds fair value.

Variable Interest Entities

We evaluate all of our interests in VIEs for consolidation. As part of this analysis, we first determine whether these interests represent variable interests. When our interests are determined to be variable interests, we assess whether we are deemed to be the primary beneficiary of the VIE. ASC 810 defines the primary beneficiary as the party that has both (i) the power to direct the activities of the VIE that most significantly impact its economic performance, and (ii) the obligation to absorb losses and the right to receive benefits from the VIE which could be potentially significant. We consider our variable interests as well as any variable interests of our related parties in making this determination. Where both of these factors are present, we are deemed to be the primary beneficiary and we consolidate the VIE. Where either one of these factors is not present, we are not the primary beneficiary and do not consolidate the VIE.

To assess whether we have the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, we consider all facts and circumstances, including our role in establishing the VIE and our ongoing rights and responsibilities. This assessment includes first, identifying the activities that most significantly impact the VIE’s economic performance; and second, identifying which party, if any, has power over those activities. In general, the parties that make the most significant

decisions affecting the VIE or have the right to unilaterally remove those decision makers are deemed to have the power to direct the activities of a VIE.

To assess whether we have the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE, we consider all of our economic interests, including debt and equity investments, servicing fees, and other arrangements deemed to be variable interests in the VIE. This assessment requires that we apply judgment in determining whether these interests, in the aggregate, are considered potentially significant to the VIE. Factors considered in assessing significance include: the design of the VIE, including its capitalization structure; subordination of interests; payment priority; relative share of interests held across various classes within the VIE’s capital structure; and the reasons why the interests are held by us.

Our purchased investment securities include CMBS which are primarily comprised of the unrated and non-investment grade rated securities issued by CMBS trusts. In certain cases, we may contract to provide special servicing activities for these CMBS trusts, or, as holder of the controlling class, we may have the right to name and remove the special servicer for these trusts. In our role as special servicer, we provide services on defaulted loans within the trusts, such as foreclosure or work-out procedures, as permitted by the underlying contractual agreements. In exchange for these services, we receive a fee. These rights give us the ability to direct activities that could significantly impact the trust’s economic performance. However, in those instances where an unrelated third party has the right to unilaterally remove us as special servicer, we do not have the power to direct activities that most significantly impact the trust’s economic performance. We evaluated all of our positions in such investments for consolidation.

We also hold retained interests in securitization transactions which are CDOs, where CMBS assets from our balance sheet were transferred to an SPE, which then issued to investors various forms of interests in those assets. We received cash and/or other interests in the SPE as proceeds for the assets transferred. We generally serve as collateral administrator of these CDOs. In this role, we perform certain administrative tasks as defined in the indenture in exchange for a fee. This role also provides us with certain rights, including a right to purchase impaired assets from the trust if an event of default has not occurred. Given the nature of the entity, its activities are relatively static until an event of default occurs. At that time, the trustee or the senior note holders are allowed to exercise certain rights, including liquidation of the CDO’s collateral.

We assessed the variable interests we hold in CDO structures and determined that we are the primary beneficiary of certain of these structures. This determination was based on the presumption that from inception of the CDO through the date of default, the most significant activity impacting the CDO’s economic performance is its initial structure. Given our involvement in structuring the entity at inception and our subsequent role as collateral administrator, we have the power to direct activities that most significantly impact the CDO’s economic performance until an event of default occurs. In addition, through our retention of the residual equity interest in the CDO at inception, we have the obligation to absorb losses or the right to receive benefits from the VIE that could be potentially significant to the VIE. Where both of these factors are present, we are deemed the primary beneficiary.

For VIEs in which we are determined to be the primary beneficiary, all of the underlying assets, liabilities and equity of the structures are recorded on our books, and the initial investment holdings, along with any associated unrealized holding gains and losses, are eliminated in consolidation. Similarly, the interest income earned from these structures, as well as the fees paid by these trusts to us in our capacity as special servicer, are eliminated in consolidation. Further, an allocable portion of the identified servicing intangible asset associated with the management fee streams, and the corresponding allocable amortization or change in fair value of the servicing intangible asset are also eliminated in consolidation. See Note 9 for further discussion regarding the impact to our financial statements from these consolidations.

We perform ongoing reassessments of: 1) whether any entities previously evaluated under the majority voting interest framework have become VIEs, based on certain events, and therefore subject to the VIE consolidation framework, and 2) whether changes in the facts and circumstances regarding our involvement with a VIE causes our consolidation conclusion regarding the VIE to change.

As stated in the Fair Value Option section above, we have elected the fair value option pursuant to ASC 825, Financial Instruments, in measuring the assets and liabilities of any VIEs which we have consolidated. Fluctuations in the fair values of the VIE assets and liabilities, along with trust interest income and trust interest and administrative expenses, are presented net in income of consolidated VIEs in our consolidated statements of earnings.

Derivative Financial Instruments

Each derivative instrument is reflected as either an asset or liability in the consolidated balance sheets at its fair value. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated in a qualifying hedging relationship. Certain criteria must be met before an interest rate swap or other derivative instrument is accounted for as a hedge. This includes formal documentation at hedge inception of (i) the hedging relationship and our risk management objective and strategy for undertaking the hedge and (ii) an indication that the hedging relationship is expected to be highly effective in hedging the designated risk during the term of the hedge. Effectiveness is tested periodically, and at least quarterly.

We periodically enter into derivative financial instruments to hedge unpredictable changes in fair values related to our investment securities and mortgage loans held for sale. These derivatives hedge value changes resulting from both interest rates and credit quality and are reported in the consolidated balance sheets at fair value with changes in the fair value recognized in our consolidated statements of earnings. Cash paid for such instruments, if any, is reflected as a derivative asset upon acquisition.

We also may enter into interest rate swap agreements to manage our interest costs and hedge against risks associated with changing interest rates on certain of our debt obligations. These derivative instruments are reported in the consolidated balance sheets at fair value. If the instrument qualifies as a cash flow hedge, the effective portion of the unrealized gain or loss on these derivatives is reported in members’ equity, net of the related tax effect, as a component of accumulated other comprehensive earnings, and the ineffective portion is recognized as interest expense in the consolidated statements of earnings. If the instrument does not qualify, the unrealized gain or loss is reported as interest expense. If a cash flow hedge is terminated or is no longer designated in a qualifying hedging relationship, the net gain or loss attributable to that hedge that has been accumulated in other comprehensive earnings is reclassified into earnings in the same period or periods during which the cash flows on the previously hedged item affect earnings. If the hedged item matures, is terminated, or is disposed of, the corresponding hedge is either terminated or re-designated to a similar instrument.

We analyze our retained interests in CDO transactions and report any resulting embedded derivatives in the balance sheets at fair value, with any changes in fair value recorded in earnings. A residual instrument is deemed to have an embedded interest rate derivative to the extent that a shortfall of cash flow could exist after the senior interest holders are paid due to adverse changes in interest rates.

Our derivative instruments are not leveraged or held-for-trading purposes. See Note 5 for further discussion of derivative financial instruments and hedging activities.

Foreign Currency

The assets and liabilities held by our foreign entities with a functional currency other than the U.S. dollar are translated into U.S. dollars at exchange rates in effect at the end of each reporting period. Foreign entity revenues and expenses are translated into U.S. dollars at the average rates that prevailed during the

period. The resulting net translation gains and losses are reported as foreign currency translation adjustments, net of the related tax effect, in members’ equity as a component of accumulated other comprehensive earnings. At December 31, 2011 and 2010, accumulated other comprehensive earnings included $3.4 million and $0.4 million of gains, respectively, from foreign currency translation adjustments. Realized foreign currency gains and losses and changes in the value of foreign currency monetary assets and liabilities are included in the determination of net income and are reported as foreign currency gain (loss) in our consolidated statements of earnings.

Upon sale or upon complete or substantially complete liquidation of an investment in a foreign entity, the amount attributable to that entity and accumulated in the translation adjustment component of other comprehensive earnings shall be removed from other comprehensive earnings and shall be reported as part of the gain or loss on sale or liquidation of the investment for the period during which the sale or liquidation occurs.

Revenue and Income Recognition

We typically seek to be the special servicer on CMBS transactions in which we invest. When we are appointed to serve in this capacity, we earn special servicing fees from the related activities performed, which consist primarily of overseeing the workout of under-performing and non-performing loans underlying the CMBS transactions. In addition, we receive management, asset acquisition, development and master servicing fees from third parties and unconsolidated affiliates. These fees are recognized in income in the period in which the services are performed and the revenue recognition criteria have been met. Development fees received from unconsolidated affiliates during the development period are recognized as revenue only to the extent of third party ownership interests in such unconsolidated entities.

Interest income on CMBS for which the fair value option is not elected is recognized in accordance with the accounting guidance governing beneficial interests in securitized financial assets, whereby we estimate all cash flows attributable to an investment security on the date the security is acquired. The amount by which estimated cash flows exceed the initial investment is recognized as interest income over the life of the security using the effective interest method. Changes in expected cash flows result in prospective adjustments to interest income. Interest income on mortgage loans for which the fair value option is not elected is comprised of interest received plus the accretion of discount, if any, between the carrying value and unpaid principal balance using a methodology that results in a level yield. Interest income on CMBS and mortgage loans for which the fair value option is elected is recognized based on the contractual rate of interest.

Revenues from sales of real estate including land held for investment and interests in unconsolidated entities are recognized using the full accrual method provided that various criteria relating to the terms of the transactions and our subsequent involvement with the sold real estate are met. Revenues relating to transactions that do not meet the established criteria are deferred and recognized when the criteria are met or using the installment or cost recovery methods, as appropriate in each circumstance. Revenue from sales of real estate to unconsolidated affiliates is recognized only to the extent of the third party ownership interests in such unconsolidated entities.

Transfers of investment securities and mortgage loans are accounted for as sales pursuant to the accounting guidance governing transfers and servicing of financial assets, providing that we have surrendered control over the assets and to the extent that we received consideration other than beneficial interests in the assets. The cost of assets sold is based on the specific identification method.

Rental income is recognized on a straight-line basis over the respective lease term, commencing on the date that the lessee is granted access to the property. Contingent rents are not recognized until realized, which is when the tenant exceeds certain contractual thresholds specified in the lease.

Income Taxes

Following the Recapitalization, we completed a reorganization through which the majority of our subsidiaries converted to Delaware LLCs. Accordingly, we are not generally subject to income taxes, as our income is taxed directly to our owners. However, certain of our subsidiaries may still be subject to income taxes in certain jurisdictions. Additionally, we retained the net tax liabilities of the Predecessor as of the date of the Recapitalization, which principally related to uncertain tax positions of the Predecessor. Recognition of an uncertain tax position is based on an evaluation of whether the position meets the more likely than not threshold for recognition. Amounts recorded are based on our best estimate of the ultimate settlement of the positions. At the date of any change in our best estimate of the ultimate settlement of these tax liabilities, if such date was within the measurement period, and related to changes in facts and circumstances that existed at the Recapitalization date, we adjusted the liability with a corresponding offset to goodwill attributable to the Recapitalization. However, for any such change in our estimate that was (i) the result of an identifiable event that occurred after the transaction date, or (ii) subsequent to the measurement period, the corresponding offset was recognized in earnings.

We recognize tax positions in the financial statements only when it is more likely than not that the position will be sustained upon examination of the relevant taxing authority, based on the technical merits of the tax position. A tax position is measured at the largest amount of benefit that will more likely than not be realized upon settlement. A liability is established for the differences between positions taken in a tax return and amounts recognized in the financial statements and no portion of the benefit is recognized in the consolidated statements of earnings. We report interest and penalties related to income tax matters as a component of income tax benefit.

From time to time, certain of our subsidiaries may be subject to audits covering a variety of tax matters by taxing authorities in any taxing jurisdiction where we conduct our business. Additionally, there are several open tax years of the Predecessor that may be selected for audit. While we believe that the tax returns filed by the Predecessor and any tax positions taken are supportable and accurate, some tax authorities may not agree with those positions. This can give rise to tax uncertainties which, upon audit, may not be resolved in our favor. The Predecessor established accruals for various tax uncertainties that we believe are probable and reasonably estimable, and these accruals were retained by the Company following the Recapitalization. These accruals are based on certain assumptions, estimates and judgments, including estimates of amounts for settlements, associated interest and penalties.

Share-Based Compensation

In a business combination, share-based payments held by employees on the acquisition date that are not formally exchanged or replaced, but that continue under their original terms after the business combination, are accounted for as if the acquirer was obligated to issue replacement awards. The portion of the deemed replacement awards attributable to precombination service is included in the consideration transferred for the acquiree, while the portion attributable to postcombination service is recognized as compensation expense in our postcombination financial statements with an equal offsetting increase to members’ equity.

Share awards issued postcombination are measured at their respective fair values at the date of grant. This fair value is expensed as compensation expense, based on our estimate of shares that will eventually vest, on a straight-line or accelerated basis over the vesting period. The fair value is determined using an income-based approach to measuring the enterprise value.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. On a regular basis, management evaluates its estimates. Actual results could differ from those estimates.

New Accounting Pronouncements

In April 2011, the FASB issued ASU No. 2011-03, “Transfers and Servicing (Topic 860): Reconsideration of Effective Control for Repurchase Agreements.” ASU No. 2011-03 changes the assessment of effective control by removing (i) the criterion that requires the transferor to have the ability to repurchase or redeem financial assets on substantially the agreed terms, even in the event of default by the transferee, and (ii) the collateral maintenance implementation guidance related to that criterion. ASU No. 2011-03 is effective for periods beginning after December 15, 2011. Because our repurchase agreements constitute secured financing transactions, this amendment is expected to have no impact on our characterization of such transactions and therefore is not expected to have any impact on our financial condition, results of operations or cash flows.

In May 2011, the FASB issued ASU No. 2011-04, “Fair Value Measurements and Disclosures (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” ASU No. 2011-04 clarifies the application of existing fair value measurement and disclosure requirements, changes certain principles related to measuring fair value, and requires additional disclosures about fair value measurements. ASU No. 2011-04 is effective for periods beginning after December 15, 2011. The adoption of this ASU is not expected to have a significant impact on our fair value measurements, financial condition, results of operations or cash flows.

In June 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income.” This ASU will require companies to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements. It eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity. The standard does not change the items which must be reported in other

comprehensive income, how such items are measured or when they must be reclassified to net income. This standard is effective for interim and annual periods beginning after December 15, 2011. The FASB subsequently deferred the effective date of certain provisions of this standard pertaining to the reclassification of items out of accumulated other comprehensive income, pending the issuance of further guidance on that matter. Because this ASU impacts presentation only, it will have no effect on our financial condition, results of operations or cash flows.

In December 2011, the FASB issued ASU 2011-11, “Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities.” The update requires new disclosures about balance sheet offsetting and related arrangements. For derivatives and financial assets and liabilities, the amendments require disclosure of gross asset and liability amounts, amounts offset on the balance sheet, and amounts subject to the offsetting requirements but not offset on the balance sheet. The guidance is effective January 1, 2013 and is to be applied retrospectively. Because this amendment impacts disclosures only, it will have no effect on our financial condition, results of operations or cash flows.

A discussion of the goodwill impairment guidance in ASU No. 2011-8 issued in September 2011 is included in the Goodwill and Intangible Assets section above.

2. Recapitalization Transaction

As described in Note 1, we completed the Recapitalization on July 29, 2010. Prior to this date, certain of the Lead Investors were already holders of notes representing approximately 74% of the Predecessor’s unsecured senior subordinated loan (the “Subordinated Loan”). Concurrent with the new equity raise by the Lead Investors of $416.5 million, on the closing date, these Lead Investors acquired from the remaining note holders the approximately 26% balance of the Subordinated Loan, for a total cash payment to those remaining note holders of $25.0 million. They then exchanged 100% of the outstanding Subordinated Loan, including accrued and unpaid interest, for equity interests in Holdco’s subsidiary, LNRPC, and the Subordinated Loan was extinguished. As a result of this transaction, LNRPC became

Assets acquired:
Cash and cash equivalents	$	75,204
Restricted cash	32,869
Investment securities	299,684
Mortgage loans	8,130
Operating properties and equipment	5,055
Land held for investment	49,816
Investment in unconsolidated entities	194,610
Derivative asset	334
Intangible assets - servicing rights	321,851
Goodwill	237,538
Other assets	43,993
			1,269,084
Liabilities assumed:
Accounts payable	7,255
Accrued expenses	174,446
Deferred income taxes	—
Derivatives liability	31,541
Mortgage notes and other debts payable	513,727
			726,969
Noncontrolling interests			41,140
Net assets acquired			$	500,975

Summary of consideration:
Cash paid for equity			$	416,500
Conversion of Holdco note to equity			84,000
Equity awards reissued			475
			$	500,975

During Fiscal 2011, we recognized $1.7 million in adjustments to the July 29, 2010 income tax liability balance, which is included within accrued expenses and other liabilities in our condensed consolidated balance sheets, and a corresponding adjustment to goodwill. These adjustments related to the finalization of the income tax returns for our Predecessor.

3. Restricted Cash

The following table provides a summary of our restricted cash (in thousands):

	December 31,
	2011		2010
Cash collateral for derivative instrument margin calls	$	4,100	$	24,943
Funds held in escrow	364		811
Other	174		72
	$	4,638	$	25,826

Balances at period end (in thousands):

	December 31,
	2011				2010
	Available-for- Sale			Held-to- Maturity	Available-for- Sale	Held-to- Maturity
Fair value	$	32,213		3,914	9,823	12,398
Gross unrealized holding gains	2,644			—	2,326	—
Gross unrealized holding losses	(6		)	—	—	—
Amortized cost	29,575			3,914	7,497	12,398
Gross OTTI recognized in accumulated OCI	—			—	—	—
Net carrying value	32,213			3,914	9,823	12,398

Activity related to credit losses (in thousands):

During Fiscal 2011 and the 2010 Stub Period, there were no investment securities held in which the total OTTI recognized was bifurcated between earnings and accumulated other comprehensive income.

Securities with gross unrealized losses, and the length of time these investments have been in a continuous unrealized loss position (in thousands):

As of December 31, 2011, there were $0.4 million of investment securities that were in a continuous unrealized loss position for less than 12 months and no investment securities in a continuous unrealized loss position for 12 months or more. Total unrealized losses on these securities were not material. As of December 31, 2010 there were no investment securities with unrealized losses.

5. Derivative Financial Instruments and Hedging Activities

The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated in a qualifying hedging relationship. There were no qualifying hedging relationships in place as of December 31, 2011 or 2010. The following tables summarize our non-qualifying derivative assets and liabilities (in thousands):

	December 31, 2011
	# Contracts	Maturities	Notional		Fair Value
*Derivative Assets:*
Embedded derivative, not designated	1	Feb-12	$	—	10
CMBX, not designated	5	Mar-49 to Oct-52	110,000		9,685
Put option, not designated	1	Mar-12	*		32
Total derivative assets, not designated	7		$	110,000	9,727

*Derivative Liabilities:*
Interest rate contracts, not designated	14	Feb-12 to Jan-22	71,712		2,715
Total derivative liabilities, not designated	14		$	71,712	2,715

*100,000 shares

	December 31, 2010
	# Contracts	Maturities	Notional		Fair Value
*Derivative Assets:*
Embedded derivative, not designated	1	Feb-12	$	—	41

*Derivative Liabilities:*
Interest rate contract, non qualifying cash flow hedge**	1	Jul-11	200,000		3,015
Interest rate contracts, non qualifying fair value hedges	9	Jul-16	162,097		20,759
Interest rate contract, not designated	1	Feb-12	—		22
Total derivative liabilities, non qualifying or not designated	11		$	362,097	23,796

** Initial notional of $200,000, reduced to $100,000 in February 2011, and reset sequentially every three months through July 2011.

Hedging Objectives and Strategies

We do not enter into derivative instruments for speculative purposes. The counterparties to our arrangements are major financial institutions with which we and our affiliates may also have other financial relationships. These counterparties potentially expose us to loss in the event of their non-performance. Generally, our derivative instruments with counterparties contain provisions that require us to post collateral when the derivatives are in a net liability position. The provisions are generally dependent upon the dollar amounts in a liability position at any given time which exceed specific thresholds, as indicated in the relevant contracts. In these circumstances, the counterparties could require additional collateral. See Note 3 for amounts held as collateral related to our derivatives in a net liability position.

Cash Flow Hedging Instruments

We periodically enter into derivative financial arrangements, primarily interest rate swap agreements, to manage fluctuations in cash flows resulting from interest rate risk. These swap agreements effectively change the variable-rate cash flows on debt obligations to fixed-rate cash flows. In connection with these agreements, we were required to pay the counterparty a predetermined fixed stream of payments in exchange for a floating rate stream from the counterparty through each swap’s maturity date. The net amount paid to the counterparty totaled $3.1 million and $4.2 million for Fiscal 2011 and the 2010 Stub Period, respectively. Payments to the counterparty are reflected as an increase to interest expense and receipts as a reduction of interest expense. There were no qualifying cash flow hedges during Fiscal 2011 or the 2010 Stub Period.

Fair Value Hedging Instruments

To manage the risk associated with unpredictable changes in asset fair values related to our fixed-rate mortgage loans held for sale or fixed-rate available-for-sale securities, we periodically use derivative financial instruments, primarily interest rate swap agreements or credit default swap index instruments (“CMBX”). During Fiscal 2011, we paid cash of $12.9 million to enter into CMBX. There were no qualifying fair value hedges during Fiscal 2011 or the 2010 Stub Period as these hedging instruments were either not designated in a qualifying hedge relationship at purchase or no longer met the criteria necessary to continue in a qualifying fair value hedging relationship.

During Fiscal 2011, we terminated the majority of interest rate swaps originally intended to hedge our available-for-sale securities, as these hedges were no longer effective at hedging changes in fair value of these instruments. In connection with these terminations, we paid $24.4 million to the respective swap counterparties. In addition, we terminated an interest rate swap in the Archetype Fund in connection with

the sale of our interests in this venture (see Note 9). We paid $2.4 million to the swap counterparty to terminate this swap.

Financial Instruments Not Designated

The table below presents the effect of our non-qualifying derivative financial instruments on our consolidated statements of earnings (in thousands):

Derivatives not designated:	Fiscal 2011			2010 Stub Period
Embedded derivatives	$	(31	)	(293	)
Interest rate contracts	(3,017		)	(2	)
Non-qualifying fair value hedges	(9,205		)	643
CMBX	(3,308		)	—
Put options	(217		)	—
Amounts included in (Loss) gain on derivative financial instruments	(15,778		)	348

Interest rate contracts	(3,181		)	—
Amounts included in earnings from discontinued operations	(3,181		)	—

Non-qualifying cash flow hedges included in interest expense	3,015			(3,929	)
Total of all non-qualifying derivatives	$	(15,944	)	(3,581	)

6. Mortgage Loans

The following table is a summary of our mortgage loans (in thousands):

	December 31,
	2011		2010
Mortgage loans held for sale, at fair value	$	107,435	—
Mortgage loans held for investment	1,349		1,451
	$	108,784	1,451

Our mortgage loans are comprised primarily of fixed-rate commercial real estate mortgage loans. We elected the fair value option for all originated mortgage loans held for sale, with increases in fair value of $1.7 million reflected within change in fair value of mortgage loans in our consolidated statement of earnings for Fiscal 2011. The unpaid principal balance of mortgage loans held for sale as of December 31, 2011 was $105.8 million, and none of these loans were 90 days or more past due or on a nonaccrual status.

In February 2012, we sold all of our mortgage loans held for sale at December 31, 2011 into a securitization structure. In connection with this sale, we repaid all outstanding amounts under the First Repurchase Agreement (see Note 10).

7. Goodwill and Intangible Assets

Goodwill at December 31, 2011 represents the excess of Recapitalization proceeds over the fair value of net assets acquired at July 29, 2010. Based on the results of our impairment assessments, we determined that goodwill was not impaired during Fiscal 2011 or the 2010 Stub Period.

Servicing intangibles consist of servicing rights associated with loan servicing contracts to which we are a party. The following table presents information about our domestic and European servicing intangibles for Fiscal 2011 and the 2010 Stub Period (in thousands):

	Fiscal 2011			2010 Stub Period
Domestic servicing rights, at fair value
Fair value at beginning of period	$	157,047		173,883
Changes in fair value due to changes in inputs and assumptions	(10,492		)	(16,836	)
Fair value at end of period	$	146,555		157,047

European servicing rights
Carrying value at beginning of period ($20.7 million and $20.7 million at fair value, respectively)	$	18,633		20,702
Amortization	(5,373		)	(1,977	)
Foreign exchange gain (loss)	88			(92	)
Carrying value at end of period ($20.3 million and $20.7 million at fair value, respectively)	$	13,348		18,633

Contractually specified servicing fees for the period	$	94,391		44,097

The future amortization expense for the European servicing intangible is expected to be as follows (in thousands):

	Years Ended December 31,
	2012		2013	2014	2015	2016	Thereafter
Amortization expense	$	3,809	3,460	1,841	2,370	1,257	611

8. Investments in Unconsolidated Entities

Summarized financial information of our unconsolidated entities on a combined 100% basis accounted for by the equity method is as follows (in thousands):

	December 31,
	2011		2010
Assets
Cash	$	155,195	101,947
Portfolio investments	2,273,021		2,771,322
Other assets	69,238		86,011
	$	2,497,454	2,959,280
Liabilities and equity
Accounts payable and other liabilities	$	77,584	116,038
Notes and mortgages payable	708,899		833,976
Equity and advances of:
LNR Property LLC	347,470		501,938
Others	1,363,501		1,507,328
	$	2,497,454	2,959,280

Summarized operating results of unconsolidated entities on a combined 100% basis accounted for by the equity method are as follows (in thousands):

	Fiscal 2011		2010 Stub Period
Revenues and other income	$	118,210	157,231
Costs and expenses	89,656		67,135
Net income of entities	$	28,554	90,096

LEI Fund

In February 2005, we along with four other investors formed the LNR Europe Investors S.A.R.L. SICAR (the “LEI Fund”), a private equity investment venture in which we hold a 50% interest. The purpose of the LEI Fund is to evaluate, make and actively manage investments in real estate, real estate-related income-bearing debt instruments and other forms of real estate related income bearing securities consisting of, but not limited to CMBS, B-notes, mezzanine debt and distressed debt products across Europe. The difference between the amount at which the investment is carried and the amount of underlying equity in net assets of the investee is $62.9 million. This basis difference resulted from our recording of the investment at its fair value at the Recapitalization date. The difference is being amortized as the underlying net assets of the investee resolve. Our investment in the LEI Fund is denominated in pounds sterling, and may be affected by fluctuations in exchange rates.

CPI Fund

In November 2005, we along with several other investors formed the LNR Commercial Property Investment Fund, L.P. (the “CPI Fund”), a private equity investment venture in which we hold an approximate 20% ownership interest. The purpose of the CPI Fund is to acquire, finance, develop and dispose of a broad range of real estate operating properties focusing primarily on industrial, rental apartments, office and retail properties and land zoned substantially for commercial uses located throughout the United States. The commitment period for the CPI Fund expired in February 2010. However, the venture may issue follow on capital calls, of which our maximum funding obligation is $22.5 million. See Note 16 for related party transaction disclosures.

The difference between the amount at which the investment is carried and the amount of underlying equity in net assets of the investee is $41.7 million. This basis difference resulted from our recording of the investment at its fair value at the Recapitalization date. The difference is being amortized as the underlying net assets of the investee are sold.

Other Commercial Real Estate Services Ventures

During Fiscal 2011, we obtained 50% equity interests in each of two newly formed joint ventures which provide commercial real estate related services to sellers of commercial real estate. We account for each of these ventures in accordance with the equity method of accounting.

Land Joint Ventures

We hold equity ownership interests in various land ventures which are accounted for pursuant to the equity method. In August 2011, we entered into a settlement agreement to resolve claims and disputes

with respect to certain of these ventures. In connection with the settlement agreement, we were released of all claims in exchange for the assignment of our membership interest in one joint venture and the liquidation of another, as well as certain other concessions. With respect to the liquidated joint venture, prior to such liquidation, the partners repaid the outstanding debt of the venture. The repayment was disproportionate to our ownership interest, and therefore was not contributed inside the venture, but rather paid directly to the lenders pursuant to a joint and several guarantee. Because this $10.8 million payment was made directly to the lenders pursuant to a guarantee, the payment is reflected as a cash outflow from financing activities in our consolidated statement of cash flows for Fiscal 2011. As noted above, one of our joint ventures was liquidated as part of the overall settlement. In connection with this liquidation, we received a noncash distribution of land with a fair value of $20.3 million which was recorded as land held for investment upon distribution. Collectively, all amounts associated with this settlement resulted in a net loss of $1.0 million which is reflected in other expense, net in our consolidated statement of earnings for Fiscal 2011.

With respect to the remaining land joint ventures at December 31, 2011, the difference between the amount at which those investments are carried and the amount of underlying equity in net assets of the investee is $96.7 million. This basis difference resulted from our recording of these investments at fair value at the Recapitalization date. The difference is being amortized as the underlying net assets of the investees are sold.

9. Consolidation of Variable Interest and Other Entities

As discussed in Note 1, we evaluate all of our investments and other interests in entities for consolidation. These included interests in investments in certain real estate entities, as well as our investment securities.

International Entity

We held an investment in a European entity which prior to 2008 held an equity interest in an entity that had an interest in a pool of commercial real estate properties located throughout France. This European entity was determined to be a VIE due to disproportionate voting and economic rights. We were deemed the primary beneficiary of the VIE, and accordingly, we consolidated this entity into our financial statements. We received a final liquidation distribution related to this entity in January 2011 in the amount of $5.2 million.

Madison Square Company LLC

Madison is an entity formed for the purpose of investing in unrated and non-investment grade rated CMBS. We own an approximately 65% interest in Madison and since we are deemed the primary beneficiary, consolidate Madison into our financial statements. On July 29, 2010, in connection with the Recapitalization, we elected the fair value option for all of Madison’s securitized assets and liabilities. This entity had assets and liabilities of $154.5 million and $133.1 million, respectively, at December 31, 2011. The securitized assets are legally owned by the issuer of the CDO and the debt of the entity is in the form of securitized notes which are non-recourse to us.

Madison is not the primary beneficiary of any of the securitization structures in which it is invested. However, we are the primary beneficiary of certain of these structures. As a result, the investment securities of the consolidated structures are eliminated in consolidation, as is an allocated portion of the related CDO debt. The consolidated structures are reflected in VIE assets and liabilities in our consolidated balance sheets. The remaining assets and liabilities of the CDO reflected on our consolidated balance sheet relate to the securitization structures for which we or Madison are not deemed the primary beneficiary. In such cases, the investment securities are reflected on our consolidated balance sheets, along with an allocated portion of the related CDO debt. See Note 10.

Archetype Fund

In February 2009, we along with several other investors formed the Archetype Fund, a private equity investment venture which invests in CMBS, B-notes, mezzanine loans, non-performing loans, sub-performing loans and distressed debt on commercial real estate properties. Although this entity was not deemed to be a VIE, we served as the sole general partner and were therefore presumed to have a controlling financial interest. As the limited partners did not maintain substantive participative rights, the Archetype Fund was consolidated into our financial statements.

We initially held a 50% ownership interest in the Archetype Fund. During 2010, prior to the Recapitalization, we transferred 4.9% of our ownership interest in the Archetype Fund to certain executives for cash consideration. These transfers are subject to dilution and vesting requirements. Since their original issuance, these interests were diluted to 1.97%, inclusive of forfeitures.

Pursuant to an agreement between us and the other Archetype Fund partners, effective December 29, 2011, our limited partner and general partner interests in the Archetype Fund were purchased by the remaining limited partners. As consideration for our interests, we received an in-kind CMBS distribution with a fair value of $19.9 million and cash of $12.5 million. The cash receipt of $12.5 million included $4.6 million related to the purchase of our general partner interest, from which $1.0 million was withheld for payment to former executives holding interests in one of our share-based compensation plans. As these transactions occurred while the Archetype Fund was still a consolidated entity, they are not separately reflected in our consolidated statement of cash flows for Fiscal 2011. Immediately after this sale was effectuated, we deconsolidated the Archetype Fund from our financial statements.

Investment Securities

As discussed in Note 1, we evaluate all of our investments and other interests in entities for consolidation, including our investments in CMBS and our retained interests in securitization transactions we initiated, all of which are generally considered to be variable interests in VIEs.

The VIEs consolidated in accordance with ASC 810 are structured as pass through entities that receive principal and interest on the underlying collateral and distribute those payments to the certificate holders. The assets and other instruments held by these securitization entities are restricted and can only be used to fulfill the obligations of the entity. Additionally, the obligations of the securitization entities do not have any recourse to the general credit of any other consolidated entities, nor to us as the primary beneficiary. As we invest primarily in non-investment grade and unrated bonds, the SPE liabilities initially represent investment securities on our balance sheet (pre-consolidation). Upon consolidation of these VIEs, our associated investment securities and any associated components of equity, such as unrealized holding gains or losses or OTTI are eliminated, as is the interest income and any impairment losses related to those securities. Similarly, the fees we earn in our roles as special servicer of the bonds issued by the consolidated VIEs or as collateral administrator of the consolidated VIEs are also eliminated. Finally, an allocable portion of the identified servicing intangible associated with the eliminated fee streams is eliminated in consolidation.

VIEs in which we are the Primary Beneficiary

The inclusion of the assets and liabilities of VIEs in which we are deemed the primary beneficiary has no economic effect on us. Our exposure to the obligations of VIEs is generally limited to our investment in these entities. We are not obligated to provide, nor have we provided, any financial support for any of these consolidated structures.

VIEs in which we are not the Primary Beneficiary

In certain instances, we hold a variable interest in a VIE in the form of CMBS, but either (i) we are not appointed, or do not serve as, special servicer or (ii) an unrelated third party has the rights to unilaterally

remove us as special servicer. In these instances, we do not have the power to direct activities that most significantly impact the VIE’s economic performance. In other cases, the variable interest we hold does not obligate us to absorb losses or provide us with the right to receive benefits from the VIE which could potentially be significant. For these structures, we are not deemed to be the primary beneficiary of the VIE, and we do not consolidate these VIEs.

Three of our CDO structures are in default as of December 31, 2011, which pursuant to the underlying indentures, changes the rights of the variable interest holders. Upon default of a CDO, the trustee or the senior note holders are allowed to exercise certain rights, including liquidation of the collateral, which at that time, is the activity which would most significantly impact the CDO’s economic performance. Further, when the CDO is in default, the collateral administrator typically no longer has the option to purchase securities from the CDO. In cases where the CDO is in default and we do not have the ability to exercise rights which would most significantly impact the CDO’s economic performance, we did not consolidate the VIE. As of December 31, 2011, two of these CDO structures were not consolidated.

As noted above, we are not obligated to provide, nor have we provided, any financial support for any of our SPEs, whether or not we are deemed to be the primary beneficiary. As such, the risk associated with our involvement in these VIEs is limited to the carrying value of our investment in the entity. As of December 31, 2011 and 2010, our maximum risk of loss related to VIEs in which we were not the primary beneficiary was $36.1 million and $22.2 million, respectively, on a fair value basis and $33.5 million and $19.9 million, respectively, on an amortized cost basis.

The VIEs which we do not consolidate have debt obligations to beneficial interest holders with unpaid principal balances of $161.3 billion and $65.4 billion at December 31, 2011 and 2010, respectively. The corresponding assets are comprised primarily of mortgage loans with unpaid principal balances corresponding to the amounts of the outstanding debt obligations.

10. Debts Payable and Repurchase Agreements

The following table summarizes our debts payable and repurchase agreements (in thousands):

			December 31,
			2011			2010
	*Interest Rate ()**	Maturity	Commitment		Outstanding	Commitment	Outstanding
Senior Secured Credit Facility:
Revolving credit line	LIBOR + 3.00%	April 2014	$	40,000	—	60,000	—
Term loan facility	LIBOR + 3.50%	April 2016	325,000		308,750	358,870	358,870
Total Senior Facility			365,000		308,750	418,870	358,870
Unamortized discount			N/A		—	N/A	(5,215	)
Senior Facility, net of unamortized discount			365,000		308,750	418,870	353,655

Senior Subordinated Notes			—		—	—	16

Collateral Debt Obligation	N/A	N/A	N/A		3,914	N/A	12,398
Promissory Note	3.54%	December 2031	10,000		8,172
Total Debts Payable ()**			$	375,000	320,836	418,870	366,069

Repurchase Agreements ()** First Repurchase Agreement	LIBOR + 2.20%	September 2013	$	250,000	72,116	—	—
Second Repurchase Agreement	LIBOR + 2.10%	November 2012	150,000		—	—	—
Total Repurchase Agreements			$	400,000	72,116	—	—

(*) The senior secured term loan facility is subject to a LIBOR floor of 1.25%.

(**) All debt is recourse except for the Collateral Debt Obligation.

Senior Secured Credit Facility

On December 31, 2010, our senior secured credit facility (the “Senior Facility”) included a $60.0 million revolving credit line, a $27.9 million term loan and a $331.0 million term loan which were scheduled to mature in July 2011. In January 2011, we repurchased $8.8 million face amount of the Senior Facility for total cash payments of $8.7 million. The repurchase resulted in no gain or loss.

In April 2011, we refinanced our Senior Facility with a new $365.0 million senior secured credit facility (the “New Senior Facility”). The New Senior Facility includes a $325.0 million, five-year term loan and a $40.0 million, three-year revolving credit facility of which $15.5 million was utilized for the issuance of letters of credit, leaving $24.5 million available at December 31, 2011. Proceeds from the refinancing, along with cash on hand, were used to repay the Senior Facility. In connection with the refinancing, we incurred approximately $10.8 million of debt issuance costs which was deferred and is being amortized to interest expense over the term of the underlying debt. In addition, we recognized a $2.2 million loss on early extinguishment of debt reflecting the write-off of the unamortized discount on the Senior Facility.

The New Senior Facility requires a minimum 10% annual amortization and is secured by substantially all of our assets, equity interests in consolidated entities (excluding consolidated VIEs) and intercompany notes. The New Senior Facility contains certain financial tests and restrictive covenants, including a requirement to maintain a minimum liquidity, specified leverage and interest coverage ratios. As of December 31, 2011, we are in compliance with all such covenants. The weighted average interest rate on the New Senior Facility for the period from its issuance to December 31, 2011 was 5.78%.

Collateral Debt Obligation

In 2004, Madison entered into a CDO transaction which was accounted for as a financing, primarily as a result of certain rights retained by the entity and the character of some of the assets held within the CDO. Pursuant to ASC 810, the securitization structures in which Madison is invested are also subject to consolidation, and we are deemed the primary beneficiary of certain of these structures. As a result, the investment securities of the consolidated structures are eliminated in consolidation, as is an allocated portion of the related CDO debt. The consolidated structures are reflected in VIE assets and liabilities in our consolidated balance sheets. The remaining assets and liabilities of the CDO reflected on our consolidated balance sheets relate to the securitization structures for which we or Madison are not deemed the primary beneficiary. In such cases, the investment securities are reflected on our consolidated balance sheets, along with an allocated portion of the related CDO debt. In accordance with our fair value policy, this allocated portion of debt is equal to the fair value of the investment securities.

During the 2010 Stub Period, we sold a portion of our owned interest in the Madison CDO for $47.4 million. As this interest is eliminated in consolidation, the sale is included in issuance of debt of consolidated VIEs in our consolidated statements of cash flows.

Promissory Note

In December 2011, we entered into a disposition and development agreement (“DDA”) with a government agency to redevelop a former military air station located in Massachusetts into a mixed-use commercial development project. The agreement provides for our phased acquisition and development of the property. Pursuant to the DDA, we acquired the land via a payment of cash of $2.0 million and an agreement to pay, on behalf of the government agency, all amounts due and payable under a $10.0 million promissory note, $8.2 million of which relates to land to which we have taken title and for which we are obligated. The remaining $1.8 million is payable only to the extent we obtain title to additional acreage at the project. See further discussion at Note 17.

Repurchase Agreements

During Fiscal 2011, one of our wholly-owned subsidiaries entered into two separate master repurchase agreements, one for $250.0 million and another for $150.0 million (collectively, the “Repurchase Agreements”). Our objective is to use these facilities to finance the origination of mortgage loans pending sale, securitization or other structured financing or liquidation of those loans. The agreements involve a sale of mortgage loans to the lender, with the concurrent agreement by us to repurchase the loans at the same price plus accrued and unpaid interest at the end of the term of the transaction. The Repurchase Agreements are secured by the mortgage loan collateral as well as a parent company guarantee (see Note 18).

The first Repurchase Agreement was entered into in September 2011 (the “First Repurchase Agreement”) and contains a two-year initial maturity with a one-year extension option, exercisable at our option if certain conditions are met. The second Repurchase Agreement was entered into in November 2011 (the “Second Repurchase Agreement”) and contains a one-year initial maturity with two one-year extension options, exercisable at our option if certain conditions are met. As of December 31, 2011, none of these extension options had been exercised.

The Repurchase Agreements contain certain financial tests and restrictive covenants, including a requirement to maintain a minimum liquidity, specified leverage and interest coverage ratios. We are subject to margin calls during the period the agreements are outstanding and therefore may be required to repay a portion of the borrowings prior to expiration of the commitment period if the value of the mortgage loans securing the agreement decreases. During Fiscal 2011, we incurred approximately $2.6 million of financing costs related to the Repurchase Agreements, which were deferred and are being amortized to interest expense over the term of the underlying debt.

Maturities

The aggregate stated principal maturities of debts payable for each of the next five fiscal years and in the aggregate thereafter are as follows, excluding the collateralized debt obligation with a fair value of $3.9 million and amounts owed pursuant to the Repurchase Agreements (in thousands):

	2012		2013	2014	2015	2016	Thereafter
Aggregate principal maturities	$	33,317	33,317	33,317	33,317	179,568	4,086

Amounts payable pursuant to the Repurchase Agreements are due upon the earliest to occur of certain dates, depending on the loan for which the agreement applies. At our option, we may repurchase the loans at any time during the respective term of each agreement. The facility remains outstanding and may be utilized to finance future purchases of mortgage loans held for sale.

In February 2012, we sold all of our mortgage loans held for sale at December 31, 2011 into a securitization structure (Note 6). In connection with this sale, we repaid all outstanding amounts under the First Repurchase Agreement.

11. Fair Value Disclosures

Our estimates of fair value are based on the best information available to management as to conditions that existed as of the valuation date. Assets and liabilities recorded at fair value in the consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to

measure their fair value. Hierarchical levels are directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities and are as follows:

Level 1 – Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. As of December 31, 2011 and 2010 and for the periods then ended, we did not have any assets or liabilities classified in Level 1 fair value.

Level 2 – Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

Level 3 – Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are categorized in the following tables based upon the lowest level of significant input to the valuations (in thousands):

	December 31, 2011
	Level 1		Level 2	Level 3	Total
Financial Assets
Investment securities at fair value	$	—	—	36,127	36,127
Mortgage loans held for sale	—		—	107,435	107,435
Derivative assets	—		9,717	10	9,727
Domestic servicing rights intangible	—		—	146,555	146,555
VIE assets	—		76,401,645	2,537,067	78,938,712
	$	—	76,411,362	2,827,194	79,238,556
Financial Liabilities
Derivative liabilities	$	—	2,715	—	2,715
Debts payable at fair value	—		—	3,914	3,914
VIE liabilities	—		76,401,645	2,312,534	78,714,179
	$	—	76,404,360	2,316,448	78,720,808

	December 31, 2010
	Level 1		Level 2	Level 3	Total
Financial Assets
Investment securities at fair value	$	—	—	22,221	22,221
Derivative assets	—		—	41	41
Domestic servicing rights intangible	—		—	157,047	157,047
VIE assets	—		138,854,694	3,588,991	142,443,685
	$	—	138,854,694	3,768,300	142,622,994
Financial Liabilities
Derivative liabilities	$	—	23,796	—	23,796
Debts payable at fair value	—		—	12,398	12,398
VIE liabilities	—		138,854,694	3,342,658	142,197,352
	$	—	138,878,490	3,355,056	142,233,546

The following is a summary of the valuation techniques employed with respect to financial instruments measured and reported at fair value:

Investment securities at fair value: We utilize several inputs and factors in determining the fair value of investment securities classified as available-for-sale or for which the fair value option was elected. These factors include projected future cash flows, ratings, subordination levels, vintage, remaining lives, credit issues, recent trades of similar securities and the spreads used in the prior valuation. We obtain current market spread information where available and use this information in evaluating and validating the market price of all investments. Depending upon the significance of the fair value inputs used in determining these fair values, these securities are classified in either Level 2 or Level 3 of the fair value hierarchy.

In the unlikely event that we are able to obtain quoted prices from an active market for identical assets, these securities would fall within Level 1 of the fair value hierarchy. Unless sufficient trading activity levels exist with respect to the security for which the quote is being provided, these quotes will not be deemed Level 1 inputs and will simply be used as a benchmark, if at all, in assessing the appropriateness of our valuations. If there is significant market volatility and diversity in quotes, then the related securities are classified within Level 3 of the fair value hierarchy.

Mortgage loans held for sale: We measure fair value of mortgage loans held for sale using a discounted cash flow analysis. This analysis requires management to make estimates regarding future interest rates and credit spreads. The most significant of these inputs relates to credit spreads and is unobservable. Thus, we have determined that the fair values of these mortgage loans in their entirety should be classified in Level 3 of the fair value hierarchy.

Liabilities of consolidated VIEs: We utilize several inputs and factors in determining the fair value of VIE liabilities, including future cash flows, market transaction information, ratings, subordination levels, and current market spread and pricing information where available. Quoted market prices are used when this debt trades as an asset. Depending upon the significance of the fair value inputs used in determining their fair values, these liabilities are classified in either Level 2 or Level 3 of the fair value hierarchy.

Assets of consolidated VIEs: The VIEs in which we invest are “static”; that is, no reinvestment is permitted, and there is no active management of the underlying assets. In determining the fair value of the assets of the VIE, we maximize the use of observable inputs over unobservable inputs. We also acknowledge that our principal market for selling CMBS assets is the securitization market where the market participant is considered to be a CMBS trust or a CDO. This methodology results in the fair value of the assets of a static CMBS trust being equal to the fair value of its liabilities. Depending upon the significance of the fair value inputs used in determining their fair values, these assets are classified in either Level 2 or Level 3 of the fair value hierarchy.

Intangible asset — Domestic servicing rights: As discussed above, the fair value measurement method was elected for subsequent measurement of the domestic servicing asset. The fair value of this intangible is determined using discounted cash flow modeling techniques which require management to make estimates regarding future net servicing cash flows, including forecasted loan defeasance, delinquency and anticipated maturity defaults. Since the most significant of these inputs is unobservable, we have determined that the fair values of these intangibles in their entirety should be classified in Level 3 of the fair value hierarchy.

Derivative assets and liabilities: For all interest rate swaps, fair value is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each interest rate swap. This analysis reflects the contractual terms of the swap, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. We incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds and guarantees.

Although we have determined that the majority of the inputs used to value interest rate swaps are classified in Level 2 of the fair value hierarchy, the credit valuation adjustments associated with these interest rate swaps utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties. However, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of these positions and have determined that the credit valuation adjustments are not significant to the overall valuation of these derivatives. As a result, we have determined that these derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

For all CMBX, fair value is determined based on changes in the relevant indices from the date of initiation of the CMBX to the reporting date, as these changes determine the amount of any future cash settlement between us and the counterparty. These indices are considered Level 2 inputs as they are directly observable. We have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our CMBX and have determined that any credit valuation adjustment would not be significant to the overall valuation as the counterparty to these contracts is a highly rated global financial institution. As a result, we have determined that CMBX are classified in Level 2 of the fair value hierarchy.

Embedded derivatives: For our embedded derivatives, fair value is computed based upon estimated cash flows of the related preferred interests resulting from any unhedged change in LIBOR, discounted at an appropriate discount rate. This determination is based in part on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. Although the forward curves utilized in the valuation of our embedded derivatives represent Level 2 inputs, the discounted cash flows which are most significant to the overall valuation of these derivatives represent Level 3 inputs. Accordingly, we have determined that the embedded derivatives in their entirety are classified in Level 3 of the fair value hierarchy.

Debts payable at fair value: The allocated portion of the Madison CDO debt is determined using the fair values of the associated investment securities as a benchmark. Depending upon the significance of the fair value inputs used in determining the underlying benchmark fair values, this debt is classified in either Level 2 or Level 3 of the fair value hierarchy.

The following tables present additional information about assets and liabilities measured at fair value on a recurring basis for which we utilized Level 3 inputs to determine fair value (in thousands):

	Investment Securities at Fair Value			Embedded Derivative Assets		Domestic Servicing Rights Intangible		VIE Assets		VIE Liabilities		Debts Payable		Mortgage Loans		Total

Balance at December 31, 2010	$	22,221		41		157,047		3,588,991		(3,342,658	)	(12,398	)	—		413,244
Total realized and unrealized gains (losses):
Included in earnings:
Gains on sales of investment securities	891			—		—		—		—		—		—		891
Loss on derivative financial instruments	—			(31	)	—		—		—		—		—		(31	)
Change in fair value	(9,217		)	—		(10,492	)	(468,698	)	409,445		8,484		1,667		(68,811	)
Impairment	(1,069		)	—		—		—		—		—		—		(1,069	)
Included in other comprehensive earnings	512			—		—		—		—		—		—		512
Net accretion	473			—		—		—		—		—		—		473
Purchases / Originations	26,645			—		—		—		—		—		105,958		132,603
Sales	(1,349		)	—		—		—		—		—		—		(1,349	)
Issuances	—			—		—		—		(61,133	)	—		—		(61,133	)
Cash repayments / receipts	(1,261		)	—		—		—		84,035		—		(190	)	82,584
Transfers into level 3	—			—		—		301,971		(301,971	)	—		—		—
Transfers out of level 3	—			—		—		(678,354	)	678,354		—		—		—
Consolidations of VIEs	—			—		—		460,629		(446,078	)	—		—		14,551
Deconsolidations of VIEs	36,174			—		—		(667,472	)	667,472		—		—		36,174
Deconsolidation of fund	(37,893		)	—		—		—		—		—		—		(37,893	)
Balance at December 31, 2011	$	36,127		10		146,555		2,537,067		(2,312,534	)	(3,914	)	107,435		510,746
Amount of total gains (losses) for the period included in earnings attributable to the change in unrealized gains or losses relating to assets still held at December 31, 2011	$	(10,286	)	(31	)	(10,492	)	(468,698	)	409,445		8,484		1,667		(69,911	)

	Investment Securities at Fair Value			Embedded Derivative Assets		Domestic Servicing Rights Intangible		VIE Assets	VIE Liabilities		Debts Payable		Mortgage Loans	Total

Balance at July 29, 2010	$	7,148		334		—		3,384,505	(3,110,027	)	—		—	281,960
Impact of fair value accounting election	—			—		173,883		127,266	(82,892	)	(16,415	)	—	201,842
Balance at July 29, 2010, as adjusted	7,148			334		173,883		3,511,771	(3,192,919	)				483,802
Total realized and unrealized gains (losses):
Included in earnings:
Gains on sales of investment securities	3,075			—		—		—	—		—		—	3,075
Losses on derivative financial instruments	—			(293	)	—		—	—		—		—	(293	)
Impairment	(24		)	—		—		—	—		—		—	(24	)
Included in other comprehensive earnings	2,326			—		—		—	—		—		—	2,326
Change in fair value	(4,041		)	—		(16,836	)	77,220	(149,739	)	4,017		—	(89,379	)
Net accretion	116			—		—		—	—		—		—	116
Net purchases, sales proceeds and cash
collections, net	(3,945		)	—		—		—	—		—		—	(3,945	)
Redesignation (to) from available-for-sale	1,151			—		—		—	—		—		—	1,151
Net transfers in (out) of Level 3	16,415			—		—		—	—		—		—	16,415
Balance at December 31, 2010	$	22,221		41		157,047		3,588,991	(3,342,658	)	(12,398	)		413,244
Amount of total losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets still held at December 31, 2010	$	(24	)	(293	)	—		—	—		—		—	(317	)

Fair Value on a Nonrecurring Basis

We use fair value measurements on a nonrecurring basis when assessing certain of our cost basis financial assets and certain non-financial assets for impairment and when accounting for business combinations pursuant to the acquisition method of accounting. There were no impairment charges recorded for assets measured at fair value on a nonrecurring basis during Fiscal 2011. The following table shows the fair value hierarchy and carrying values for those assets measured at fair value on a nonrecurring basis for which an impairment charge was recorded during the 2010 Stub Period, based upon the lowest level of significant input to the valuations, and the amounts of the impairments included in our consolidated statements of earnings (in thousands):

As of December 31, 2010 and for the Period from July 29, 2010 to

December 31, 2010

Impairment

Level 1

Level 2

Level 3

Total

Charges

Non-Financial Assets

Investments in unconsolidated entities

—

6,250

15,376

The following is a summary of the valuation techniques employed with respect to assets and liabilities measured at fair value on a nonrecurring basis:

Investments in unconsolidated entities: The fair value of these investments is determined based on the fair values of the underlying assets and liabilities of the investee. Since these inputs are unobservable, we have determined that the fair values of these investments should be classified in Level 3 of the fair value hierarchy.

Financial Instruments not Measured at Fair Value

In addition to the financial instruments which utilize fair value measurements on a recurring or nonrecurring basis, the following represents fair value disclosures for our remaining financial instruments:

Cash and cash equivalents, restricted cash, financial instruments included within other assets and accounts payable, accrued expenses and other liabilities: Fair values approximate carrying values due to their short-term nature.

Debts payable not at fair value: The fair values of our New Senior Facility is based on quoted market prices, as this debt trades as an asset. The fair value of this facility at December 31, 2011 and 2010 was $391.8 million and $369.9 million, respectively. The carrying value of our Repurchase Agreements approximates fair value at December 31, 2011 due to the relatively short-term nature of these instruments.

12. Noncontrolling Interests

Noncontrolling interests relate to the third-party ownership interests in entities (including corporations, partnerships and VIEs) we consolidate. For financial reporting purposes, the entities’ assets, liabilities and results of operations are consolidated, and the third parties’ interests in the entities are included in our consolidated financial statements as noncontrolling interests.

13. Member Interests

Member Interests

Interests in LNR Property LLC are represented by units. The only units issued to date were issued in connection with the Recapitalization. The following table summarizes each member’s number of units and their respective ownership interests at December 31, 2011:

Member	Number of Units	% Ownership
VNO LNR Holdco LLC (a Vornado affiliate)	26,174	26.174	%
iStar Marlin LLC (an iStar affiliate)	23,976	23.976	%
CBR I LLC (a Cerberus affiliate)	18,042	18.042	%
Aozora Investments LLC (an Aozora affiliate)	16,723	16.723	%
Opps VIIb LProp, L.P. (an Oaktree affiliate)	15,085	15.085	%
Total	100,000	100.000	%

To the extent permitted by the debt instruments to which we are a party, we are required to annually distribute to each member, not later than 90 days after the close of each taxable year, an amount sufficient to cover their income tax liability attributable to their ownership interest. This distribution is treated as a reduction to the member’s interest account. Distributions of $73.9 million and zero were made in Fiscal 2011 and the 2010 Stub Period, respectively.

Share-Based Compensation

In October 2010, we adopted the LNR Property LLC 2010 Management Equity Compensation Plan (the “2010 Equity Plan”). The purpose of the 2010 Equity Plan is to attract, retain and motivate officers, directors, employees, consultants and others who may perform services for us or our affiliates, and to compensate them for their contributions to our long-term growth and profits. Awards under the 2010 Equity Plan are granted in the form of options which allow the recipient to acquire units in LNR Property LLC at a specified exercise price. The options vest and become exercisable upon the earlier of (a) the satisfaction of certain performance conditions, or (b) five years. Due to the inherent uncertainty associated with predicting the timing of achievement of the specified performance conditions, we are recognizing the grant date fair value of these options on a straight-line basis over five years. During Fiscal 2011 and the 2010 Stub Period, we recognized $2.6 million and $0.5 million, respectively, of compensation expense with an equal offsetting increase in members’ equity, related to the 2010 Equity Plan. The Board of the Company has authorized the issuance of up to 25,000 units through the 2010 Equity Plan. At December 31, 2011, options for the purchase of 12,500 units at exercise prices from approximately $5,000 to $7,000 per unit were outstanding. There were no grants under the 2010 Equity Plan during Fiscal 2011 and no awards vested, were forfeited, exercised or expired under the 2010 Equity Plan during Fiscal 2011 or the 2010 Stub Period. All outstanding awards at December 31, 2011 were issued during the 2010 Stub Period and had a grant date fair value of $15.3 million.

15. Income Taxes

The income tax (benefit) expense from continuing operations consisted of the following (in thousands):

	Fiscal 2011			2010 Stub Period
Current
Federal	$	(41,432	)	693
Foreign	5,378			816
State	(4,309		)	(35,181	)
Total income tax benefit	$	(40,363	)	(33,672	)

As described in Note 2, we reorganized as a limited liability corporation after the Recapitalization, and consequently, we are not generally subject to income taxes. However, certain of our subsidiaries may be subject to taxes in certain jurisdictions. Additionally, at the Recapitalization date, we retained certain tax liabilities and uncertain tax positions of the Predecessor.

The deferred tax assets and liabilities and net operating loss and credit carryforwards of our taxable subsidiaries as of December 31, 2011 and December 31, 2010 were not material.

As of December 31, 2011, we had a liability of $2.8 million related to uncertain tax positions, of which $1.9 million related to interest. These represent tax positions of the Predecessor, any of which may be challenged by tax authorities, and for which we could be held responsible. If challenged, the amount of taxes, penalties and interest which could be assessed by taxing authorities may differ from the amount that has been accrued. No change to these unrecognized tax benefits is anticipated within the next twelve months as a result of statute of limitations expirations or audit resolutions.

In the 2010 Stub Period, through a state voluntary disclosure program, we settled an uncertain tax position, which resulted in a reduction of $34.5 million in accrued state income tax liabilities. Of this settlement, $0.2 million was paid to the taxing authority while $34.3 was recognized in our consolidated statement of earnings. This adjustment comprised essentially all of the state income tax benefit recognized by the Company. During Fiscal 2011, several uncertain tax positions were effectively settled, resulting in the recognition of a $47.3 million income tax benefit within our consolidated statement of earnings.

A reconciliation of the change in the accrual for uncertain tax positions, which is included in accrued expenses and other liabilities in our consolidated balance sheets, is as follows (in thousands):

Balance at July 28, 2010	$	83,268
Additions for tax positions related to prior years	1,321
Reductions for tax positions effectively settled	(34,466		)
Reductions for statute closings and other reductions	(1,536		)
Balance at December 31, 2010	48,587

Additions for tax positions related to prior years	1,502
Reductions for tax positions effectively settled	(47,261		)
Balance at December 31, 2011	$	2,828

During Fiscal 2011 and the 2010 Stub Period, federal tax refunds received totaled $6.5 million and $5.6 million, respectively, and state tax refunds totaled $0.8 million and $0.8 million, respectively.

16. Related Party Transactions

Transactions with our Owners and their Affiliates

We lease space in a satellite office from one of our Lead Investors. During Fiscal 2011, we paid $0.1 million to this related party for rent and related amounts associated with this arrangement. Such amount is included within general and administrative expense in our consolidated statement of earnings for Fiscal 2011. Additionally, during Fiscal 2011, we performed due diligence services for one of our Lead Investors, for which we recognized $0.4 million of management fees in our consolidated statement of earnings.

Investments in Unconsolidated Entities

As previously discussed in Note 8, we are a partner in the CPI Fund, a private equity investment venture of which we hold an approximate 20% ownership interest. We receive project cost reimbursements for services we perform on behalf of the CPI Fund, mostly related to due diligence efforts. We also earn fees from managing the CPI Fund, the LEI Fund and other unconsolidated entities in which we have investments and from acquiring, developing and disposing of assets held by such entities. We perform certain administrative activities including accounting and human resources functions for joint ventures in which we hold an ownership interest. The joint ventures pay us shared services fees as compensation for these administrative services. We also have an exclusive marketing agreement with the joint ventures which obligates us to utilize services of the ventures exclusively for any commercial real estate property we seek to sell in our capacity as either the owner or special servicer.

The table below sets forth amounts recorded in connection with transactions between us and our unconsolidated entities (in thousands):

	Fiscal 2011		2010 Stub Period

Project cost reimbursements from the CPI Fund	$	1,335	221

Management fees earned
From the CPI Fund	11,349		5,695
From the LEI Fund	1,537		75
From other unconsolidated entities	1,737		1,197

	December 31,
	2011		2010
Management fees receivable at year end
From the CPI Fund	$	2,760	1,043
From the LEI Fund	96		—
From other unconsolidated entities	836		257

Management / development fees payable at year end
To the CPI Fund	3,885		3,279

Executive Resignations

Following the Recapitalization, our Chief Executive Officer (“CEO”) resigned. In connection with his resignation, we entered into a separation agreement with the former CEO and made a cash payment in the amount of $4.0 million, which is included in general and administrative expenses in the 2010 Stub Period.

As discussed in Note 9, during 2010, prior to the Recapitalization, we transferred 4.9% of our ownership interest in the Archetype Fund to certain executives for cash consideration. These transfers were subject to dilution and vesting requirements. Since their original issuance, these interests were diluted to 1.97%, inclusive of forfeitures.

Following the Recapitalization, certain executives were terminated. During Fiscal 2011, these executives filed a complaint against us in connection with the termination of their employment relationships. All claims have been resolved, resulting in a cash payment to these former executives of $4.3 million during Fiscal 2011.

17. Commitments and Contingent Liabilities

We are subject to various claims, legal actions and complaints arising in the ordinary course of business. In our opinion, the disposition of these matters will not have a material adverse effect on our financial condition, results of operations or cash flows. We are also subject to the usual obligations associated with entering into contracts for the purchase, development and sale of real estate, as well as the management of entities and special servicing of CMBS and mortgage loans in the routine conduct of our business.

We provide commitments to fund capital contributions to certain unconsolidated entities and consolidated joint ventures, as required by the respective partnership agreements or pursuant to approved business plans. These commitments amounted to $136.2 million at December 31, 2011 and are not reflected in our consolidated financial statements. See also Note 8 and Note 9 for discussion of additional funding commitments related to certain of our investments.

In December 2001, we entered into a disposition and development agreement with a government agency to redevelop a military base located in California into a mixed-use commercial development project. The agreement provides for our phased acquisition and development of property in exchange for certain profit participation rights, all amounts pursuant to which are payable only if certain targets are achieved on the overall project. In December 2005, we sold our rights to the agreement (to acquire, develop and sell the land) for a portion of the project to the CPI Fund for a sales price of $12.1 million and additional amounts payable only if certain targets are achieved, consistent with those in the original agreement. In connection with this agreement, we have recorded a liability of $6.0 million in our consolidated balance sheets at December 31, 2011 and 2010, based on the anticipated profit participation payments to be made under the agreement for the overall project.

In Fiscal 2011, we entered into an arrangement with a government agency to redevelop a former military air station in Massachusetts into a mixed-use commercial development project. The agreement provides for our phased acquisition and development of property in exchange for cash, a debt obligation, and certain profit participation rights. The cash and debt are discussed in Note 10. The profit participation rights are payable only if certain targets are achieved on the overall project. We have recorded a liability of $7.4 million in our consolidated balance sheet at December 31, 2011 based on the anticipated profit participation payments to be made under this arrangement.

In connection with the Recapitalization, we recognized an intangible unfavorable lease liability of $11.8 million related to an operating lease for our corporate headquarters in Miami Beach, Florida. This liability is included in accrued expenses and other liabilities and is being amortized over the remaining 11 years of the underlying lease term. Amortization of this liability is reflected in general and administrative expense in Fiscal 2011 and the 2010 Stub Period. The liability was $10.3 million as of December 31, 2011. We sublease a portion of this office space and collect sublease income which is reported net against the related rent expense in general and administrative expenses in our consolidated statements of earnings, and we lease other premises and office equipment under non-cancelable operating leases with terms expiring thru June 2019, exclusive of renewal options periods. At the Recapitalization date, we recognized an intangible favorable lease asset of $1.0 million related to these operating leases. This asset

is included in other assets in our consolidated balance sheet. Rental income related to these subleases and rent expense, included in general and administrative expense in our consolidated statements of earnings, was as follows:

The future minimum rents and sublease income related to all of our existing leases and subleases for each of the next five fiscal years and in the aggregate thereafter are expected to be as follows (in thousands):

	2012		2013	2014	2015	2016	Thereafter
Minimum Rents	$	5,958	6,041	6,041	5,896	5,237	21,764

Sublease Income	1,061		1,036	867	800	564	212

18. Guarantees

In the ordinary course of business, we provide various guarantees, including: (i) standby letters of credit, generally to guarantee our performance under contractual obligations; (ii) guarantees of debt to obtain financing for consolidated and unconsolidated entities; (iii) lease payment guarantees in connection with office leases and equipment, and (iv) surety bond reimbursement guarantees, generally related to specific performance obligations relating to property development, and court and utility bonds related to our specially serviced loans. These guarantees have varying expiration dates through May 2021, and total $52.2 million at December 31, 2011. We believe the risk associated with these guarantees is low, as most of the conditions that must be met are within our control.

As is customary in the real estate development business, we also have provided completion guarantees to our construction lenders that guarantee we will complete the development of the project they are financing. We cannot estimate the maximum exposure on these guarantees because the amount of any obligations we might incur would depend on the extent to which costs of completing construction exceeded amounts provided by committed borrowings and capital contributions. We are not currently aware of any reason to expect we will be required to make payments under any of our outstanding construction completion guarantees.

We are a partner in a joint venture formed to purchase 3,724 acres of land, a former military base, in California. We are subject to a completion guarantee related to this venture which obligates us to fund the development of certain infrastructure improvements should the venture fail to do so. We also issued a $24.4 million payment guarantee, representing the amount of our future capital commitment to the venture. We have funded $9.4 million of our capital commitment to date and have no reason to believe that we will not continue to fund our remaining commitment. As such, the maximum determinable amount of this guarantee at December 31, 2011 is $15.0 million.

We have not recorded any liabilities at December 31, 2011 and 2010 in connection with the above mentioned guarantees as their fair value at inception was zero and they did not meet the subsequent measurement recognition criteria.

19. Discontinued Operations

As described in Note 1 and Note 9, on December 29, 2011, we sold our limited partner and general partner interests in the Archetype Fund. Concurrently with this transaction, we deconsolidated the

Archetype Fund from our financial statements. The results of discontinued operations related to the Archetype Fund were as follows (in thousands):

	Fiscal 2011			2010 Stub Period
Costs and expenses
General and administrative	$	468		25
Impairment losses on investment securities	222			—
Total costs and expenses	690			25

Other income
Interest income	16,059			11,467
Gain on sale of investment securities	37,500			13,672
Change in fair value of investment securities	(2,432		)	(9,924	)
Change in fair value of derivatives	(3,181		)	—
Total other income	47,946			15,215

Gain on sale of interest in the Archetype Fund	113			—

Income from discontinued operations	47,369			15,190
Income from discontinued operations attributable to noncontrolling interests	17,821			10,106
Income from discontinued operations attributable to members	$	29,548		5,084

20. Financial Statement Reissuance

Subsequent events have been considered through March 20, 2012, and reconsidered through February 11, 2013, the date the consolidated financial statements were issued and reissued, respectively.

2013 Purchase Agreement

On January 23, 2013, we entered into a definitive agreement with Starwood Property Trust and Starwood Capital Group (collectively “Starwood”) whereby Starwood would acquire LNR Property LLC for a total purchase price of approximately $1.05 billion in cash.

	Year Ended December 31, 2011			Period from July 29, 2010 to December 31, 2010
Net income	$	222,597		75,665
Other comprehensive earnings, net of tax:
Unrealized gain on available-for-sale securities with no other than temporary impairments during the period	2,307			1,327
Unrealized loss on available-for-sale securities with other than temporary impairments during the period	(888		)	—
Reclassification adjustment for gain on available-for-sale securities included in net income	(108		)	—
Unrealized gain on foreign currency translation	3,033			399
Unrealized (loss) gain on derivative financial instruments	(730		)	730
Amounts attributable to noncontrolling interests	(941		)	1,045
Other comprehensive earnings, net of tax	2,673			3,501
Comprehensive earnings	$	225,270		79,166

Fiscal 2011

2010 Stub
Period

Rental Income

Rental Expense