Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2013

9. Goodwill and Intangible Assets

Goodwill

Goodwill at September 30, 2013 represents the excess of consideration transferred over the fair value of net assets acquired on April 19, 2013 for the acquisition of LNR. The goodwill recognized is attributable to value embedded in LNR’s existing platform, which includes an international network of commercial real estate asset managers, work-out specialists, underwriters and administrative support professionals as well as proprietary historical performance data on commercial real estate assets. The tax deductible component of our goodwill as of April 19, 2013 is $101.7 million and is deductible over 15 years.

Servicing Rights Intangibles

In connection with the LNR acquisition, we identified domestic and European servicing rights that existed at the purchase date, based upon the expected future cash flows of the associated servicing contracts. All of our servicing fees are specified by these Pooling and Servicing Agreements. The table below presents information about our GAAP servicing intangibles for the LNR Stub Period (in thousands). At September 30, 2013, the balance of the domestic servicing intangible is net of $88.6 million that is eliminated in consolidation pursuant to ASC 810 against VIE assets in connection with our consolidation of securitization VIEs. Before VIE consolidation, the domestic servicing intangible has a balance of $246.6 million, which represents our economic interest in this asset.

Domestic servicing rights, at fair value
Fair value at April 19, 2013	$	156,993
Changes in fair value due to changes in inputs and assumptions	1,030
Fair value at September 30, 2013	158,023

European servicing rights
Carrying value at April 19, 2013 (fair value)	32,649
Amortization	(4,765		)
Foreign exchange gain	1,825
Carrying value at September 30, 2013 (fair value of $31.4 million)	29,709
Total servicing rights at September 30, 2013	$	187,732

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

2013 (remainder of)	$	3,160
2014	12,961
2015	8,808
2016	3,472
2017 and thereafter	1,308
Total	$	29,709

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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