Goodwill and Intangible Assets

3 Months Ended

Mar. 31, 2016

8. Goodwill and Intangible Assets

Goodwill

Goodwill at March 31, 2016 and December 31, 2015 represents the excess of consideration transferred over the fair value of net assets of LNR Property LLC (“LNR”) acquired on April 19, 2013. 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.

Intangible Assets

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. At March 31, 2016 and December 31, 2015, the balance of the domestic servicing intangible was net of $27.4 million and $11.8 million, respectively, that was eliminated in consolidation pursuant to ASC 810 against VIE assets in connection with our consolidation of securitization VIEs. Before VIE consolidation, as of March 31, 2016 and December 31, 2015, the domestic servicing intangible had a balance of $122.9 million and $131.5 million, respectively, which represents our economic interest in this asset.

Lease Intangibles

In connection with our acquisitions of commercial real estate, we recognized in-place lease intangible assets and favorable lease intangible assets associated with certain noncancelable operating leases of the acquired properties. The following table summarizes our intangible assets, which are comprised of servicing rights intangibles and lease intangibles, as of March 31, 2016 and December 31, 2015 (amounts in thousands):


	As of March 31, 2016						As of December 31, 2015
	Gross Carrying		Accumulated		Net Carrying		Gross Carrying		Accumulated		Net Carrying
	Value		Amortization		Value		Value		Amortization		Value
Domestic servicing rights, at fair value	$	95,492	$	—	$	95,492	$	119,698	$	—	$	119,698
European servicing rights (1)		30,778		(28,656)		2,122		31,593		(28,967)		2,626
In-place lease intangible assets		88,364		(19,899)		68,465		74,983		(8,898)		66,085
Favorable lease intangible assets		15,914		(1,517)		14,397		14,103		(942)		13,161
Total net intangible assets	$	230,548	$	(50,072)	$	180,476	$	240,377	$	(38,807)	$	201,570

(1)

The fair value as of March 31, 2016 and December 31, 2015 was $4.9 million and $5.3 million, respectively.

The following table summarizes the activity within intangible assets for the three months ended March 31, 2016 (amounts in thousands):


	Domestic		European		In-place Lease		Favorable Lease
	Servicing		Servicing		Intangible		Intangible
	Rights		Rights		Assets		Assets		Total
Balance as of January 1, 2016	$	119,698	$	2,626	$	66,085	$	13,161	$	201,570
Impact of ASU 2015-02 Adoption (1)		(17,467)		—		—		—		(17,467)
Acquisition of additional Woodstar Portfolio properties		—		—		6,837		—		6,837
Acquisition of additional REO Portfolio properties		—		—		4,290		1,268		5,558
Amortization		—		(435)		(10,716)		(528)		(11,679)
Foreign exchange (loss) gain		—		(69)		1,969		496		2,396
Changes in fair value due to changes in inputs and assumptions		(6,739)		—		—		—		(6,739)
Balance as of March 31, 2016	$	95,492	$	2,122	$	68,465	$	14,397	$	180,476

(1)

As discussed in Notes 2 and 14, our implementation of ASU 2015-02 resulted in the consolidation of certain CMBS trusts effective January 1, 2016, which required the elimination of $17.5 million of domestic servicing rights associated with these newly consolidated trusts.

The following table sets forth the estimated aggregate amortization of our European servicing rights, in-place lease intangible assets and favorable lease intangible assets for the next five years and thereafter (amounts in thousands):


2016 (remainder of)	$	18,931
2017		11,622
2018		10,080
2019		8,663
2020		6,708
Thereafter		28,980
Total	$	84,984

- 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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