7.	Preferred Equity Investments

As of September 30, 2017, we own a 24.4% interest in PGRESS Equity Holdings L.P., an entity that owns certain preferred equity investments that are consolidated into our consolidated financial statements and summarized in the table below.

Preferred equity investments are recorded at cost. We evaluate the collectability of preferred equity investments each quarter in determining whether they are impaired. Preferred equity investments are impaired when changes in events or circumstances, including delinquencies, loss experience and collateral quality, indicate that it is probable we will be unable to collect all amounts due under the contractual terms. If a preferred equity investment is considered impaired, an impairment loss is measured based on the excess of the carrying amount of the investment over the net realizable value of the collateral. On April 11, 2017, the partnership that owns 2 Herald Square defaulted on the obligation to extend the maturity date or redeem the preferred equity investment, together with accrued and unpaid dividends. We believe, based on current facts and circumstances, that the redemption of our preferred equity investment, is not probable. Accordingly, we have recorded a $19,588,000 valuation allowance, which is included in “interest and other (loss) income” on our consolidated statements of income for the three and nine months ended September 30, 2017.

The following is a summary of the preferred equity investments.

(Amounts in thousands, except square feet)	Paramount		Dividend		Initial	As of
Preferred Equity Investment	Ownership		Rate		Maturity	September 30, 2017			December 31, 2016
470 Vanderbilt Avenue ⁽¹⁾		24.4%		10.3%	Feb-2019	$	35,763		$	35,613
2 Herald Square⁽²⁾		24.4%		10.3%	Apr-2017		19,588			19,438
							55,351			55,051
Less: valuation allowance ⁽²⁾							(19,588	)		-
Preferred equity investments, net						$	35,763		$	55,051

⁽¹⁾

Represents a $33,750 preferred equity investment in a partnership that owns 470 Vanderbilt Avenue, a 650,000 square foot office building in Brooklyn, New York. The preferred equity has a dividend rate of 10.3%, of which 8.0% was paid in cash through February 2016 and the unpaid portion accreted to the balance of the investment. Subsequent to February 2016, the entire 10.3% dividend is being paid in cash.

⁽²⁾

Represents a $17,500 preferred equity investment in a partnership that owns 2 Herald Square, a 369,000 square foot office and retail property in Manhattan. The preferred equity investment had a dividend rate of 10.3%, of which 7.0% was paid in cash and the remainder accreted to the balance of the investment. The preferred equity investment had two one-year extension options.