Equity Investments

6 Months Ended

Jun. 30, 2011

Equity Investments

The Trust’s equity investments consist of the following at June 30, 2011 and December 31, 2010 (in thousands):


		Nominal % Ownership			June 30,		December 31,
Venture Partner	Equity Investment	at June 30, 2011			2011		2010

Marc Realty (1) (2)	8 South Michigan LLC		N/A		$	—	$	7,087
Marc Realty (1) (2)	11 East Adams Street LLC		N/A			—		3,223
Marc Realty (1) (2)	29 East Madison Street LLC		N/A			—		7,720
Marc Realty (2)	Michigan 30 LLC		50.0	%		12,126		12,080
Marc Realty (2)	Brooks Building LLC		50.0	%		7,680		7,452
Marc Realty (2)	High Point Plaza LLC		50.0	%		6,244		6,275
Marc Realty (2)	Salt Creek LLC		50.0	%		2,254		2,344
Marc Realty (2)	1701 Woodfield LLC		50.0	%		4,080		4,221
Marc Realty (2)	River Road LLC		50.0	%		4,074		4,123
Marc Realty (2)	3701 Algonquin Road LLC		50.0	%		2,820		2,931
Marc Realty (2)	Enterprise Center LLC		50.0	%		2,827		3,018
Marc Realty (2)	900 Ridgebrook LLC		50.0	%		1,630		1,676
Sealy (2)	Northwest Atlanta Partners LP		60.0	%		4,119		2,479
Sealy (2)	Newmarket GP LLC		68.0	%		4,604		6,647
Sealy	Airpark Nashville GP		50.0	%		2,075		2,778
Inland/Lexington	Concord Debt Holdings LLC		33.3	%		—		—
Inland/Lexington	CDH CDO LLC		33.3	%		—		—
ROIC (2)	WRT-ROIC Riverside LLC		50.0	%		7,883		7,883
ROIC	WRT-ROIC Lakeside Eagle LLC		50.0	%		9		—
Atrium Holding	WRT-46th Street Gotham LLC		50.0	%		20		—
Atrium Holding (2)	RE CDO Management LLC		50.0	%		1,250		—
Lexington (2)	LW-SOFI LLC		50.0	%		6,022		—
VHH LLC (2)	Vintage Housing LLC		75.0	%		25,452		—

					$	95,169	$	81,937


(1)		On June 1, 2011, the Trust sold its equity investments in 8 South Michigan LLC, 11 East Adams Street LLC and 29 East Adams Street LLC to affiliates of its venture partner for $18,544,000 resulting in a deferred gain of $385,000.

(2)		The Trust has determined that these equity investments are VIEs. The Trust has determined that it is not the primary beneficiary of these investments since the Trust does not have the power to direct the activities of the investments that most significantly impact the investments’ economic performance.

The following table reflects the activity of the Trust’s equity investments for the period ended June 30, 2011 (in thousands):


	Balance at				Equity Income									Balance at
Venture Partner	December 31, 2010		Contributions		(loss)			Distributions			Sales			June 30, 2011

Marc Realty	$	62,150	$	1,222	$	(120	)	$	(1,358	)	$	(18,159	)	$	43,735
Sealy		11,904		—		(856	)		(250	)		—			10,798
Inland/Lexington		—		—		479			(479	)		—			—
ROIC		7,883		18,093		1,134			(19,218	)		—			7,892
Atrium		—		9,287		621			(8,638	)		—			1,270
Lexington		—		5,760		262			—			—			6,022
VHH LLC		—		25,452		—			—			—			25,452

Total	$	81,937	$	59,814	$	1,520		$	(29,943	)	$	(18,159	)	$	95,169

On June 23, 2011 the Trust’s Sealy Northwest Atlanta venture fully satisfied its $28,750,000 first mortgage loan plus accrued interest of approximately $1,083,000 (net of escrowed funds) for a negotiated discounted payoff amount of $20,500,000. As a result of the discounted payoff, the venture recognized approximately $9,203,000 of cancellation of debt income of which $5,522,000 was allocated to the Trust. The allocation of income effectively increases the carrying value of the Trust’s investment in the venture.

At June 30, 2011 the Trust determined that, as a result of current market conditions, including current occupancy levels, current rental rates and an increase in terminal capitalization rates, the fair value of its equity investments in Sealy Northwest Atlanta and Sealy Newmarket were below the carrying values. Accordingly, the Trust assessed whether this decline in value was other-than-temporary. In making this determination, the Trust considered the length of time which the decline has occurred, the length of time before an expected recovery and the lack of any comparables in the market. The Trust determined the fair value of its investments utilizing an unleveraged cash flow methodology with a 10 year hold period and an estimated terminal capitalization rate. The cash flows were then discounted using an estimated market rate. Based on the foregoing, all of which requires significant judgement, the Trust concluded that the declines in value were other-than-temporary, and the Trust recorded other-than-temporary impairment charges of $2,900,000 and $900,000 on its investments in Sealy Northwest Atlanta and Sealy Newmarket, respectively, during the three months ended June 30, 2011.

The summarized balance sheets of the Trust’s Sealy Northwest Atlanta investment are as follows (in thousands):


	June 30, 2011			December 31, 2010
ASSETS

Real estate, net	$	31,426		$	31,919
Cash and cash equivalents		166			289
Receivables & other		1,259			1,564

Total assets	$	32,851		$	33,772


LIABILITIES AND MEMBERS’/PARTNERS’ EQUITY

Mortgage and notes payable	$	20,641		$	28,750
Other liabilities		514			892
Members’/partners’ equity		11,696			4,130

Total liabilities and members’/partners’ equity	$	32,851		$	33,772


Trust’s share of equity	$	7,019		$	2,479
Other-than-temporary impairment		(2,900	)		—

Carrying value of Trust’s investment in Sealy Northwest	$	4,119		$	2,479

The summarized statements of operations of the Trust’s Sealy Northwest Atlanta investment are as follows (in thousands):


	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010

Revenue	$	788		$	756		$	1,498		$	1,518
Cancellation of debt income		9,203			—			9,203			—

Total revenue		9,991			756			10,701			1,518

Operating		263			223			440			445
Real estate taxes		91			100			182			200
Interest		781			417			1,911			829
Depreciation/amortortization		303			307			602			626

Total expenses		1,438			1,047			3,135			2,100

Net income(loss)	$	8,553		$	(291	)	$	7,566		$	(582	)


Trust’s share of net income(loss)		5,132			(175	)		4,540			(349	)
Other than temporary impairment		(2,900	)		—			(2,900	)		—

Income(loss) from equity in Northwest Atanta	$	2,232		$	(175	)	$	1,640		$	(349	)

In addition, the Trust has determined that the fair value of certain of its Marc Realty investments each marginally exceed their carrying values. While the ventures continue to aggressively market available space for lease and work with existing tenants for lease renewal, declines in occupancy could cause impairment of certain of the Trust’s Marc Realty ventures that could be material to the Trust’s results of operations.

On June 2, 2011 the Trust contributed approximately $5,760,000 to LW SOFI. On June 3, LW SOFI acquired from Concord for approximately $11,520,000, 100% of the economic rights and obligations in a $71,530,000 mezzanine loan. The loan is interest only, bears interest at LIBOR plus 185 basis points and matures on February 1, 2012. The loan is encumbered by a $56,090,000 repurchase obligation that charges interest at a variable interest rate of 1-month LIBOR plus 100 basis points and matures on December 31, 2012.

On June 24, 2011 the Trust closed on the second phase of its Vintage transaction to acquire an effective 75% interest in Vintage entitling the Trust to a 12% preferred return from current cash flow. Vintage owns general partnership interests and certain developer fees and advances receivable from partnerships owning 25 multifamily and senior housing properties comprising approximately 4,200 units located primarily in the Pacific Northwest and California with assets and liabilities at June 30, 2011 in excess of $310,000,000 and $230,000,000, respectively.

- Definition

The entire disclosure for equity investment, or group of investments, for which combined disclosure is appropriate, including: (a) the name of each investee and percentage of ownership of common stock, (b) accounting policies for investments in common stock, (c) difference between the amount at which the investment is carried and the amount of underlying equity in net assets and the accounting treatment of the difference, (d) the total fair value of each identified investment for which a market value is available, (e) summarized information as to assets, liabilities, and results of operations of the investees (for investments in unconsolidated subsidiaries, common stock of joint ventures, or other investments using the equity method), and (f) material effects of possible conversions, exercises, or contingent issuances of the investee. Other disclosures include (a) the names of any investee in which the investor owns 20 percent or more of the voting stock and investment is not accounted for using the equity method, and the reasons why not, and (b) the names of any investee in which the investor owns less than 20 percent of the voting stock and the investment is accounted for using the equity method, and the reasons why it is.

+ References+ Details