5.	Loans Receivable

The following table summarizes the Trust’s loans receivable at March 31, 2014 and December 31, 2013 (in thousands):


					Carrying Amount				Contractual Maturity Date
Description	Loan Position	Stated Interest Rate			March 31, 2014		December 31, 2013		Contractual Maturity Date

The Shops at Wailea	B-Note		6.15	%	$	6,559	$	6,292		10/06/14
Churchill (1)	Whole Loan		LIBOR + 3.75	%		372		683		06/01/15
Playa Vista / Water’s Edge	Mezzanine		LIBOR + 15.75	%(2)		12,346		10,327		01/23/15
Rockwell	Mezzanine		12.0	%		—		—		05/01/16
Pinnacle II	B-Note		6.31	%		4,644		4,648		09/06/16
Popiu Shopping Village	B-Note		6.62	%		2,087		2,058		01/06/17
Marc Realty	Mezzanine		6.00	%		4,523		—		03/01/17
Edens Center and Norridge Commons	Mezzanine		LIBOR + 12	%(2)		15,624		—		03/09/17
Mentor Building	Whole Loan		10.0	%		2,512		2,512		09/10/17
1515 Market	Whole Loan		—			—		—			(3)
Hotel Wales	Whole Loan		—			—		20,101			(4)
Legacy Orchard	Corporate Loan		—			—		9,750			(4)
Queensridge	Whole Loan		—			—		2,942			(5)
San Marbeya	Whole Loan		—			—		28,546			(4)
500-512 7th Ave	B-Note		—			—		10,250			(4)
Wellington Tower	Mezzanine		—			—		2,991			(4)

					$	48,667	$	101,100

(1)

The Trust determined that this loan receivable is a variable interest in a VIE primarily based on the fact that the underlying entity does not have sufficient equity at risk to permit the entity to finance its activities without additional subordinated financial support. The Trust does not have the power to direct the activities of the entity that most significantly impact the entity’s economic performance and is not required to consolidate the underlying entity.

(2)	LIBOR floor of 0.5%.

(3)	This loan was in maturity default at the time of acquisition. The loan was modified on February 1, 2013. The Trust consolidates the operations of the borrower entity and the loan receivable is eliminated in consolidation.

(4)	These loans were sold to an independent third party in February 2014. See Note 4 - Acquisition and Disposition Activity for details on the sale.

(5)	The loan was satisfied during the three months ended March 31, 2014.

The carrying amount of loans receivable includes accrued interest of $342,000 and $501,000 at March 31, 2014 and December 31, 2013, respectively, and cumulative accretion of $1,827,000 and $6,488,000 at March 31, 2014 and December 31, 2013, respectively.

At March 31, 2014 and December 31, 2013, the Trust’s loan receivables have accretable discount yet to be recognized as income totaling $3,340,000 and $5,782,000, respectively.

The weighted average coupon on the Trust’s loans receivable was 10.44% and 6.55% and the weighted average yield to maturity was 14.58% and 11.59% at March 31, 2014 and December 31, 2013, respectively.

Loan Receivable Activity

Activity related to loans receivable is as follows (in thousands):


	Three Months Ended March 31, 2014

Balance at beginning of period	$	101,100
Purchase and advances		21,992
Interest (received) accrued, net		(159	)
Repayments / sale proceeds / forgiveness		(69,606	)
Loan discount accretion		1,205
Discount accretion received in cash		(5,865	)

Balance at end of period	$	48,667

The following table summarizes the Trust’s interest, dividend and discount accretion income for the three months ended March 31, 2014 and 2013 (in thousands):


	Three Months Ended March 31,
	2014		2013

Interest on loan assets	$	2,505	$	4,454
Exit fee / prepayment penalty		1,787		—
Accretion of loan discount		1,205		716
Interest and dividends on REIT securities		—		150

Total interest, dividends, and discount accretion	$	5,497	$	5,320

Credit Quality of Loans Receivable and Loan Losses

The Trust evaluates impairment on its loan portfolio on an individual basis and has developed a loan grading system for all of its outstanding loans that are collateralized directly or indirectly by real estate. Grading categories include debt yield, debt service coverage ratio, length of loan, property type, loan type, and other more subjective variables that include property or collateral location, market conditions, industry conditions, and sponsor’s financial stability. Management reviews each category and assigns an overall numeric grade for each loan to determine the loan’s risk of loss and to provide a determination as to whether an individual loan is impaired and whether a specific loan loss allowance is necessary. A loan’s grade of credit quality is determined quarterly.

All loans with a positive score do not require a loan loss allowance. Any loan graded with a neutral score or “zero” is subject to further review of the collectability of the interest and principal based on current conditions and qualitative factors to determine if impairment is warranted. Any loan with a negative score is deemed impaired and management then would measure the specific impairment of each loan separately using the fair value of the collateral less costs to sell.

Management estimates the loan loss allowance by calculating the estimated fair value less costs to sell of the underlying collateral securing the loan based on the fair value of underlying collateral and comparing the fair value to the loan’s net carrying value. If the fair value is less than the net carrying value of the loan, an allowance is created with a corresponding charge to the provision for loan losses. The allowance for each loan will be maintained at a level the Trust believes will be adequate to absorb losses.

The table below summarizes the Trust’s loans receivable by internal credit rating at March 31, 2014 and December 31, 2013 (in thousands, except for number of loans):


	March 31, 2014				December 31, 2013
Internal Credit Quality	Number of Loans		Carrying Value of Loans Receivable		Number of Loans		Carrying Value of Loans Receivable

Greater than zero		7	$	36,321		11	$	90,773
Equal to zero		1		12,346		1		10,327
Less than zero		1		—		1		—

		9	$	48,667		13	$	101,100

Non-Performing Loans

The Trust considers a loan to be non-performing and places loans on non-accrual status at such time as management determines it is probable that it will be unable to collect all amounts due according to the contractual terms of the loan. While on non-accrual status, based on the Trust’s judgment as to collectability of principal, loans are either accounted for on a cash basis, where interest income is recognized only upon actual receipt of cash, or on a cost-recovery basis, where all cash receipts reduce a loan’s carrying value. If and when a loan is brought back into compliance with its contractual terms, the Trust will resume accrual of interest.

As of March 31, 2014 and December 31, 2013, there was one non-performing loan with past due payments. A $348,000 provision for loan loss was recorded as of December 31, 2013. The Trust did not record any provision for loan loss for the three months ended March 31, 2014.