NOTES RECEIVABLE AND PREFERRED EQUITY INVESTMENTS, NET

As of June 30, 2014, the Company’s notes receivable and preferred equity investments, net, aggregated $96.3 million, and were collateralized either by underlying properties, the borrowers' ownership interests in the entities that own properties and/or by the borrowers' personal guarantee subject, as applicable, to senior liens, as follows:



(dollars in thousands)
Description	Effective interest rate (1)	First Priority liens	Net Carrying Amounts of Notes Receivable as of June 30, 2014		Net Carrying Amounts of Notes Receivable as of December 31, 2013		Maturity date
First Mortgage Loan	6.0%	—	$	—	$	6,400	Demand
Mezzanine Loan ²	10.0%	89,566	9,089		9,089		Demand
First Mortgage Loan	5.5%	—	4,000		42,000		4/1/2016
Zero Coupon Loan ³	24.0%	166,200	4,708		4,431		1/3/2016
Mezzanine Loan	15.0%	—	30,879		30,879		11/9/2020
Mezzanine Loan	15.0%	—	—		3,834		Upon Capital Event
Preferred Equity	8.1%	20,855	13,000		13,000		9/1/2017
Construction Loan	7.7%	—	12,000		12,000		1/1/2015
Mezzanine Loan	12.7%	—	13,000		—		10/3/2015
Preferred Equity	13.5%	—	4,000		—		5/9/2016
Mezzanine Loan	2.5% + Libor	—	3,000		3,000		12/30/2020
Individually less than 3% ⁴	2.7% to 11.6%	—	2,631		2,023		12/31/14 to 5/1/2024
Total			$	96,307	$	126,656

Notes:

(1) Includes origination and exit fees

(2) Comprised of three cross-collateralized loans from one borrower, which are non-performing

(3) The principal balance for this accrual only loan is increased by the interest accrued

(4) Consists of three loans as of June 30, 2014.

During January 2014, the Company received a repayment of $6.4 million, representing the full principal amount on a note receivable.

During January 2014, the Company also received a payment of $1.4 million for a mezzanine loan with a carrying value, net of reserves, of $0.7 million. The Company recognized income of approximately $0.7 million relating to the payoff, which is included in Other, a component of income in the accompanying Consolidated Statement of Income.

During April 2014, the Company made a $13.0 million loan, which is collateralized by a property and bears interest at 12.7% and matures October 2015.

During April 2014, the Company made a $1.9 million loan, which is collateralized by a property and bears interest at Libor plus 375 basis points and matures May 2024.

During April 2014, the Company converted a $38.0 million loan into an equity interest in 152-154 Spring Street (Note 4).

During April 2014, the Company received payment of $10.3 million representing principal and accrued interest on a mezzanine loan for which the Company had a carrying value of $8.5 million, net of a $2.0 million reserve. Following the full collection of all amounts due under this note, the Company recognized income of approximately $2.0 million, which is included in Other, a component of income in the accompanying Consolidated Statement of Income.

6. NOTES RECEIVABLE AND PREFERRED EQUITY INVESTMENTS, NET (continued)

During May 2014, the Company made a $4.0 million preferred equity investment in an entity which owns a property located in the Bronx. The investment has a preferred return of 13.5% and matures May 9, 2016.

The Company monitors the credit quality of its notes receivable on an ongoing basis and considers indicators of credit quality such as loan payment activity, the estimated fair value of the underlying collateral, the seniority of the Company's loan in relation to other debt secured by the collateral and the prospects of the borrower. As of June 30, 2014, the Company held three non-performing notes aggregating $9.1 million for which payment was delinquent. Based primarily on the indicators noted above, the Company has no reserve established as of June 30, 2014 related to these notes. The following table reconciles the allowance for notes receivable from December 31, 2013 to June 30, 2014:



(dollars in thousands)	Allowance for Notes Receivable
Balance at December 31, 2013	$	3,681
Additional reserves	—
Recoveries	(3,681		)
Charge-offs and reclassifications	—
Balance at June 30, 2014	$	—