Notes Receivable, Preferred Equity and Other Real Estate Related Investments

During 2014, the Company made total investments in notes receivable and preferred equity investments of $31.2 million and total collections of $18.1 million.

The following table reconciles notes receivable investments from January 1, 2012 to December 31, 2014:



	For the years ended December 31,
(dollars in thousands)	2014			2013			2012
Beginning Balance	$	126,656		$	129,278		$	59,989
Additions during period:
New investments	31,169			45,000			108,629
Deductions during period:
Collections of principal	(18,095		)	(29,583		)	(25,388		)
Conversion to real estate through receipt of deed or through foreclosure	(38,000		)	(18,500		)	(14,000		)
Non-cash accretion of notes receivable	556			461			453
Reserves	—			—			(405		)
Ending Balance	$	102,286		$	126,656		$	129,278

As of December 31, 2014, the Company’s notes receivable, net, approximated $102.3 million and were collateralized by the underlying properties, the borrower’s ownership interest in the entities that own the properties and/or by the borrower’s personal guarantee. Notes receivable were as follows at December 31, 2014:

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. Notes Receivable, Preferred Equity and Other Real Estate Related Investments, continued



Note Description	Effective interest rate (1)	First Priority Liens		Net Carrying Amount of Notes Receivable as of December 31, 2014		Net Carrying Amount of Notes Receivable as of December 31, 2013		Maturity Date	Extension Options
(dollars in thousands)
First Mortgage Loan	7.7%	$	—	$	12,000	$	12,000	1/1/2015	—
Mezzanine Loan	12.7%	18,900		8,000		—		10/3/2015
First Mortgage Loan	8.8%	—		7,500		—		10/31/2015	1 x 12 Months
Zero Coupon Loan (2)	24.0%	166,200		4,986		4,431		1/3/2016	—
First Mortgage Loan	5.5%	—		4,000		42,000		4/1/2016	1 x 6 Months
Preferred Equity	13.5%	—		4,000		—		5/9/2016
Other	18.0%	—		3,307		—		7/1/2017
Preferred Equity	8.1%	20,855		13,000		13,000		9/1/2017	—
Mezzanine Loan	15.0%	—		30,879		30,879		11/9/2020	—
First Mortgage Loan	6.0%	—		—		6,400		Demand	—
Other	LIBOR + 2.5%	—		4,000		3,000		12/30/2020
Mezzanine Loan (3)	10.0%	87,477		7,983		9,089		Demand	—
Mezzanine Loan	15.0%	16,668		—		3,834		Upon Capital Event	—
Individually less than 3% (4)	2.7% to 17.5%	—		2,631		2,023		12/31/2015 to 5/1/2024	—
Total				$	102,286	$	126,656

Notes:

(1) Includes origination and exit fees

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

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

(4) Consists of three loans as of December 31, 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 revenue for the year ended December 31, 2014.

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 July 2014, the borrower repaid $5.0 million of the loan. The outstanding balance at December 31, 2014 was $8.0 million.

During April 2014, the Company made a $1.9 million loan, which is collateralized by a property, 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).

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. Notes Receivable, Preferred Equity and Other Real Estate Related Investments, continued

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 $8.3 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 revenue for the year ended December 31, 2014.

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 2016.

During July 2014, the Company made an additional $1.0 million loan, which is collateralized by Common OP Units, to an existing borrower, bringing the total outstanding amount to $4.0 million. This loan bears interest at LIBOR plus 250 basis points and matures 12/20/20.

During July 2014, the Company made a $4.8 million loan, which is collateralized by the borrower's interest in a property, bears interest at 18% and matures July 2017. As of December 31, 2014, $3.3 million has been drawn down on the loan.

During September 2014, the Company received payment of $1.9 million on a note, representing $0.7 million of accrued interest and $1.2 million of principal.

During October 2014, the Company made a $7.5 million loan, which is collateralized by a property, bears interest at 8.8% and matures October 2015.

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 December 31, 2014, the Company held three non-performing notes.

The following table reconciles the activity in the allowance for notes receivable from December 31, 2012 to December 31, 2014:



	Allowance for
(dollars in thousands)	Notes Receivable
Balance at December 31, 2012	$	3,681
Additional reserves	—
Recoveries	—
Charge-offs and reclassifications	—
Balance at December 31, 2013	$	3,681
Additional reserves	—
Recoveries	(2,724		)
Charge-offs and reclassifications	(957		)
Balance at December 31, 2014	$	—