Investments in Partially Owned Entities

3 Months Ended

Mar. 31, 2013

Equity Method Investments and Joint Ventures [Abstract]

8. Investments in Partially Owned Entities

Toys “R” Us (“Toys”)

As of March 31, 2013, we own 32.5% of Toys. We account for our investment in Toys under the equity method and record our share of Toys' net income or loss on a one-quarter lag basis because Toys' fiscal year ends on the Saturday nearest January 31, and our fiscal year ends on December 31. The business of Toys is highly seasonal. Historically, Toys' fourth quarter net income accounts for more than 80% of its fiscal year net income.

In the three months ended December 31, 2012, we recorded a $40,000,000 non-cash impairment loss with regards to our investment in Toys and disclosed, that if current facts don't change, our share of Toys' undistributed income, which in accordance with the equity method of accounting, would increase the carrying amount of our investment above fair value, would require an offsetting impairment loss.

In the three months ended March 31, 2013, we recognized our 32.5% share of Toys' fourth quarter net income of $78,542,000 and a corresponding non-cash impairment loss of the same amount. Our income applicable to Toys after the impairment loss was $1,759,000, representing management fees earned and received.

Below is a summary of Toys' latest available financial information on a purchase accounting basis:

(Amounts in thousands)		Balance as of
Balance Sheet:		February 2, 2013			October 27, 2012
	Assets	$	11,920,000		$	12,953,000
	Liabilities		9,921,000			11,190,000
	Noncontrolling interests		49,000			44,000
	Toys “R” Us, Inc. equity		1,950,000	⁽¹⁾		1,719,000

		For the Three Months Ended
Income Statement:		February 2, 2013			January 28, 2012
	Total revenues	$	5,770,000		$	5,925,000
	Net income attributable to Toys		241,000			349,000


(1)	As of March 31, 2013, the carrying amount of our investment in Toys is less than our share of Toys' equity by approximately $141,270,000. This basis difference resulted primarily from non-cash impairment losses aggregating $118,542,000 that we recognized in 2012 and 2013. We have allocated the basis difference to Toys' intangible assets (primarily trade names and trademarks). The basis difference is not being amortized and will be recognized upon disposition of our investment.

Alexander's, Inc. (“Alexander's”) (NYSE: ALX)

As of March 31, 2013, we own 1,654,068 Alexander's common shares, or approximately 32.4% of Alexander's common equity. We manage, lease and develop Alexander's properties pursuant to agreements which expire in March of each year and are automatically renewable. As of March 31, 2013, Alexander's owed us $45,623,000 in fees under these agreements.

As of March 31, 2013, the market value (“fair value” pursuant to ASC 820) of our investment in Alexander's, based on Alexander's March 31, 2013 closing share price of $329.69, was $545,330,000, or $373,510,000 in excess of the carrying amount on our consolidated balance sheet. As of March 31, 2013, the carrying amount of our investment in Alexander's, excluding amounts owed to us, exceeds our share of the equity in the net assets of Alexander's by approximately $43,595,000. The majority of this basis difference resulted from the excess of our purchase price for the Alexander's common stock acquired over the book value of Alexander's net assets. Substantially all of this basis difference was allocated, based on our estimates of the fair values of Alexander's assets and liabilities, to real estate (land and buildings). We are amortizing the basis difference related to the buildings into earnings as additional depreciation expense over their estimated useful lives. This depreciation is not material to our share of equity in Alexander's net income. The basis difference related to the land will be recognized upon disposition of our investment.

8. Investments in Partially Owned Entities – continued

Alexander's, Inc. (“Alexander's”) (NYSE: ALX)- continued

Below is a summary of Alexander's latest available financial information:

(Amounts in thousands)		Balance as of
Balance Sheet:		March 31, 2013		December 31, 2012
	Assets	$	1,485,000	$	1,482,000
	Liabilities		1,150,000		1,150,000
	Stockholders' equity		335,000		332,000

		For the Three Months Ended
Income Statement:		March 31, 2013		March 31, 2012
	Total revenues	$	49,000	$	47,000
	Net income attributable to Alexander’s		14,000		19,000

LNR Property LLC (“LNR”)

At March 31, 2013, we owned a 26.2% interest in LNR and accounted for our investment under the equity method. We recorded our share of LNR's net income or loss on a one-quarter lag basis because we filed our consolidated financial statements on Form 10-K and 10-Q prior to receiving LNR's consolidated financial statements.

Below is a summary of LNR's latest available financial information:

(Amounts in thousands)		Balance as of
Balance Sheet:		December 31, 2012		September 30, 2012
	Assets	$	92,267,000	$	98,530,000
	Liabilities		91,204,000		97,643,000
	Noncontrolling interests		8,000		8,000
	LNR Property Corporation equity		1,055,000		879,000

		For the Three Months Ended
Income Statement:		December 31, 2012		December 31, 2011
	Total revenues	$	48,000	$	49,000
	Net income attributable to LNR		176,000		51,000

In the three months ended March 31, 2013, we recognized our 26.2% share of LNR's fourth quarter net income of $18,731,000, which increased the carrying amount of our investment to approximately $241,000,000. In the second quarter of 2013, LNR was sold for $1.053 billion, and we received net proceeds of approximately $241,000,000 for our interest. Pursuant to the sale agreement, we ceased receiving income as of January 1, 2013.

8. Investments in Partially Owned Entities – continued

Below is a schedule of our investments in partially owned entities as of March 31, 2013 and December 31, 2012.

			Percentage
(Amounts in thousands)			Ownership at		Balance as of
Investments:			March 31, 2013		March 31, 2013		December 31, 2012
Toys				32.5%	$	474,466	$	478,041

Alexander’s				32.4%	$	171,820	$	171,013

Lexington⁽¹⁾				n/a		-		75,542

LNR (see page 14 for details)				26.2%		241,377		224,724

India real estate ventures				4.0%-36.5%		94,691		95,516

Partially owned office buildings:
	280 Park Avenue			49.5%		199,466		197,516
	Rosslyn Plaza			43.7%-50.4%		61,827		62,627
	West 57th Street properties			50.0%		56,500		57,033
	One Park Avenue			30.3%		52,238		50,509
	666 Fifth Avenue Office Condominium			49.5%		37,212		35,527
	330 Madison Avenue			25.0%		31,581		30,277
	Warner Building			55.0%		10,118		8,775
	Fairfax Square			20.0%		5,299		5,368
	Other partially owned office buildings			Various		8,942		9,315

Other investments:
	Downtown Crossing, Boston⁽²⁾			50.0%		46,309		48,122
	Monmouth Mall			50.0%		7,380		7,205
	Other investments⁽³⁾			Various		173,256		147,187
					$	1,198,016	$	1,226,256



(1)		In the first quarter of 2013, we began accounting for our investment in Lexington as a marketable equity security - available for sale (see page 12 for details).

(2)		On April 24, 2013, the joint venture sold the site in Downtown Crossing, Boston, and we received approximately $45,000 for our 50% interest (see note 2 on page 16 for details).

(3)		Includes interests in 85 10th Avenue, Fashion Centre Mall, 50-70 West 93rd Street and others.

8. Investments in Partially Owned Entities - continued

Below is a schedule of income recognized from investments in partially owned entities for the three months ended March 31, 2013 and 2012.

			Percentage	For the Three Months
(Amounts in thousands)			Ownership	Ended March 31,
Our Share of Net Income (Loss):			March 31, 2013	2013		2012
Toys:			32.5%
	Equity in net income before income taxes			$	137,888	$	157,387
	Income tax expense				(59,346)		(43,203)
	Equity in net income				78,542		114,184
	Non-cash impairment loss (see page 13 for details)				(78,542)		-
	Management fees				1,759		2,287
				$	1,759	$	116,471

Alexander’s:			32.4%
	Equity in net income			$	4,589	$	6,132
	Management, leasing and development fees				1,487		1,889
					6,076		8,021

Lexington⁽¹⁾			n/a		(979)		930

LNR ( see page 14 for details)			26.2%		18,731		13,250

India real estate ventures			4.0%-36.5%		(767)		(793)

Partially owned office buildings:
	280 Park Avenue		49.5%		(2,569)		(5,595)
	Warner Building		55.0%		(2,346)		(3,010)
	666 Fifth Avenue Office Condominium		49.5%		2,019		1,715
	330 Madison Avenue		25.0%		1,304		794
	One Park Avenue		30.3%		457		331
	Rosslyn Plaza		43.7%-50.4%		(446)		158
	1101 17th Street		55.0%		384		683
	West 57th Street properties		50.0%		172		313
	Fairfax Square		20.0%		(45)		(12)
	Other partially owned office buildings		Various		488		527
					(582)		(4,096)

Other investments:
	Downtown Crossing, Boston⁽²⁾		50.0%		(2,374)		(334)
	Monmouth Mall		50.0%		859		362
	Independence Plaza⁽³⁾		n/a		-		1,682
	Other investments⁽⁴⁾		Various		(198)		638
					(1,713)		2,348

				$	20,766	$	19,660


(1)		In the first quarter of 2013, we began accounting for our investment in Lexington as a marketable equity security - available for sale (see page 12 for details).

(2)		On April 24, 2013, the joint venture sold the site in Downtown Crossing, Boston, and we received approximately $45,000 for our 50% interest. In connection therewith we recognized a $2,335 impairment loss in the first quarter.

(3)		In December 2012, we acquired a 58.75% interest in Independence Plaza and began to consolidate the accounts of the property into our consolidated financial statements.

(4)		Includes interests in 85 10th Avenue, Fashion Centre Mall, 50-70 West 93rd Street and others.

8. Investments in Partially Owned Entities – continued

Below is a summary of the debt of our partially owned entities as of March 31, 2013 and December 31, 2012, none of which is recourse to us.

			Percentage		Interest	100% of
			Ownership at		Rate at	Partially Owned Entities’ Debt at
(Amounts in thousands)			March 31,		March 31,	March 31,		December 31,
			2013	Maturity	2013	2013		2012
Toys:			32.5%
	Notes, loans and mortgages payable			2013-2021	7.71%	$	5,294,567	$	5,683,733

Alexander's:			32.4%
	Mortgages payable			2014-2018	3.85%	$	1,061,953	$	1,065,916

Lexington⁽¹⁾:
	Mortgages payable			n/a	n/a	$	-	$	1,994,179

LNR (sold in April 2013):			26.2%
	Mortgages payable			2013-2031	4.62%	$	383,804	$	309,787
	Liabilities of consolidated CMBS and CDO trusts			n/a	5.38%		90,735,416		97,211,734
						$	91,119,220	$	97,521,521

Partially owned office buildings:
	666 Fifth Avenue Office Condominium mortgage
		payable	49.5%	02/19	6.76%	$	1,124,402	$	1,109,700
	280 Park Avenue mortgage payable		49.5%	06/16	6.65%		738,240		738,228
	Warner Building mortgage payable		55.0%	05/16	6.26%		292,700		292,700
	One Park Avenue mortgage payable		30.3%	03/16	5.00%		250,000		250,000
	330 Madison Avenue mortgage payable		25.0%	06/15	1.70%		150,000		150,000
	Fairfax Square mortgage payable		20.0%	12/14	7.00%		69,906		70,127
	West 57th Street properties mortgages payable		50.0%	02/14	4.94%		20,088		20,434
	1101 17th Street mortgage payable		55.0%	01/15	1.45%		31,000		31,000
	Other		Various	Various	6.03%		76,611		69,704
						$	2,752,947	$	2,731,893

India Real Estate Ventures:
	TCG Urban Infrastructure Holdings mortgages
		payable	25.0%	2013-2022	13.51%	$	238,359	$	236,579

Other:
	Monmouth Mall mortgage payable		50.0%	09/15	5.44%		159,459		159,896
	Other⁽²⁾		Various	Various	5.02%		990,533		990,647
						$	1,149,992	$	1,150,543


(1)		In the first quarter of 2013, we began accounting for our investment in Lexington as a marketable equity security - available for sale (see page 12 for details).

(2)		Includes interests in Fashion Centre Mall, 50-70 West 93rd Street and others.

Based on our ownership interest in the partially owned entities above, our pro rata share of the debt of these partially owned entities was $27,439,213,000 and $29,443,128,000 at March 31, 2013 and December 31, 2012, respectively. Excluding our pro rata share of LNR's liabilities related to consolidated CMBS and CDO trusts, which are non-recourse to LNR and its equity holders, including us, our pro rata share of partially owned entities debt was $3,690,125,000 and $3,998,929,000 at March 31, 2013 and December 31, 2012, respectively.

- Definition

The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group.

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