Investments in Partially Owned Entities

6 Months Ended

Jun. 30, 2012

Investments in Partially Owned Entities [Abstract]

8. Investments in Partially Owned Entities

Toys “R” Us (“Toys”)

As of June 30, 2012, we own 32.5% of Toys. The business of Toys is highly seasonal. Historically, Toys' fourth quarter net income accounts for more than 80% of its fiscal year net income. We account for our investment in Toys under the equity method and record our 32.5% 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. As of June 30, 2012, the carrying amount of our investment in Toys does not differ materially from our share of the equity in the net assets of Toys on a purchase accounting basis.

8. Investments in Partially Owned Entities – continued

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

(Amounts in thousands)						Balance as of
Balance Sheet:						April 28, 2012		October 29, 2011
	Assets					$	11,889,000	$	13,221,000
	Liabilities						9,969,000		11,530,000
	Noncontrolling interests						34,000		-
	Toys “R” Us, Inc. equity						1,886,000		1,691,000

		For the Three Months Ended				For the Six Months Ended
Income Statement:		April 28, 2012		April 30, 2011		April 28, 2012		April 30, 2011
	Total revenues	$	2,612,000	$	2,636,000	$	8,537,000	$	8,608,000
	Net (loss) income attributable to Toys		(66,000)		(77,000)		283,000		262,000

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

As of June 30, 2012, 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 June 30, 2012, Alexander's owed us $40,480,000 in fees under these agreements.

As of June 30, 2012, the market value of our investment in Alexander's, based on Alexander's June 30, 2012 closing share price of $431.11, was $713,085,000, or $524,376,000 in excess of the carrying amount on our consolidated balance sheet. As of June 30, 2012, 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 $58,552,000. 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 amortization 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.

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

(Amounts in thousands)						Balance as of
Balance Sheet:						June 30, 2012		December 31, 2011
	Assets					$	1,761,000	$	1,771,000
	Liabilities						1,397,000		1,408,000
	Noncontrolling interests						5,000		4,000
	Stockholders' equity						359,000		359,000

		For the Three Months Ended				For the Six Months Ended
Income Statement:		June 30, 2012		June 30, 2011		June 30, 2012		June 30, 2011
	Total revenues	$	64,000	$	62,000	$	127,000	$	125,000
	Net income attributable to Alexander’s		19,000		20,000		38,000		38,000

Lexington Realty Trust (“Lexington”) (NYSE: LXP)

As of June 30, 2012, we own 18,468,969 Lexington common shares, or approximately 11.9% of Lexington's common equity. We account for our investment in Lexington under the equity method because we believe we have the ability to exercise significant influence over Lexington's operating and financial policies, based on, among other factors, our representation on Lexington's Board of Trustees and the level of our ownership in Lexington as compared to other shareholders. We record our pro rata share of Lexington's net income or loss on a one-quarter lag basis because we file our consolidated financial statements on Form 10-K and 10-Q prior to the time that Lexington files its consolidated financial statements.

8. Investments in Partially Owned Entities – continued

Based on Lexington's June 30, 2012 closing share price of $8.47, the market value of our investment in Lexington was $156,432,000, or $102,877,000 in excess of the June 30, 2012 carrying amount on our consolidated balance sheet. As of June 30, 2012, the carrying amount of our investment in Lexington was less than our share of the equity in the net assets of Lexington by approximately $45,263,000. This basis difference resulted primarily from $107,882,000 of non-cash impairment charges recognized in 2008, partially offset by purchase accounting for our acquisition of an additional 8,000,000 common shares of Lexington in October 2008, of which the majority relates to our estimate of the fair values of Lexington's real estate (land and buildings) as compared to the carrying amounts in Lexington's consolidated financial statements. We are amortizing the basis difference related to the buildings into earnings as additional depreciation expense over their estimated useful lives. This amortization is not material to our share of equity in Lexington's net income or loss. The basis difference related to the land will be recognized upon disposition of our investment.

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

(Amounts in thousands)						Balance as of
Balance Sheet:						March 31, 2012		September 30, 2011
	Assets					$	3,047,000	$	3,164,000
	Liabilities						1,844,000		1,888,000
	Noncontrolling interests						60,000		59,000
	Shareholders’ equity						1,143,000		1,217,000

		For the Three Months Ended				For the Six Months Ended
Income Statement:		March 31, 2012		March 31, 2011		March 31, 2012		March 31, 2011
	Total revenues	$	83,000	$	80,000	$	166,000	$	160,000
	Net income (loss) attributable to Lexington		4,000		(17,000)		17,000		(5,000)

LNR Property LLC (“LNR”)

As of June 30, 2012, we own a 26.2% equity interest in LNR. We account for our investment in LNR under the equity method and record our 26.2% share of LNR's net income or loss on a one-quarter lag basis because we file our consolidated financial statements on Form 10-K and 10-Q prior to receiving LNR's consolidated financial statements.

LNR consolidates certain Commercial Mortgage-Backed Securities (“CMBS”) and Collateralized Debt Obligation (“CDO”) trusts for which it is the primary beneficiary. The assets of these trusts (primarily commercial mortgage loans), which aggregate approximately $85 billion as of March 31, 2012, are the sole source of repayment of the related liabilities, which are non-recourse to LNR and its equity holders, including us. Changes in the fair value of these assets each period are offset by changes in the fair value of the related liabilities through LNR's consolidated income statement. As of June 30, 2012, the carrying amount of our investment in LNR does not materially differ from our share of LNR's equity.

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

(Amounts in thousands)						Balance as of
Balance Sheet:						March 31, 2012		September 30, 2011
	Assets					$	86,155,000	$	128,536,000
	Liabilities						85,383,000		127,809,000
	Noncontrolling interests						14,000		55,000
	LNR Property Corporation equity						758,000		672,000

		For the Three Months Ended				For the Six Months Ended
Income Statement:		March 31, 2012		March 31, 2011		March 31, 2012		March 31, 2011
	Total revenues	$	55,000	$	47,000	$	104,000	$	83,000
	Net income attributable to LNR		36,000		42,000		87,000		100,000

8. Investments in Partially Owned Entities – continued

Below is a schedule of our investments in partially owned entities as of June 30, 2012 and December 31, 2011.

			Percentage
(Amounts in thousands)			Ownership at		Balance as of
Investments:			June 30, 2012		June 30, 2012		December 31, 2011
Toys				32.5%⁽¹⁾	$	573,292	$	506,809

Alexander’s				32.4%	$	188,709	$	189,775

Lexington				11.9%⁽²⁾		53,555		57,402

LNR				26.2%		192,788		174,408

India real estate ventures				4.0%-36.5%		96,518		80,499

Partially owned office buildings:
	280 Park Avenue			49.5%		186,102		184,516
	Rosslyn Plaza			43.7%-50.4%		62,552		53,333
	West 57th Street properties			50.0%		57,754		58,529
	One Park Avenue			30.3%		48,202		47,568
	666 Fifth Avenue Office Condominium			49.5%		33,107		23,655
	330 Madison Avenue			25.0%		23,229		20,353
	1101 17th Street			55.0%		21,688		20,407
	Fairfax Square			20.0%		6,144		6,343
	Warner Building			55.0%		5,009		2,715
	Other partially owned office buildings			Various		10,569		11,547

Other equity method investments:
	Verde Realty Operating Partnership			8.3%		58,595		59,801
	Independence Plaza Partnership⁽³⁾			51.0%		51,718		48,511
	Downtown Crossing, Boston			50.0%		47,365		46,691
	Monmouth Mall			50.0%		7,573		7,536
	Other equity method investments⁽⁴⁾			Various		133,970		140,061
					$	1,285,147	$	1,233,650


(1)		32.7% at December 31, 2011.

(2)		12.0% at December 31, 2011.

(3)		Represents an investment in mezzanine loans to the property owner entity.

(4)		Includes interests in 85 10th Avenue, Farley Project, Suffolk Downs, Dune Capital L.P., Fashion Centre Mall 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 and six months ended June 30, 2012 and 2011.

				Percentage	For the Three Months				For the Six Months
(Amounts in thousands)				Ownership	Ended June 30,				Ended June 30,
Our Share of Net Income (Loss):				June 30, 2012	2012		2011		2012		2011
Toys:				32.5%⁽¹⁾
	Equity in net (loss) income before income taxes				$	(35,664)	$	(49,017)	$	121,723	$	130,822
	Income tax benefit (expense)					14,103		23,969		(29,100)		(45,049)
	Equity in net (loss) income					(21,561)		(25,048)		92,623		85,773
	Management fees					2,371		2,202		4,658		4,325
					$	(19,190)	$	(22,846)	$	97,281	$	90,098

Alexander’s:				32.4%
	Equity in net income				$	5,941	$	6,351	$	12,073	$	12,070
	Fee income					1,907		1,900		3,796		3,787
						7,848		8,251		15,869		15,857

Lexington:				11.9%⁽²⁾
	Equity in net (loss) income					(236)		346		694		1,066
	Net gain resulting from Lexington's stock issuance					-		8,308		-		9,760
						(236)		8,654		694		10,826

LNR:				26.2%
	Equity in net income					9,469		4,983		22,719		11,260
	Net gains from asset sales and tax settlement gains					-		6,020		-		14,997
						9,469		11,003		22,719		26,257

India real estate ventures				4.0%-36.5%		(3,815)		205		(4,608)		(2)

Partially owned office buildings:
	Warner Building:			55.0%
		Equity in net loss				(1,589)		(3,225)		(4,599)		(3,525)
		Straight-line reserves and write-off of tenant
			improvements			-		-		-		(9,022)
						(1,589)		(3,225)		(4,599)		(12,547)
	280 Park Avenue (acquired in May 2011)			49.5%		(1,955)		(2,184)		(7,550)		(2,184)
	666 Fifth Avenue Office Condominium (acquired
		in December 2011)		49.5%		1,785		-		3,500		-
	1101 17th Street			55.0%		646		700		1,329		1,423
	330 Madison Avenue			25.0%		18		506		812		1,125
	One Park Avenue (acquired in March 2011)			30.3%		303		(243)		634		(1,471)
	West 57th Street properties			50.0%		252		238		565		336
	Rosslyn Plaza			43.7%-50.4%		145		(195)		303		2,220
	Fairfax Square			20.0%		(40)		42		(52)		29
	Other partially owned office buildings			Various		555		1,997		1,082		4,086
						120		(2,364)		(3,976)		(6,983)

Other equity method investments:
	Independence Plaza Partnership (acquired in June 2011)⁽³⁾			51.0%		1,733		-		3,415		-
	Downtown Crossing, Boston			50.0%		(500)		(242)		(834)		(748)
	Monmouth Mall			50.0%		298		826		660		957
	Verde Realty Operating Partnership			8.3%		(289)		585		(612)		(1,209)
	Other equity method investments⁽⁴⁾			Various		(2,065)		(902)		(1,104)		(3,060)
						(823)		267		1,525		(4,060)

					$	12,563	$	26,016	$	32,223	$	41,895

(1)		32.7% at June 30, 2011.

(2)		11.7% at June 30, 2011.

(3)		Represents an investment in mezzanine loans to the property owner entity.

(3)		Includes interests in 85 10th Avenue, Farley Project, Suffolk Downs, Dune Capital L.P., Fashion Centre Mall and others.

8. Investments in Partially Owned Entities – continued

Below is a summary of the debt of our partially owned entities as of June 30, 2012 and December 31, 2011, none of which is recourse to us.

					Interest	100% of
			Percentage		Rate at	Partially Owned Entities’ Debt at
(Amounts in thousands)			Ownership at		June 30,	June 30,		December 31,
			June 30, 2012	Maturity	2012	2012		2011
Toys:			32.5%⁽¹⁾
	Notes, loans and mortgages payable			2012-2021	7.40%	$	5,439,646	$	6,047,521

Alexander's:			32.4%
	Mortgage notes payable			2013-2018	3.51%	$	1,323,532	$	1,330,932

Lexington:			11.9%⁽²⁾
	Mortgage notes payable			2012-2037	5.58%	$	1,652,094	$	1,712,750

LNR:			26.2%
	Mortgage notes payable			2013-2031	4.34%	$	373,286	$	353,504
	Liabilities of consolidated CMBS and CDO trusts			n/a	5.32%		84,922,346		127,348,336
						$	85,295,632	$	127,701,840

Partially owned office buildings:
	666 Fifth Avenue Office Condominium mortgage
		note payable	49.5%	02/19	6.76%	$	1,070,288	$	1,035,884
	280 Park Avenue mortgage notes payable		49.5%	06/16	6.65%		738,001		737,678
	Warner Building mortgage note payable		55.0%	05/16	6.26%		292,700		292,700
	One Park Avenue mortgage note payable		30.3%	03/16	5.00%		250,000		250,000
	330 Madison Avenue mortgage note payable		25.0%	06/15	1.74%		150,000		150,000
	Fairfax Square mortgage note payable		20.0%	12/14	7.00%		70,558		70,974
	Rosslyn Plaza mortgage note payable		43.7% to 50.4%	n/a	n/a		-		56,680
	West 57th Street properties mortgage note payable		50.0%	02/14	4.94%		21,026		21,864
	Other		Various	Various	6.38%		69,972		70,230
						$	2,662,545	$	2,686,010

India Real Estate Ventures:
	TCG Urban Infrastructure Holdings mortgage notes
		payable	25.0%	2012-2022	12.97%	$	227,820	$	226,534

Other:
	Verde Realty Operating Partnership mortgage notes
		payable	8.3%	2013-2025	5.51%	$	522,022	$	340,378
	Monmouth Mall mortgage note payable		50.0%	09/15	5.44%		161,016		162,153
	Other⁽³⁾		Various	Various	4.88%		973,289		992,872
						$	1,656,327	$	1,495,403


(1)		32.7% at December 31, 2011.

(2)		12.0% at December 31, 2011.

(3)		Includes interests in Suffolk Downs, Fashion Centre Mall 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 $26,214,635,000 and $37,531,298,000 at June 30, 2012 and December 31, 2011, 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 $3,987,060,000 and $4,199,145,000 at June 30, 2012 and December 31, 2011, 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.

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