Investments in Partially Owned Entities

6 Months Ended

Jun. 30, 2013

Equity Method Investments and Joint Ventures [Abstract]

7. Investments in Partially Owned Entities

Toys “R” Us (“Toys”)

As of June 30, 2013, we own 32.6% 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 fourth quarter of 2012, we recorded a $40,000,000 non-cash impairment loss on 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 first quarter of 2013, we recognized our share of Toys' fourth quarter net income of $78,542,000 and a corresponding non-cash impairment loss of the same amount.

As of June 30, 2013, the carrying amount of our investment in Toys is less than our share of Toys' equity by approximately $146,215,000. This basis difference resulted primarily from the non-cash impairment losses aggregating $118,542,000 that were 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.

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

(Amounts in thousands)						Balance as of
Balance Sheet:						May 4, 2013		October 27, 2012
	Assets					$	11,303,000	$	12,953,000
	Liabilities						9,475,000		11,190,000
	Noncontrolling interests						67,000		44,000
	Toys “R” Us, Inc. equity						1,761,000		1,719,000

		For the Three Months Ended				For the Six Months Ended
Income Statement:		May 4, 2013		April 28, 2012		May 4, 2013		April 28, 2012
	Total revenues	$	2,408,000	$	2,612,000	$	8,178,000	$	8,537,000
	Net (loss) income attributable to Toys		(119,000)		(66,000)		122,000		283,000

7. Investments in Partially Owned Entities – continued

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

As of June 30, 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 June 30, 2013, Alexander's owed us $44,883,000 in fees under these agreements.

As of June 30, 2013, the market value (“fair value” pursuant to ASC 820) of our investment in Alexander's, based on Alexander's June 30, 2013 closing share price of $293.71, was $485,816,000, or $315,635,000 in excess of the carrying amount on our consolidated balance sheet. As of June 30, 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 $43,292,000. 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.

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

(Amounts in thousands)						Balance as of
Balance Sheet:						June 30, 2013		December 31, 2012
	Assets					$	1,469,000	$	1,482,000
	Liabilities						1,136,000		1,150,000
	Stockholders' equity						333,000		332,000

		For the Three Months Ended				For the Six Months Ended
Income Statement:		June 30, 2013		June 30, 2012		June 30, 2013		June 30, 2012
	Total revenues	$	47,000	$	47,000	$	96,000	$	94,000
	Net income attributable to Alexander’s		13,000		19,000		27,000		38,000

LNR Property LLC (“LNR”)

In the first quarter of 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. On April 22, 2013, LNR was sold for $1.053 billion, and we received net proceeds of $241,000,000 for our interest. Pursuant to the sale agreement, we ceased receiving income as of January 1, 2013.

7. Investments in Partially Owned Entities – continued

Independence Plaza

On December 21, 2012, we acquired a 58.75% economic interest in Independence Plaza, a three-building 1,328 unit residential complex in the Tribeca submarket of Manhattan (the “Property”). We determined, at that time, that we were the primary beneficiary of the variable interest entity (“VIE”) that owned the Property. Accordingly, we consolidated the operations of the Property from the date of acquisition. Upon consolidation, our preliminary purchase price allocation was primarily to land ($309,848,000) and building ($527,578,000). Based on a third party appraisal and additional information about facts and circumstances that existed at the acquisition date, which was obtained subsequent to the date of acquisition, we finalized the purchase price allocation in the first quarter of 2013, and retroactively adjusted our December 31, 2012 consolidated balance sheet as follows:

(Amounts in thousands)
Land	$	602,662
Building and improvements		252,844
Acquired above-market leases (included in identified intangible assets)		13,115
Acquired in-place leases (included in identified intangible assets)		67,879
Other assets		7,374
Acquired below-market leases (included in deferred revenue)		(99,074)
Purchase price	$	844,800

On June 7, 2013, the existing $323,000,000 mortgage loan was refinanced with a $550,000,000 five-year, fixed-rate interest only mortgage loan bearing interest at 3.48%. The net proceeds of $219,000,000, after repaying the existing loan and closing costs, were distributed to the partners, of which our share was $137,000,000. Simultaneously with the refinancing, we sold an 8.65% economic interest in the Property to our partner for $41,000,000 in cash, which reduced our economic interest to 50.1%. As a result of this transaction, we determined that we are no longer the primary beneficiary of the VIE. Accordingly, we deconsolidated the operations of the Property on June 7, 2013 and began accounting for our investment under the equity method.

7. Investments in Partially Owned Entities – continued

Below is a schedule of our investments in partially owned entities as of June 30, 2013 and December 31, 2012.

			Percentage
(Amounts in thousands)			Ownership at		Balance as of
Investments:			June 30, 2013		June 30, 2013		December 31, 2012
Toys				32.6%	$	417,764	$	478,041

Alexander’s				32.4%	$	170,181	$	171,013

Lexington⁽¹⁾				n/a		-		75,542

LNR⁽²⁾				n/a		-		224,724

India real estate ventures				4.0%-36.5%		90,717		95,516

Partially owned office buildings:
	280 Park Avenue			49.5%		207,956		197,516
	Rosslyn Plaza			43.7%-50.4%		60,345		62,627
	West 57th Street properties			50.0%		56,696		57,033
	One Park Avenue			30.3%		54,367		50,509
	666 Fifth Avenue Office Condominium			49.5%		38,664		35,527
	330 Madison Avenue			25.0%		32,766		30,277
	Warner Building			55.0%		11,754		8,775
	Fairfax Square			20.0%		5,242		5,368
	Other partially owned office buildings			Various		9,508		9,315

Other investments:
	Independence Plaza (includes $26,679 attributable
		to non-controlling interests)⁽³⁾		50.1%		166,569		-
	Monmouth Mall			50.0%		7,248		7,205
	Downtown Crossing, Boston⁽⁴⁾			n/a		-		48,122
	Other investments⁽⁵⁾			Various		119,631		147,187
					$	1,031,644	$	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 22, 2013, LNR was sold (see page 14 for details).

(3)		On June 7, 2013, we sold an 8.65% economic interest in the property (see page 15 for details).

(4)		On April 24, 2013, the joint venture sold the site in Downtown Crossing, Boston (see note 3 on page 17 for details).

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

7. 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, 2013 and 2012.

			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, 2013	2013		2012		2013		2012
Toys:			32.6%
	Equity in net (loss) income before income taxes			$	(64,372)	$	(35,664)	$	73,516	$	121,723
	Income tax benefit (expense)				25,664		14,103		(33,682)		(29,100)
	Equity in net (loss) income				(38,708)		(21,561)		39,834		92,623
	Non-cash impairment loss (see page 13 for details)				-		-		(78,542)		-
	Management fees				1,847		2,371		3,606		4,658
				$	(36,861)	$	(19,190)	$	(35,102)	$	97,281

Alexander’s:			32.4%
	Equity in net income			$	4,077	$	5,941	$	8,486	$	12,073
	Management, leasing and development fees				1,674		1,907		3,341		3,796
					5,751		7,848		11,827		15,869

Lexington⁽¹⁾			n/a		-		(236)		(979)		694

LNR⁽²⁾			n/a		-		9,469		18,731		22,719

India real estate ventures			4.0%-36.5%		(414)		(3,815)		(1,181)		(4,608)

Partially owned office buildings:
	280 Park Avenue		49.5%		(2,021)		(1,955)		(4,590)		(7,550)
	Warner Building		55.0%		(1,996)		(1,589)		(4,342)		(4,599)
	666 Fifth Avenue Office Condominium		49.5%		1,899		1,785		3,918		3,500
	330 Madison Avenue		25.0%		1,185		18		2,489		812
	Rosslyn Plaza		43.7%-50.4%		(1,005)		145		(1,451)		303
	1101 17th Street		55.0%		236		646		620		1,329
	West 57th Street properties		50.0%		196		252		368		565
	One Park Avenue		30.3%		(83)		303		374		634
	Fairfax Square		20.0%		(18)		(40)		(63)		(52)
	Other partially owned office buildings		Various		565		555		1,053		1,082
					(1,042)		120		(1,624)		(3,976)

Other investments:
	Independence Plaza (see page 15 for details)		50.1%		(1,118)		1,733		(1,118)		3,415
	Monmouth Mall		50.0%		426		298		1,285		660
	Downtown Crossing, Boston⁽³⁾		n/a		16		(500)		(2,358)		(834)
	Other investments⁽⁴⁾		Various		(2,147)		(2,354)		(2,345)		(1,716)
					(2,823)		(823)		(4,536)		1,525

				$	1,472	$	12,563	$	22,238	$	32,223


(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 22, 2013, LNR was sold (see page 14 for details).

(3)		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.

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

7. Investments in Partially Owned Entities – continued

Below is a summary of the debt of our partially owned entities as of June 30, 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)			June 30,		June 30,	June 30,		December 31,
			2013	Maturity	2013	2013		2012
Toys:			32.6%
	Notes, loans and mortgages payable			2014-2021	7.83%	$	5,158,005	$	5,683,733

Alexander's:			32.4%
	Mortgages payable			2014-2018	3.85%	$	1,058,028	$	1,065,916

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

LNR⁽²⁾:			n/a
	Mortgages payable			n/a	n/a	$	-	$	309,787
	Liabilities of consolidated CMBS and CDO trusts			n/a	n/a		-		97,211,734
						$	-	$	97,521,521

Partially owned office buildings:
	666 Fifth Avenue Office Condominium mortgage
		payable	49.5%	02/19	6.76%	$	1,139,585	$	1,109,700
	280 Park Avenue mortgage payable		49.5%	06/16	6.64%		738,462		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	1.69%		150,000		150,000
	Fairfax Square mortgage payable		20.0%	12/14	7.00%		69,681		70,127
	1101 17th Street mortgage payable		55.0%	01/15	1.44%		31,000		31,000
	Rosslyn Plaza		43.7%-50.4%	03/18	2.69%		20,984		-
	West 57th Street properties mortgages payable		50.0%	02/14	4.94%		19,899		20,434
	Other		Various	Various	6.37%		69,424		69,704
						$	2,781,735	$	2,731,893

India Real Estate Ventures:
	TCG Urban Infrastructure Holdings mortgages
		payable	25.0%	2013-2022	13.62%	$	222,016	$	236,579

Other:
	Independence Plaza (see page 15 for details)		50.1%	06/18	3.48%		550,000		-
	Monmouth Mall mortgage payable		50.0%	09/15	5.44%		158,882		159,896
	Other⁽³⁾		Various	Various	5.00%		970,518		990,647
						$	1,679,400	$	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)		On April 22, 2013, LNR was sold (see page 14 for details).

(3)		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 $3,831,483,000 and $29,443,128,000 at June 30, 2013 and December 31, 2012, respectively. Excluding our pro rata share of LNR's liabilities related to consolidated CMBS and CDO trusts, which were non-recourse to LNR and its equity holders, including us, our pro rata share of partially owned entities debt was $3,998,929,000 at December 31, 2012.

- 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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