At March 31, 2014 and December 31, 2013, commercial real estate investments were composed of the following:

CRE Debt and Preferred Equity Investments

	March 31, 2014							December 31, 2013
	Outstanding Principal		Carrying Value(1)		Percentage of Loan Portfolio(2)			Outstanding Principal		Carrying Value(1)		Percentage of Loan Portfolio(2)
	(dollars in thousands)							(dollars in thousands)
Senior mortgages	$	337,845	$	336,845		20.5	%	$	669,512	$	667,299		42.2	%
Senior securitized mortgages(3)		399,541		398,113		24.3	%		-		-		0.0	%
Subordinate notes		15,965		16,049		1.0	%		41,059		41,408		2.6	%
Mezzanine loans		641,253		641,887		39.0	%		626,883		628,102		39.5	%
Preferred equity		249,769		247,312		15.2	%		249,769		247,160		15.7	%
Total	$	1,644,373	$	1,640,206		100	%	$	1,587,223	$	1,583,969		100	%

(1) Net carrying value includes unamortized origination fees of $4.9 million.

(2) Based on outstanding principal.

(3) Assets of consolidated VIE.

	March 31, 2014
	Senior Mortgages			Senior Securitized Mortgages(1)		Subordinate Notes			Mezzanine Loans			Preferred Equity		Total
	(dollars in thousands)
Beginning balance	$	667,299		$	-	$	41,408		$	628,102		$	247,160	$	1,583,969
Originations & advances (principal)		67,946			-		-			59,000			-		126,946
Principal payments		(72	)		-		(25,094	)		(44,630	)		-		(69,796	)
Sales (principal)		-			-		-			-			-		-
Amortization & accretion of (premium) discounts		(36	)		-		(265	)		(617	)		28		(890	)
Net (increase) decrease in origination fees		(1,012	)		-		-			15			1		(996	)
Amortization of net origination fees		698			135		-			17			123		973
Transfers		(397,978	)		397,978		-			-			-		-
Allowance for loan losses		-			-		-			-			-		-
Net carrying value	$	336,845		$	398,113	$	16,049		$	641,887		$	247,312	$	1,640,206

(1) Assets of consolidated VIE.

	December 31, 2013
	Senior Mortgages			Senior Securitized Mortgages(1)		Subordinate Notes			Mezzanine Loans			Preferred Equity			Total
	(dollars in thousands)
Beginning balance	$	429,229		$	-	$	41,571		$	568,759		$	187,623		$	1,227,182
Originations & advances (principal)		240,150			-		-			136,040			60,000			436,190
Principal payments		(388	)		-		(90	)		(64,035	)		-			(64,513	)
Sales (principal)		(13,750	)		-		-			-			-			(13,750	)
Amortization & accretion of (premium) discounts		(37	)		-		(73	)		(192	)		31			(271	)
Net (increase) decrease in origination fees		(1,106	)		-		-			14			(601	)		(1,693	)
Amortization of net origination fees		701			-		-			16			107			824
Transfers		12,500			-		-			(12,500	)		-			-
Allowance for loan losses		-			-		-			-			-			-
Net carrying value	$	667,299		$	-	$	41,408		$	628,102		$	247,160		$	1,583,969
(1) Assets of consolidated VIE.

Internal CRE Debt and Preferred Equity Investment Ratings

	March 31, 2014
			Percentage of CRE Debt and			Internal Ratings
Investment Type	Outstanding Principal		Preferred Equity Portfolio			Performing		Watch List Loans			Workout Loans
	(dollars in thousands)
Senior mortgages	$	337,845		20.5	%	$	312,372	$	25,473	(2)	$	-
Senior securitized mortgages(1)		399,541		24.3	%		399,541		-			-
Subordinate notes		15,965		1.0	%		15,965		-			-
Mezzanine loans		641,253		39.0	%		635,253		6,000			-
Preferred equity		249,769		15.2	%		249,769		-			-
	$	1,644,373		100	%	$	1,612,900	$	31,473		$	-

(1) Assets of consolidated VIE.

(2) Includes approximately $13 million related to one loan on non accrual status.

	December 31, 2013
			Percentage of CRE Debt and			Internal Ratings
Investment Type	Outstanding Principal		Preferred Equity Portfolio			Performing		Watch List Loans			Workout Loans
	(dollars in thousands)
Senior mortgages	$	669,512		42.2	%	$	644,039	$	25,473	(1)	$	-
Subordinate notes		41,059		2.6	%		41,059		-			-
Mezzanine loans		626,883		39.5	%		620,883		6,000			-
Preferred equity		249,769		15.7	%		249,769		-			-
	$	1,587,223		100	%	$	1,555,750	$	31,473		$	-
(1) Includes approximately $13 million related to one loan on non accrual status.

Total Commercial Real Estate Investment

	March 31, 2014			December 31, 2013
	(dollars in thousands)			(dollars in thousands)
Real estate held for investment, at amortized cost
Land	$	6,639		$	6,639
Buildings and improvements		31,100			31,100
Subtotal		37,739			37,739
Less: accumulated depreciation		(1,170	)		(877	)
Total real estate held for investment at amortized cost, net		36,569			36,862
Real estate held for sale at fair value		3,744			23,270
Total investment in commercial real estate, net		40,313			60,132
Net carrying value of CRE Debt and Preferred Equity Investments		1,640,206			1,583,969
Total commercial real estate investments	$	1,680,519		$	1,644,101

Securitizations and VIEs

In January 2014, the Company closed NLY Commercial Mortgage Trust 2014-FL1 (the “Trust”), a $399.5 million securitization financing transaction which provides permanent, non-recourse financing collateralized by floating-rate first mortgage debt investments originated or purchased by the Company and is not subject to margin calls. A total of $260.7 million of investment grade bonds were issued by the Trust, representing an advance rate of 65.3% at a weighted average coupon of LIBOR plus 1.74%. The Company is using the proceeds to originate commercial real estate investments. The Company retained bonds rated below investment grade and the only interest-only bond issued by the Trust, which are referred to as the subordinate bonds.

The Company incurred approximately $4.3 million of costs in connection with the securitization that have been capitalized and are being amortized to interest expense. Deferred financing costs are included in Other assets in the accompanying consolidated statements of financial condition.

The Trust is structured as a pass through entity that receives principal and interest on the underlying collateral and distributes those payments to the certificate holders. The Trust is a VIE and the Company is the primary beneficiary as a result of its ability to replace the special servicer without cause through its ownership interest in the subordinate bonds. The Company’s exposure to the obligations of the VIE is generally limited to the Company’s investment in the Trust. Assets of the Trust may only be used to settle obligations of the Trust. Creditors of the Trust have no recourse to the general credit of the Company. The Company is not contractually required to provide and has not provided any form of financial support to the Trust. No gain or loss was recognized upon initial consolidation of the Trust.

As of March 31, 2014 the carrying value of the Trust’s assets was $398.1 million, net of $1.4 million of unamortized origination fees, which are included in Commercial real estate debt and preferred equity investments in the accompanying Consolidated Statements of Financial Condition. As of March 31, 2014, the carrying value of the Trust’s liabilities was $260.7 million, classified as Securitized debt in the accompanying Consolidated Statements of Financial Condition.