Notes Receivable Backed by Real Estate

9 Months Ended

Sep. 30, 2011

Notes Receivable Backed by Real Estate [Abstract]

Notes Receivable Backed by Real Estate

5. Notes Receivable Backed by Real Estate

The activity on the notes receivable backed by real estate for the nine months ended September 30, 2011 is as follows (in thousands):

	$188 million Preferred Equity Interest (1)			$55 million Preferred Equity Interest (2)		ProLogis NAIF II Secured Mortgage Receivable (3)			Other Notes Receivable (4)		Total
Balance as of December 31, 2010	$	189,550		$	—	$	81,540		$	31,054	$	302,144
Investment		—			55,000		—			—		55,000
Principal payment received		—			—		(2,676	)		—		(2,676	)
Accrued interest, (interest payments received), net		(1,550	)		970		—			—		(580	)
Impact of changes in foreign currency exchange rates		—			—		—			366		366
Balance as of September 30, 2011	$	188,000		$	55,970	$	78,864		$	31,420	$	354,254

(1) We entered into this Preferred Equity Interest in the fourth quarter of 2010 through a sale of a portfolio of industrial properties. We earn a preferred return and partial or full redemption can occur at any time at the buyer’s discretion or after the five-year anniversary at our discretion.

(2) In the first quarter of 2011, we completed the sale of a portfolio of retail, mixed-use and other non-core assets to a third party. As part of the transaction, we invested approximately $55 million in a preferred equity interest in a subsidiary of the buyer. Based on the terms of this instrument, the preferred equity interest meets the definition of an investment in a debt security from an accounting perspective. We earn a preferred return at an annual rate of 7% for the first three years, 8% for the fourth year and 10% for the fifth year. Partial or full redemption can occur at any time at the buyer’s discretion or after the five year anniversary at our discretion.

(3) During the first quarter of 2011, one of the properties securing this note was sold and the proceeds were used to pay down the balance on the note. As of September 30, 2011 this note is secured by 12 properties.

(4) This represents a receivable related to an investment we made in 2007 in an entity that develops retail and mixed use properties in Europe. During 2008 and 2009, in connection with our evaluation of the recoverability of our investment in and advances to this entity, we recorded impairment charges of $114 million and $115 million, respectively, based on the circumstances and our estimate of future cash flows at that time. In 2010, in connection with a restructuring and plan of liquidation, we received $11 million in payments on the receivable. During the third quarter of 2011, this entity went into administration in the United Kingdom. We are currently working with the administrators to recover value under our secured interests. Based on the information available to us at this time, we expect to recover our investments. We will continue to evaluate and adjust our investment, if appropriate.