Notes Receivable and Allowance or Losses

9 Months Ended

Sep. 30, 2012

Accounts and Notes Receivable, Net [Abstract]

Notes Receivable And Allowance For Losses

Notes Receivable and Allowance for Losses

The Company segregates its notes receivable for the purposes of evaluating allowances for credit losses between two categories: Mezzanine and Other Notes Receivable and Forgivable Notes Receivable. The Company utilizes the level of security it has in the various notes receivable as its primary credit quality indicator (i.e. senior, subordinated or unsecured) when determining the appropriate allowances for uncollectible loans within these categories.

The following table shows the composition of our notes receivable balances:

	September 30, 2012						December 31, 2011
	($ in thousands)						($ in thousands)
Credit Quality Indicator	Forgivable Notes Receivable		Mezzanine & Other Notes Receivable		Total		Forgivable Notes Receivable		Mezzanine & Other Notes Receivable		Total
Senior	$	—	$	11,191	$	11,191	$	—	$	7,900	$	7,900
Subordinated	—		14,984		14,984		—		13,992		13,992
Unsecured	8,561		631		9,192		7,948		—		7,948
Total notes receivable	8,561		26,806		35,367		7,948		21,892		29,840
Allowance for losses on non-impaired loans	856		309		1,165		795		225		1,020
Allowance for losses on receivables specifically evaluated for impairment	—		8,289		8,289		—		8,208		8,208
Total loan reserves	856		8,598		9,454		795		8,433		9,228
Net carrying value	$	7,705	$	18,208	$	25,913	$	7,153	$	13,459	$	20,612
Current portion, net	$	150	$	6,377	$	6,527	$	102	$	3,002	$	3,104
Long-term portion, net	7,555		11,831		19,386		7,051		10,457		17,508
Total	$	7,705	$	18,208	$	25,913	$	7,153	$	13,459	$	20,612

The Company classifies notes receivable due within one year as other current assets and notes receivable with a maturity greater than one year as other assets in the Company’s consolidated balance sheets.

The following table summarizes the activity related to the Company’s Forgivable Notes Receivable and Mezzanine and Other Notes Receivable allowance for losses from December 31, 2011 through September 30, 2012:

	Forgivable Notes Receivable			Mezzanine & Other  Notes Receivable
	(In thousands)
Balance, December 31, 2011	$	795		$	8,433
Provisions	292			262
Recoveries	(33		)	(97		)
Write-offs	(214		)	—
Other(1)	16			—
Balance, September 30, 2012	$	856		$	8,598

(1) Consists of default rate assumption changes

Forgivable Notes Receivable

As of September 30, 2012 and December 31, 2011, the unamortized balance of the Company's forgivable notes receivable totaled $8.6 million and $7.9 million, respectively. The Company recorded an allowance for credit losses on these forgivable notes receivable of $0.9 million and $0.8 million at September 30, 2012 and December 31, 2011, respectively. At September 30, 2012 and December 31, 2011, the Company did not have any forgivable unsecured notes that were past due. Amortization expense included in the accompanying consolidated statements of income related to the notes was $0.7 million and $2.0 million for the three and nine months ended September 30, 2012, respectively. Amortization expense for the three and nine months ended September 30, 2011 was $0.6 million and $1.7 million, respectively.

Mezzanine and Other Notes Receivable

The Company has determined that approximately $12.7 million and $11.2 million of its mezzanine and other notes receivable were impaired at September 30, 2012 and December 31, 2011, respectively. The Company has recorded allowance for credit losses on these impaired loans at September 30, 2012 and December 31, 2011 totaling $8.3 million and $8.2 million resulting in a carrying value of impaired loans of $4.4 million and $3.0 million, respectively for which we had no related allowance for credit losses. The Company recognized approximately $38 thousand and $100 thousand of interest income on impaired loans during the three and nine months ended September 30, 2012, respectively, on the cash basis. The Company did not recognize any interest on an accrual or cash basis on its impaired loans during the three and nine months ended September 30, 2011. The Company had provided loan reserves on non-impaired loans totaling $0.3 million and $0.2 million at September 30, 2012 and December 31, 2011, respectively.

Past due balances of mezzanine and other notes receivable by credit quality indicators are as follows:

	30-89 days Past Due		> 90 days Past Due		Total Past Due		Current		Total Receivables
	($ in thousands)
As of September 30, 2012
Senior	$	—	$	—	$	—	$	11,191	$	11,191
Subordinated	—		9,629		9,629		5,355		14,984
Unsecured	—		$	47	$	47	$	584	$	631
	$	—	$	9,676	$	9,676	$	17,130	$	26,806
As of December 31, 2011
Senior	$	—	$	—	$	—	$	7,900	$	7,900
Subordinated	—		9,773		9,773		4,219		13,992
	$	—	$	9,773	$	9,773	$	12,119	$	21,892

Loans Acquired with Deteriorated Credit Quality

On December 2, 2011, the Company acquired an $11.5 million mortgage, held on a franchisee hotel asset, from a financial institution for $7.9 million. At both September 30, 2012 and December 31, 2011, the carrying amount of this loan, which is reported under senior mezzanine and other notes receivables, was $7.9 million and there was no allowance for uncollectable amounts. The Company's accretable yield at acquisition was $1.8 million or 7.36% and a reconciliation of the accretable yield for the nine months ended September 30, 2012 is as follows:

	Accretable Yield ($ in thousands)
Balance, December 31, 2011	$	1,793
Additions	—
Accretion	(388		)
Disposals	—
Reclassifications from nonaccretable yield	—
Balance, September 30, 2012	$	1,405