Participations Sold

3 Months Ended

Jun. 30, 2011

Participations Sold

Note 8. Participations Sold

Participations sold represent interests in certain loans that we originated and subsequently sold to one of our investment management vehicles or to third-parties. We present these participations sold as both assets and non-recourse liabilities because these arrangements do not qualify as sales under GAAP. Generally, participations sold are recorded as assets and liabilities in equal amounts on our consolidated balance sheets, and an equivalent amount of interest income and interest expense is recorded on our consolidated statements of operations. However, impaired loan assets must be reduced through the provision for loans losses while the associated non-recourse liability cannot be reduced until the participation has been contractually extinguished. This can result in an imbalance between the loan participations sold asset and liability. We have no economic exposure to these liabilities.

During the six months ended June 30, 2011, (i) a $75.0 million loan participation sold, which had previously been 100% impaired, was terminated as a result of a restructuring which termination resulted in recognition of a $75.0 million gain on extinguishment of debt, (ii) a $97.5 million loan participation sold, which had similarly been 100% impaired, was transferred to CT Legacy REIT, and (iii) a $51.8 million loan participation sold was fully repaid.

The following table describes our participations sold assets and liabilities as of June 30, 2011 and December 31, 2010 (in thousands):

	June 30,		December 31,
	2011		2010
Participations sold assets
Gross carrying value		$28,660		$259,304
Less: Provision for loan losses		—		(172,465	)
Net book value of assets		28,660		86,839
Participations sold liabilities
Net book value of liabilities		28,660		259,304
Net impact to shareholders' equity		$—		($172,465	)