Shareholders' Equity

3 Months Ended

Sep. 30, 2011

Notes to Financial Statements

Shareholders' Equity

Note 12. Shareholders’ Equity

Authorized Capital

We have the authority to issue up to 200,000,000 shares of stock, consisting of 100,000,000 shares of class A common stock and 100,000,000 shares of preferred stock. Subject to applicable NYSE listing requirements, our board of directors is authorized to issue additional shares of authorized stock without shareholder approval. In addition, to the extent not issued, currently authorized stock may be reclassified between class A common stock and preferred stock.

Common Stock

Shares of class A common stock are entitled to vote on all matters presented to a vote of shareholders, except as provided by law or subject to the voting rights of any outstanding preferred stock. Holders of record of shares of class A common stock on the record date fixed by our board of directors are entitled to receive such dividends as may be declared by the board of directors subject to the rights of the holders of any outstanding preferred stock. A total of 22,748,729 shares of common stock and stock units were issued and outstanding as of September 30, 2011.

We did not repurchase any of our common stock during the nine months ended September 30, 2011, other than the 34,892 shares we acquired pursuant to elections by incentive plan participants to satisfy tax withholding obligations through the surrender of shares equal in value to the amount of the withholding obligation incurred upon the vesting of restricted stock.

Preferred Stock

We have not issued any shares of preferred stock since we repurchased all of the previously issued and outstanding preferred stock in 2001.

Warrants

In conjunction with the March 2009 restructuring of our legacy repurchase obligations, we issued to our former repurchase lenders warrants to purchase an aggregate 3,479,691 shares of our class A common stock at an exercise price of $1.79 per share. The warrants will become exercisable on March 16, 2012 and expire on March 16, 2019, and may be exercised through a cashless exercise at the option of the warrant holders. The fair value assigned to these warrants, totaling $940,000, has been recorded as an increase to additional paid-in capital, and was amortized into interest expense over the term of the related debt obligations. The warrants were valued using the Black-Scholes valuation method.

Dividends

We generally intend to distribute each year substantially all of our taxable income (which does not necessarily equal net income as calculated in accordance with GAAP) to our shareholders to comply with the REIT provisions of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code. To the extent permitted, we may make certain distributions in stock, taking into consideration the recent Internal Revenue Service rulings which allow REITs to distribute up to 90% of their dividends in the form of stock for tax years ending on or before December 31, 2011.

In addition, ourdividend policy remains subject to revision at the discretion of our board of directors. All distributions will be made at the discretion of our board of directors and will depend upon our taxable income, our financial condition, our maintenance of REIT status and other factors as our board of directors deems relevant.

No dividends were declared during the nine months ended September 30, 2011 or 2010.

Accumulated Other Comprehensive Loss

The following table details the primary components of accumulated other comprehensive loss as of September 30, 2011 and significant activity for the nine months ended September 30, 2011 (in thousands):

	Mark-to-Market on Interest Rate Hedges			Deferred Gains on Settled Hedges			Other-than-Temporary Impairments			Unrealized Gains on Securities			Total
December 31, 2010		($37,914	)		$165			($16,800	)		$4,087			($50,462	)
Consolidation of additional securitization vehicles (1)		—			—			538			—			538
Unrealized gain on derivative financial instruments		2,912			—			—			—			2,912
Ineffective portion of cash flow hedges (2)		4,447			—			—			—			4,447
Amortization of net unrealized gains on securities		—			—			—			(93	)		(93	)
Amortization of net deferred gains on settlement of swaps		—			(75	)		—			—			(75	)
Other-than-temporary impairments of securities (3)		—			—			4,236			—			4,236
September 30, 2011		($30,555	)		$90			($12,026	)		$3,994			($38,497	)

(1)	As further described above, we began consolidating an additional securitization vehicle in the third quarter of 2011. This newly consolidated vehicle was previously accounted for as part of CT Legacy REIT’s securities portfolio. This security had previously been other-than-temporarily impaired, a portion of which was recorded in accumulated other comprehensive income, and is now eliminated in consolidation.
(2)	As a result of significant repayments under floating rate debt obligations of CT Legacy REIT a portion of its interest rate swaps were deemed ineffective in the second quarter of 2011 and are no longer designated as hedging instruments. As a result, a portion of accumulated other comprehensive income is reclassified into earnings each period to reflect the non-hedge designation. See Note 10 for further discussion.
(3)	Represents the reclassification of other-than-temporary impairments of securities to credit losses recognized through earnings, including amortization of prior other-than-temporary impairments of $1.1 million.

Noncontrolling Interests

The noncontrolling interests included on our consolidated balance sheet represent the equity interests in CT Legacy REIT which are not owned by us, as described in Note 1. CT Legacy REIT’s outstanding common stock includes class A-1 common stock, class A-2 common stock, and subordinate class B common stock. A portion of CT Legacy REIT’s consolidated equity and results of operations are allocated to these noncontrolling interests based on their pro-rata ownership of CT Legacy REIT. The following table describes activity relating to noncontrolling interests for the nine months ended September 30, 2011 (in thousands):

	Noncontrolling Interests
December 31, 2010		$—
Allocation to noncontrolling interests		(12,623	)
Net income attributable to noncontrolling interests		1,935
September 30, 2011		($10,688	)

As of September 30, 2011, the noncontrolling interests recorded on our consolidated balance sheet was a deficit, which reflects the consolidated book value of CT Legacy REIT, including certain securitization trusts in which losses have been recorded in excess of CT Legacy REIT’s net investment.

During the second quarter of 2011, we purchased 118,651 shares of class B common stock of CT Legacy REIT which were issued to our former lenders in conjunction with our March 2011 restructuring. This purchase did not impact the book value of noncontrolling interests.

Earnings Per Share

The following table sets forth the calculation of Basic and Diluted earnings per share, or EPS, based on the weighted average of both restricted and unrestricted class A common stock outstanding, for the nine months ended September 30, 2011 (in thousands, except share and per share amounts):

	Nine Months Ended September 30, 2011
	Net		Wtd. Avg.		Per Share
	Income		Shares		Amount
Basic EPS:
Net income allocable to common stock		$266,464		22,630,672		$11.77
Effect of Dilutive Securities:
Warrants & Options outstanding for the purchase of common stock		—		1,426,702
Diluted EPS:
Net income per share of common stock and assumed conversions		$266,464		24,057,374		$11.08

The following table sets forth the calculation of Basic and Diluted EPS based on the weighted average of both restricted and unrestricted class A common stock outstanding, for the nine months ended September 30, 2010 (in thousands, except share and per share amounts):

	Nine Months Ended September 30, 2010
	Net			Wtd. Avg.		Per Share
	Loss			Shares (1)		Amount
Basic EPS:
Net loss allocable to common stock		($195,259	)		22,356,857		($8.73	)
Effect of Dilutive Securities:
Warrants & Options outstanding for the purchase of common stock		—			—
Diluted EPS:
Net loss per share of common stock and assumed conversions		($195,259	)		22,356,857		($8.73	)

(1) Diluted EPS excludes 129,000 options and 3.5 million warrants which were not dilutive for the period. These instruments could potentially impact Diluted EPS in future periods, depending on changes in our stock price.

The following table sets forth the calculation of Basic and Diluted earnings per share, or EPS, based on the weighted average of both restricted and unrestricted class A common stock outstanding, for the three months ended September 30, 2011 (in thousands, except share and per share amounts):

	Three Months Ended September 30, 2011
	Net		Wtd. Avg.		Per Share
	Income		Shares		Amount
Basic EPS:
Net income allocable to common stock		$13,722		22,730,080		$0.60
Effect of Dilutive Securities:
Warrants & Options outstanding for the purchase of common stock		—		1,391,893
Diluted EPS:
Net income per share of common stock and assumed conversions		$13,722		24,121,973		$0.57

The following table sets forth the calculation of Basic and Diluted EPS based on the weighted average of both restricted and unrestricted class A common stock outstanding, for the three months ended September 30, 2010 (in thousands, except share and per share amounts):

	Three Months Ended September 30, 2010
	Net			Wtd. Avg.		Per Share
	Loss			Shares (1)		Amount
Basic EPS:
Net loss allocable to common stock		($134,709	)		22,389,901		($6.02	)
Effect of Dilutive Securities:
Warrants & Options outstanding for the purchase of common stock		—			—
Diluted EPS:
Net loss per share of common stock and assumed conversions		($134,709	)		22,389,901		($6.02	)

(1) Diluted EPS excludes 129,000 options and 3.5 million warrants which were not dilutive for the period. These instruments could potentially impact Diluted EPS in future periods, depending on changes in our stock price.