Acquisition, Disposition, Leasing and Financing Activities

6 Months Ended

Jun. 30, 2012

Acquisition, Disposition, Leasing and Financing Activities [Abstract]

Acquisition, Disposition, Leasing and Financing Activities

4. Acquisition, Disposition, Leasing and Financing Activities

Acquisition & Loan Origination Activity:

Fenway Shea—Loan Asset—On April 5, 2012, the Trust originated a $2,250,000 first mortgage loan which bears interest at 12% per annum and matures on April 5, 2014, with one, one-year extension right. Payments are interest only payable monthly with a balloon payment due at maturity. The loan is collateralized by a 45,655 square foot, two-story multi-tenant office building located at 4545 East Shea Boulevard, Phoenix, Arizona.

Waterford Place Apartments—Operating Property—On April 17, 2012, the Trust acquired a 320 unit class A multi-family property situated on 27.9 acres in the Germantown/Collierville submarket of Memphis, Tennessee commonly referred to as Waterford Place for a purchase price of approximately $21,473,000. The property which had been foreclosed on by the mortgage lender in May 2011 was constructed in 2001 and was 87% occupied at acquisition. Costs incurred to complete the acquisition have been expensed in the current period.

127 West 25^th Street—Loan Asset —On May 14, 2012, the Trust originated a $9,000,000 mezzanine loan collateralized by 100% of the member interests in the entity that holds title to the 104,000 square foot, 12-story building located at 127 West 25th Street, Manhattan, New York. The loan bears interest at a rate equal to the greater of 14% per annum or LIBOR plus 10%, requires payment of principal and interest and matures on April 30, 2015. In connection with the entering into of the loan agreement, the Trust received a 1% origination fee of $90,000 and commitment fees totaling $591,500, which have been deferred and will be amortized as a yield adjustment over the life of the loan. The loan is subordinate to a mortgage loan of $35,180,000 which bears interest at a rate of 4.5% per annum and requires payments of interest only.

Broward Financial Center—Loan Asset—On May 23, 2012, the Trust acquired for approximately $42,800,000 a matured first mortgage loan with a face value of $42,098,000 collateralized by a 326,000 square-foot commercial building located at 500 East Broward Boulevard, Ft. Lauderdale, Florida, containing approximately 47,000 square feet of retail space and 279,000 square feet of office space that is currently 74% leased. Following the acquisition of this loan, the Trust entered into a modification with the borrower, pursuant to which the maturity date was extended until October 15, 2012, the interest rate was increased to 9.836% per annum and the borrower made a payment of approximately $12,800,000, which reduced the outstanding principal balance of the loan to $30,000,000.

Mentor Building—Loan Asset and Equity Investment—On March 6, 2012, the Trust purchased a first mortgage loan at par for $2,521,000 with a fixed interest rate of 7.5% per annum, requiring payments of principal and interest, and a maturity date of September 10, 2012. The loan is secured by a 6,571 square foot retail condominium building known as the Mentor Building located in Chicago, Illinois which is adjacent to the Sullivan Center property held by the Trust’s WRT-Elad joint venture. On May 10, 2012, the Trust agreed to modify the terms of the loan increasing the interest rate to 10% per annum, requiring payments of interest only and extending the maturity date to September 10, 2017. Concurrent with the loan modification, on May 10, 2012 the Trust also acquired for $300,000 a 20% interest in the borrower from a third party member and simultaneously made a $200,000 capital contribution to the borrower, which combined, resulted in a 49.9% aggregate equity investment for $500,000.

One East Erie / Ontario Operating Property – Non-Controlling Interest—On June 1, 2012, the Trust purchased from Marc Realty its 20% non-controlling interest in FT-Ontario Holdings LLC (“Ontario”) for $5,850,000. The property contains 126,000 square feet of retail and office space consisting of the first six floors in a mixed use building together with 208 parking spaces located at One East Erie, Chicago, Illinois. The Trust now owns 100% of Ontario. The Trust accounted for the purchase as an equity transaction recording the difference in the $363,000 carrying value of the acquired non-controlling interest and the purchase price as a $5,487,000 reduction in paid-in-capital.

Investments in Joint Ventures:

Southern California Office Portfolio (“SoCal”) – Investment in Loan Asset—On April 6, 2012, WRT-SoCal Lender LLC (“Lender”) a consolidated joint venture which holds an investment in a loan collateralized by the SoCal officer portfolio amended and restated its operating agreement to allow for the admission of IX SoCal Holdings LP (“Starwood”) as a member. Starwood contributed $3,500,000 for a 10.2178% interest in the joint venture. The Trust received a special distribution from Lender equal to Starwood’s contribution which was recorded as a contribution from non-controlling interests. The admission of Starwood did not result in a change in control with respect to Lender, which the trust continues to consolidate. As a result, the Trust now owns a 50.2% effective interest in the SoCal loan investment on a fully-diluted basis.

10 Metrotech – Equity Investment Loan Asset—On April 18, 2012, the Trust funded $75,000 for a 33.33% interest in a joint venture (“10 Metrotech JV”). These funds were used to acquire from Sorin Real Estate CDO IV LTD, a $21,000,000, B Participation in the whole loan secured by a 364,968 square foot, seven story, class B/C office building on a 0.58 acre land parcel in Brooklyn, New York referred to as 10 Metrotech. The B Participation is subordinate to a $39,400,000 senior participation. The senior participation and the B Participation collectively are referred to as the Metrotech Loan. See Note 16 – Subsequent Events for recent developments on this investment.

Concord—Additional Equity Investment—On May 1, 2012, the Trust acquired from Lexington Realty Trust its 33.33% interest in both Concord Debt Holdings LLC (“Concord”) and CDH CDO LLC (“CDH CDO”) and its 50% interest in the collateral manager of Concord Real Estate CDO 2006-1, Ltd. for an aggregate purchase price of $7,000,000. As a result, the Trust now holds a 66.67% interest in both Concord and CDH CDO and 100% of the economics of the collateral manager. This transaction did not result in a change in control. In the event of a sale of the Trust’s interest in CDH CDO or its interest in the collateral manager, additional proceeds may be payable to Lexington Realty Trust if the sales price exceeds the purchase price paid by the Trust.

Vintage Housing Holdings LLC – Equity Investment and Preferred Equity Investment—On June 1, 2012, the Trust contributed an additional $5,500,000 to its Vintage Housing Holdings LLC (“VHH”) equity investment platform consisting of $1,500,000 in common equity and $4,000,000 in preferred equity with a 12% return. In connection with the transaction, VHH acquired a general partner interest and development fees relating to a residential development project referred to as Vintage at Urban Center, a tax credit apartment community in Lynwood, Washington with a proposed village development of 395 multi-family rental units and 4,000 square feet of retail space.

Disposition & Loan Repayments Activity:

Broadway / FII Co-Invest LLC – Private Equity Securities—On April 10, 2012, the Trust’s interest in FII Co-Invest LLC was redeemed for $2,032,000, net of costs. The Trust recognized a $232,000 gain on the sale of this private equity investment for which it had a cost basis of $1,800,000.

160 Spear Street – Loan Asset—On May 9, 2012, the Trust’s 160 Spear loans receivable with a par value of $19,645,000 were paid off at par by the borrower. The Trust’s outstanding investment in these loans prior to payoff was $8,054,000.

Magazine—Loan Asset—On May 9, 2012, the Trust’s Magazine loan receivable with a par value of $20,000,000 was paid off at par by the borrower. The Trust’s outstanding investment in this loan prior to payoff was $17,525,000.

Churchill—Operating Property—On May 14, 2012, the Trust sold the portion of the Churchill, Pennsylvania property that was not leased to Westinghouse for $914,000. No gain on loss was recognized as a result of this transaction, and it resulted in a $632,000 reduction of the basis in the Churchill property by the net proceeds received. The Trust agreed to provide financing to the buyer in the aggregate amount of $675,000 to cover property operating expenses. At closing, the Trust provided $324,000 of financing to cover buyers expenses and taxes due. An additional $175,000 will be advanced on each of August 20, 2012 and November 20, 2012 directly to the taxing authority to cover taxes due on the sold parcel. The loan is interest only and bears interest at LIBOR + 3.75%, matures on June 1, 2015 and is collateralized by the property.

Marc Realty 30 North Michigan—Equity Investment—On May 31, 2012, the Trust sold to its joint venture partner, Marc Realty, for $10,300,000 its equity interest in Michigan 30 LLC. The purchase price was financed with a $6,550,000 secured promissory note which bears interest at 10% per annum, requires payments of interest only and matures on May 31, 2015. This note was fully satisfied on August 3, 2012. The Trust recognized a loss of approximately $95,000 on the transaction which is reflected in equity earnings.

Marc Realty—Equity Investments—On May 31, 2012, the Trust sold to its joint venture partner, Marc Realty for $2,100,000 all of its equity interests in River Road LLC, Salt Creek LLC, and 900 Ridgebrook LLC equity investments for $1,000,000, $0 and $1,100,000, respectively. The Trust recognized an aggregate $16,000 gain on the transactions which is reflected in equity earnings.