Loans Receivable

12 Months Ended

Dec. 31, 2016

Receivables [Abstract]

Loans Receivable

7. Loans Receivable

Loans receivable at December 31, 2016 and 2015 are as follows (in thousands):

					Carrying Amount (1)				Contractual Maturity Date
Description	Loan Position		Stated Interest Rate at December 31, 2015		December 31, 2016		December 31, 2015
Jacksonville (2)		Whole Loan		LIBOR + 5%	$	8,400	$	—		07/01/19
Poipu Shopping Village (3)		B-Note		N/A		—		2,769		N/A
Mentor Building (3)		Whole Loan		N/A		—		2,511		N/A
Rockwell (4)		Mezzanine		N/A		—		—		N/A
Churchill (5)		Whole Loan		N/A		—		—		N/A
					$	8,400	$	5,280

(1) The carrying amount represents the estimated amount expected to be collected on disposition of the loan plus contractual interest receivable.

(2) The loan has an interest rate floor of 6% and an interest rate ceiling of 8%.

(3) The loan was repaid in full during 2016.

(4) The senior lien holder foreclosed on the property on June 2, 2016.

(5) The loan was fully satisfied for a discounted payoff amount of $100 in October 2016.

The carrying amount of loans receivable at December 31, 2016 and 2015 represents the estimated amount expected to be collected on disposition of the loans and includes accrued interest of $0 and $28,000, respectively.

The weighted average coupon as calculated on the par value of loans receivable was 6.00% and 7.97% at December 31, 2016 and 2015, respectively, and the weighted average yield to maturity as calculated on the carrying value of loans receivable was 6.00% and 13.54% at December 31, 2016 and 2015, respectively.

At December 31, 2016 and 2015, none of Winthrop’s or the Liquidating Trust’s loans receivable were directly financed.

Loan Receivable Activity

Activity related to loans receivable is as follows (in thousands):

	Year Ended			Year Ended
	December 31, 2016			December 31, 2015
Balance at beginning of year	$	5,280		$	24,005
Purchase and advances		9,035			—
Interest received, net		(28	)		(190	)
Repayments/sale proceeds		(5,987	)		(18,535	)
Change in liquidation value		100			—
Balance at end of year	$	8,400		$	5,280

Credit Quality of Loans Receivable

Under liquidation accounting, the Liquidating Trust carries its loans receivable at the estimated amount of principal payments it expects to receive over the holding period of the loan. The Liquidating Trust utilizes a grading system to assess the collectability of its loan portfolio. Grading categories included debt yield, debt service coverage ratio, length of loan, property type, loan type, and other more subjective variables that included property or collateral location, market conditions, industry conditions, and sponsor’s financial stability. Management reviewed each category and assigned an overall numeric grade for each loan to determine the loan’s risk of loss and to provide a determination as to whether an individual loan required an adjustment to the recorded liquidation value.

All loans with a positive score did not require a loan loss allowance. Any loan graded with a neutral score or “zero” was subject to further review of the collectability of the interest and principal based on current conditions and qualitative factors. Any change in the credit quality of the loan receivable that changes the Liquidating Trust’s estimate of the amount it expects to collect will be recorded as a change to the liquidation value of its loans receivable.

The table below summarizes the Liquidating Trust’s loans receivable by internal credit rating at December 31, 2016 and 2015 (in thousands, except for number of loans):

	December 31, 2016				December 31, 2015
			Liquidation				Liquidation
	Number of		Value of Loans		Number of		Value of Loans
Internal Credit Quality	Loans		Receivable		Loans		Receivable
Greater than zero		1	$	8,400		2	$	5,280
Equal to zero		—		—		1		—
Less than zero		—		—		1		—
		1	$	8,400		4	$	5,280

Secured Financing Receivable

In August 2013 Winthrop closed on an agreement to acquire its venture partner’s (“Elad”) 50% interest in the mezzanine lender with respect to the One South State Street, Chicago, Illinois property (“Lender LP”) for $30,000,000. In connection with the transaction, Winthrop entered into an option agreement with Elad granting Elad the right, but not obligation, to repurchase the interest in the venture. The option agreement provided Elad, as the transferor, the option to unilaterally cause the return of the asset at the earlier of two years from and after August 21, 2013 or an event of default on Lender LP’s mezzanine debt. As such, Elad was able to retain control of its interest in Lender LP for financial reporting purposes as the exercise of the option was unconditional other than for the passage of time. As a result, for financial reporting purposes, the transfer of the financial asset was accounted for as a secured financing rather than an acquisition. The $30,000,000 acquisition price was recorded as a secured financing receivable. On April 27, 2016 Winthrop sold its interest in the secured financing receivable. See Note 6 – “Investment and Disposition Activities” for further details on the sale.