NOTE 8 – VARIABLE INTEREST ENTITIES

In general, VIEs are entities in which equity investors lack the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. The Company has variable interests in VIEs through its management contracts and investments in various securitization entities, including collateralized loan obligation (“CLO”) and CDO issuers. Since the Company serves as the asset manager for the investment entities it sponsored and manages, the Company is generally deemed to have the power to direct the activities of the VIE that most significantly impact the entity's economic performance. In the case of an interest in a VIE managed by the Company, the Company will perform an additional qualitative analysis to determine if its interest (including any investment as well as any management fees that qualify as variable interests) could absorb losses or receive benefits that could potentially be significant to the VIE. This analysis considers the most optimistic and pessimistic scenarios of potential economic results that could reasonably be experienced by the VIE. Then, the Company compares the benefits it would receive (in the optimistic scenario) or the losses it would absorb (in the pessimistic scenario) as compared to all benefits and losses absorbed by the VIE in total. If the benefits or losses absorbed by the Company were significant as compared to total benefits and losses absorbed by all variable interest holders, then the Company would conclude it is the primary beneficiary.

Consolidated VIE. The following table reflects the assets and liabilities of a real estate VIE which was included in the Company's consolidated balance sheets (in thousands):

	December 31,		September 30,
	2011		2011
Cash and property and equipment, net	$	912	$	955
Accrued expenses and other liabilities		260		300

VIEs Not Consolidated. The Company's investments in RCC, Resource Real Estate Opportunity REIT, Inc. (“RRE Opportunity REIT”), a fund that is currently in the offering stage, and its investments in the structured finance entities that hold investments in bank loans (“Apidos entities”), trust preferred assets (“Trapeza entities”) and asset-backed securities (“Ischus entities”), were all determined to be VIEs that the Company does not consolidate as it does not have the obligation of, or right to, losses or earnings that would be significant to those entities. With respect to RRE Opportunity REIT, the Company has advanced offering costs that are being reimbursed as the REIT raises additional equity. Except for those advances, the Company has not provided financial or other support to these VIEs and has no liabilities, contingent liabilities, or guarantees (implicit or explicit) related to these VIEs at December 31, 2011.

The following table presents the carrying amounts of the assets in the Company's consolidated balance sheet that relate to the Company's variable interests in identified nonconsolidated VIEs and the Company's maximum exposure to loss associated with these VIEs in which it holds variable interests at December 31, 2011 (in thousands):

	Receivables from Managed Entities and Related Parties, Net (1)		Investments		Maximum Exposure to Loss in Non-Consolidated VIEs
RCC	$	3,277	$	14,162	$	17,439
RRE Opportunity REIT		−		519		519
Apidos entities		2,257		2,981		5,238
Ischus entities		270		−		270
Trapeza entities		−		867		867
	$	5,804	$	18,529	$	24,333

(1)	Exclusive of expense reimbursements due to the Company.