NOTES RECEIVABLE

9 Months Ended

Sep. 30, 2012

Mortgage Loans on Real Estate [Abstract]

Notes Receivable

NOTES RECEIVABLE

As of September 30, 2012, the Company’s notes receivable, net, aggregated $78.8 million, and were collateralized either by the underlying properties or the borrowers' ownership interests in the entities that own the properties and/or by the borrowers' personal guarantee subject, as applicable, to senior liens, as follows:

Description	Effective Interest Rate	Maturity Date	First Priority Liens		Net Carrying amount of Notes Receivable		Extension Options
(dollars in thousands)
Zero Coupon Loan	24.0%	1/3/2016	$	166,200	$	3,861	—
Mezzanine Loan	10.0%	12/31/2013	85,835		9,089		—
Mezzanine Loan	15.0%	Upon Capital Event	11,925		3,834		—
First Mortgage Loan	12.0%	12/5/2012	—		19,500		—
First Mortgage Loan	9.2%	3/30/2013	—		3,000		—
First Mortgage Loan	5.3%	Demand	—		18,500		—
First Mortgage Loan	6.0%	12/1/2012	—		12,609		2 x 6 months
Construction Loan	20.5%	10/1/2012	—		5,400		—
Individually less than 3.0%	10.0% to 12.0%	12/31/13 to 1/1/17	37,623		3,033		—
Total					$	78,826

During August 2012, the Company obtained a deed in lieu of foreclosure on a property located in Farmingdale, New York encumbered by its $10.0 million first mortgage loan (Note 4).

During April 2012, the Company acquired a first mortgage loan, collateralized by a property located in Brooklyn, New York, for $18.5 million. The loan, with an initial maturity date of May 2012, has been in default since November 2011 and has been accruing interest at a 16.0% annual default interest rate. As of September 30, 2012, the loan had an outstanding balance of $23.5 million, including default interest, and was in maturity default. The Company has commenced foreclosure proceedings and a receiver has been appointed.

Allowances for real estate notes receivable are established based upon management's quarterly review of the investments. In performing this review, management considers the estimated net recoverable value of the loan as well as other factors, including the fair value of any collateral, the amount and status of any senior debt, and the prospects for the borrower. Because this determination is based upon projections of future economic events, which are inherently subjective, the amounts ultimately realized from the loans may differ materially from the carrying value at the balance sheet date. The Company charges additions to the allowance for loan losses to current period earnings through a provision for loan losses.

The activity in the allowance for notes receivable for the nine months ended September 30, 2012 is as follows:

(dollars in thousands)	Allowance for Notes Receivable
Balance at December 31, 2011	$	3,276
Provision for losses on notes receivable	5,147
Balance at September 30, 2012	$	8,423