NOTES RECEIVABLE

As of June 30, 2013, the Company’s notes receivable, net, aggregated $105.5 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:



(dollars in thousands)
Note description	Effective interest rate (1)	First Priority liens		Net Carrying Amounts of Notes Receivable as of June 30, 2013		Net Carrying Amounts of Notes Receivable as of December 31, 2012		Maturity date	Extension Options
First Mortgage Loan	12.0%	$	—	$	12,204	$	12,333	12/1/2013	—
First Mortgage Loan	6.0%	—		10,250		10,250		12/31/2013	—
First Mortgage Loan	8.0%	—		8,000		8,000		12/31/2013	—
Mezzanine Loan ²	10.0%	85,835		9,089		9,089		12/31/2013	—
First Mortgage Loan	11.0%	—		25,000		25,000		1/1/2014	1 x 6 months
Zero Coupon Loan ³	24.0%	166,200		4,196		3,961		1/3/2016	—
Mezzanine Loan	15.0%	—		30,879		30,879		11/9/2020	—
Mezzanine Loan ⁴	15.0%	13,265		3,834		3,834		Upon Capital Event	—
First Mortgage Loan	5.3%	—		—		18,500		Demand	—
Construction Loan	20.5%	—		—		5,400		12/31/2012	—
Individually less than 3% ⁵	11.00% to 17.50%	37,623		2,032		2,032		12/31/13 to Capital Event	—
Total				$	105,484	$	129,278

Notes:

(1) The effective interest rate includes origination and exit fees.

(2) Comprised of three cross-collateralized loans from one borrower, which are non-performing

(3) The principal balance for this accrual only loan is increased by the interest accrued

(4) Non-performing loan

(5) Consists of three loans of which two are non-performing with an aggregate face value of $5.7 million, of which $3.9 million has been reserved

During January 2013, Fund III received a payment of $2.5 million, representing the full principal and interest amount on a note that had been previously written off.

During February 2013, Fund III, in conjunction with its acquisition of Nostrand Place (Note 4), received repayment on $13.0 million of its first mortgage loan of $18.5 million and contributed the remaining unliquidated balance to a joint venture.

During March 2013, the Company received a payment of $5.4 million, representing full payment on a construction loan.

The Company monitors the credit quality of its notes receivable on an ongoing basis and considers indicators of credit quality such as loan payment activity, the estimated fair value of the underlying collateral, the seniority of the Company's loan in relation to other debt secured by the collateral and the prospects of the borrower. As of June 30, 2013, the Company held six non-performing notes aggregating $18.6 million for which payment was delinquent. Based primarily on the indicators noted above, the Company has established a reserve of $3.9 million as of June 30, 2013 related to these notes. The following table reconciles the allowance for notes receivable from December 31, 2012 to June 30, 2013:


6.	NOTES RECEIVABLE (continued)



(dollars in thousands)	Allowance for Notes Receivable
Balance at December 31, 2012	$	3,681
Additional reserves	208
Recoveries	—
Charge-offs and reclassifications	—
Balance at June 30, 2013	$	3,889