NOTES RECEIVABLE, PREFERRED EQUITY AND OTHER REAL ESTATE RELATED INVESTMENTS

3 Months Ended

Mar. 31, 2014

Mortgage Loans on Real Estate [Abstract]

NOTES RECEIVABLE, PREFERRED EQUITY AND OTHER REAL ESTATE RELATED INVESTMENTS

NOTES RECEIVABLE AND PREFERRED EQUITY INVESTMENTS, NET

As of March 31, 2014, the Company’s notes receivable, net, aggregated $119.6 million, and were collateralized either by the underlying properties, 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 March 31, 2014		Net Carrying Amounts of Notes Receivable as of December 31, 2013		Maturity date
First Mortgage Loan	8.0%	—	$	—	$	6,400	Demand
Mezzanine Loan ²	10.0%	89,566	9,089		9,089		Demand
First Mortgage Loan	11.0%	—	42,000		42,000		Demand
Zero Coupon Loan ³	24.0%	166,200	4,570		4,431		1/3/2016
Mezzanine Loan	15.0%	—	30,879		30,879		11/9/2020
Mezzanine Loan ⁴	15.0%	17,298	3,834		3,834		Upon Capital Event
Mezzanine Loan	8.1%	—	13,000		13,000		9/1/2017
Construction Loan	7.0%	—	12,000		12,000		1/1/2015
Individually less than 3% ⁵	2.8% to 12.0%	20,855	4,267		5,023		12/31/14 to Capital Event
Total			$	119,639	$	126,656

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, one of which is non-performing with a face value of $3.0 million, of which $2.0 million has been reserved

During January 2014, the Company received a repayment of $6.4 million, representing the full principal amount on a note receivable.

During January 2014, the Company also received a payment of $1.4 million for a mezzanine loan with a face value of $3.5 million and a carrying value, net of reserves, of $0.7 million. The Company recognized income of approximately $0.7 million relating to the payoff, which is included in Other income on the accompanying 2014 Consolidated Statement of Income.

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 March 31, 2014, the Company held five non-performing notes aggregating $15.9 million for which payment was delinquent. Based primarily on the indicators noted above, the Company has established a reserve of $2.0 million as of March 31, 2014 related to these notes. The following table reconciles the allowance for notes receivable from December 31, 2013 to March 31, 2014:


6.	NOTES RECEIVABLE AND PREFERRED EQUITY INVESTMENTS, NET (continued)



(dollars in thousands)	Allowance for Notes Receivable
Balance at December 31, 2013	$	3,681
Additional reserves	—
Recoveries	(1,688		)
Charge-offs and reclassifications	—
Balance at March 31, 2014	$	1,993