Loans Receivable

9 Months Ended

Sep. 30, 2012

Loans Receivable [Abstract]

Loans Receivable

As of September 30, 2012 and December 31, 2011, the Company's loans receivable, including accrued interest and net of origination fees, were comprised primarily of first and second mortgage loans and mezzanine loans on real estate aggregating $72,786 and $66,619, respectively. The loans bear interest, including imputed interest, at rates ranging from 4.6% to 20.0% and mature at various dates between 2012 and 2022.

During the second quarter of 2012, the Company contracted to lend up to $8,000 to fund the construction of a charter school in Homestead, Florida. The loan, which had an outstanding principal balance of $7,970 as of September 30, 2012, matures in August 2014 and accrues interest at 7.5% per annum.

During the first quarter of 2011, the Company, through a lender subsidiary, loaned $3,003 to the buyer in connection with the sale for $3,650 of a vacant industrial property. The loan is secured by the property, bears interest at 7.8% and matures in January 2013. The loan, which had an outstanding balance of $3,086 at September 30, 2012, is currently in default and the Company has initiated foreclosure proceedings. The Company believes the industrial property has an estimated fair value in excess of the Company's investment.

During 2011 and 2010, the Company, through a lender subsidiary, made a mortgage loan to an entity that owns an office property in Schaumburg, Illinois. As of September 30, 2012, the loan had an outstanding balance of $21,942, net of a $1,722 reserve allowance, and currently bears interest at 20.0%. This mortgage loan had a maturity date of January 15, 2012 with a borrower option to extend one additional year for a 50 basis point fee, which was not timely exercised. The property is net-leased through December 31, 2022 for an average annual rent of $3,968. The lender subsidiary may be obligated to lend an additional amount for tenant improvement costs. The borrower defaulted on the loan causing the applicable interest rate to increase from 15.0% to 20.0% per annum. The tenant of the property has brought an action against the borrower and our lender subsidiary claiming the additional tenant improvement cost. The Company believes the office property has an estimated fair value in excess of the Company's investment and the Company has initiated foreclosure proceedings. Interest income is no longer being recorded on the note.

During 2010, the Company, through a lender subsidiary, made a $17,000 mezzanine loan to entities which, collectively, owned five medical facilities. The mezzanine loan (1) was guaranteed by a parent entity and a principal, (2) was principally secured by either ownership pledges for, second mortgage liens or mortgage liens against the medical facilities, (3) matured in December 2011 and (4) required payments of interest only at a rate of 14.0% through February 2011 and 16.0% thereafter. The lender subsidiary received aggregate prepayments of $7,500 in December 2010 and February 2011, and the balance of $9,500 was fully repaid in December 2011.

The Company has two types of financing receivables: loans receivable and a capitalized financing lease. The Company determined that its financing receivables operate within one portfolio segment as they are within the same industry and use the same impairment methodology. The Company's loans receivable are secured by commercial real estate assets and the capitalized financing lease is for a commercial office property located in Greenville, South Carolina. In addition, the Company assesses all financing receivables for impairment, when warranted, based on an individual analysis of each receivable.

The Company's financing receivables operate within one class of financing receivables as these assets are collateralized by commercial real estate and similar metrics are used to monitor the risk and performance of these assets. The Company's management uses credit quality indicators to monitor financing receivables such as quality of collateral, the underlying tenant's credit rating and collection experience. As of September 30, 2012, the financing receivables, other than as previously disclosed, were performing as anticipated and there were no significant delinquent amounts outstanding.