Note 11. Loans to and Investments in Associated Companies

A summary of loans to and investments in associated companies at June 30, 2014 and December 31, 2013 accounted for under the equity method of accounting is as follows (in thousands):


		June 30,		December 31,
		2014		2013

Jefferies Finance, LLC	$	343,464	$	470,537
Jefferies LoanCore LLC		158,071		224,037
Berkadia		203,133		182,573
Garcadia companies		126,378		120,017
HomeFed		254,035		52,923
Linkem S.p.A.		162,131		173,577
Other		48,654		34,677

Total	$	1,295,866	$	1,258,341

Income (losses) related to associated companies includes the following for the three and six months ended June 30, 2014 and 2013 (in thousands):


		For the Three Month						For the Six Month
		Period Ended June 30,						Period Ended June 30,
		2014			2013			2014			2013

Berkadia	$	24,388		$	30,844		$	38,361		$	49,431
Garcadia companies		14,043			11,244			25,302			20,115
Linkem		(4,723	)		(6,920	)		(10,559	)		(13,522	)
HomeFed		795			(355	)		177			(596	)
Jefferies High Yield Holdings, LLC ("JHYH")		-			-			-			7,178
Other		842			50			2,100			3,065

Total	$	35,345		$	34,863		$	55,381		$	65,671

For the three month period ended June 30, 2013, our share of Berkadia's income includes an out of period adjustment of $14.8 million to record income related to prior periods.

Income (losses) related to associated companies classified as Other revenues includes the following for the three and six months ended June 30, 2014 and 2013 (in thousands):


		For the Three			For the Six			For the Three
		Month			Month			and Six Month
		Period Ended			Period Ended			Periods Ended
		June 30, 2014			June 30, 2014			June 30, 2013

Jefferies Finance	$	14,673		$	32,274		$	11,969
Jefferies LoanCore		3,400			5,882			16,723
Other		(808	)		(264	)		(152	)

Total	$	17,265		$	37,892		$	28,540

Jefferies Finance

In October 2004, Jefferies entered into an agreement with Babson Capital Management LLC ("Babson Capital") and Massachusetts Mutual Life Insurance Company ("MassMutual") to form Jefferies Finance, a joint venture entity. Jefferies Finance is a commercial finance company whose primary focus is the origination and syndication of senior secured debt to middle market and growth companies in the form of term and revolving loans. Loans are originated primarily through the investment banking efforts of Jefferies, with Babson Capital providing primary credit analytics and portfolio management services. Jefferies Finance also originates other debt products such as second lien term, bridge and mezzanine loans, as well as related equity co-investments. Jefferies Finance also purchases syndicated loans in the secondary market, including loans that are performing, stressed and distressed loan obligations.

Jefferies and MassMutual each have equity commitments to Jefferies Finance of $600.0 million. At June 30, 2014, approximately $331.1 million of Jefferies commitment was funded. The investment commitment is scheduled to mature on March 1, 2016 with automatic one year extensions subject to a 60 day termination notice by either party.

In addition, Jefferies and MassMutual have entered into a Secured Revolving Credit Facility, to be funded equally, to support loan underwritings by Jefferies Finance. The Secured Revolving Credit Facility bears interest based on the interest rates of the related Jefferies Finance underwritten loans and is secured by the underlying loans funded by the proceeds of the facility. The total committed Secured Revolving Credit Facility is $700.0 million and is scheduled to mature on March 1, 2016 with automatic one year extensions subject to a 60 day termination notice by either party. At June 30, 2014 and December 31, 2013, $0.0 million and $123.8 million, respectively, of Jefferies $350.0 million commitment was funded.

Jefferies engages in debt capital markets transactions with Jefferies Finance related to the originations of loans by Jefferies Finance. In connection with such transactions, Jefferies earned net underwriting fees of $38.8 million and $86.4 million during the three and six months ended June 30, 2014, respectively, and $35.2 million during the three and six months ended June 30, 2013, recognized in Investment banking revenues in the Consolidated Statements of Operations. In addition, Jefferies paid fees to Jefferies Finance regarding certain loans originated by Jefferies Finance of $3.4 million and $7.7 million during the three and six months ended June 30, 2014, respectively, and $6.2 million during the three and six months ended June 30, 2013, which are recognized within Selling, general and other expenses in the Consolidated Statements of Operations. Under a service agreement, Jefferies charged Jefferies Finance $7.0 million and $28.7 million for services provided during the three and six months ended June 30, 2014, respectively, and $5.4 million during the three and six months ended June 30, 2013. Receivables from Jefferies Finance, included within Other assets in the Consolidated Statements of Financial Condition, were $14.2 million and $31.1 million at June 30, 2014 and December 31, 2013, respectively.

Jefferies LoanCore

In February 2011, Jefferies entered into a joint venture agreement with the Government of Singapore Investment Corporation and LoanCore, LLC and formed Jefferies LoanCore, a commercial real estate finance company. Jefferies LoanCore originates and purchases commercial real estate loans throughout the United States with the support of the investment banking and securitization capabilities of Jefferies and the real estate and mortgage investment expertise of the Government of Singapore Investment Corporation and LoanCore, LLC. Jefferies LoanCore has aggregate equity commitments of $600.0 million. At June 30, 2014 and December 31, 2013, Jefferies has funded $108.1 million and $175.5 million, respectively, of its $291.0 million equity commitment and has a 48.5% voting interest in Jefferies LoanCore.

Berkadia

Berkadia Commercial Mortgage LLC is a commercial mortgage banking and servicing joint venture formed in 2009 with Berkshire Hathaway. We and Berkshire Hathaway each contributed $217.2 million of equity capital to the joint venture and each have a 50% equity interest in Berkadia. Through June 30, 2014, cumulative cash distributions received from this investment aggregated $249.2 million. Berkadia originates commercial real estate loans that are sold to U.S. government agencies, and originates and brokers commercial mortgage loans which are not part of government agency programs. Berkadia is a servicer of commercial real estate loans in the U.S., performing primary, master and special servicing functions for U.S. government agency programs, commercial mortgage-backed securities transactions, banks, insurance companies and other financial institutions.

Berkadia uses all of the proceeds from the commercial paper sales of an affiliate of Berkadia to fund new mortgage loans, servicer advances, investments and other working capital requirements. Repayment of the commercial paper is supported by a $2.5 billion surety policy issued by a Berkshire Hathaway insurance subsidiary and corporate guaranty, and we have agreed to reimburse Berkshire Hathaway for one-half of any losses incurred thereunder. As of June 30, 2014, the aggregate amount of commercial paper outstanding was $2.47 billion.

Linkem

We have acquired 40.2% of the common shares of Linkem, a fixed wireless broadband services provider in Italy, for aggregate cash consideration of $138.4 million. In addition, we have purchased 5% convertible notes issued by Linkem for $81.2 million (€58.9 million principal amount); if converted, we would own approximately 53% of Linkem's common equity. The excess of our investment in Linkem's common shares over our share of underlying book value is being amortized to expense over 12 years.

HomeFed

At June 30, 2014, we owned 9,460,563 shares of HomeFed's common stock, representing approximately 64% of HomeFed's outstanding common shares; however, we have agreed to limit our voting rights such that we will not be able to vote more than 45% of HomeFed's total voting securities voting on any matter, assuming all HomeFed shares not owned by us are voted. HomeFed is engaged, directly and through subsidiaries, in the investment in and development of real estate projects. HomeFed is a public company traded on the NASD OTC Bulletin Board (Symbol: HOFD). As a result of a 1998 distribution to all of our shareholders, approximately 5% of HomeFed is beneficially owned by our Chairman at June 30, 2014. Our Chairman also serves as HomeFed's Chairman, and our President is a Director of HomeFed.

In March 2014, we sold to HomeFed substantially all of our real estate properties and operations, most of our interest in Brooklyn Renaissance Plaza ("BRP") and cash of $12.5 million (subject to adjustment), in exchange for 6,986,337 newly issued unregistered HomeFed common shares. The remainder of our interest in BRP will be sold to HomeFed for 513,663 additional HomeFed common shares upon receipt of the approval of a lender to BRP; closing of this portion of the transaction is expected during the third quarter of 2014.

Since we do not control HomeFed, our investment in HomeFed is accounted for as an investment in an associated company. We have also entered into a stockholders agreement that will limit our ability to increase our interest in HomeFed or dispose of our interest in HomeFed. We have a registration rights agreement with HomeFed that covers all of our HomeFed shares. See Note 27 for more information about the assets sold to HomeFed.

Under GAAP, we are not permitted to immediately recognize any gain on real estate sale transactions in which the seller does not receive cash; accordingly the gain on sale of approximately $27.1 million was deferred and will be recognized into income over time. The new HomeFed shares received were recorded at fair value, which we estimated to be approximately $28.76 per share, based on projections of future cash flows for HomeFed's underlying projects, discounted at a risk adjusted rate.

JHYH

Under GAAP, JHYH was considered a variable interest entity that was consolidated by Jefferies, since Jefferies was the primary beneficiary. In connection with the Jefferies acquisition, we contributed our investment in JHYH to Jefferies, other third-party investors were redeemed and JHYH was effectively dissolved.