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Note 9 - Other Real Estate Investments | 12 Months Ended
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Dec. 31, 2012
Other Real Estate Investments [Text Block] | 9. Other Real Estate Investments: Preferred Equity Capital – The Company previously provided capital to owners and developers of real estate properties through its Preferred Equity program. As of December 31, 2012, the Company’s net investment under the Preferred Equity program was $287.8 million relating to 504 properties, including 397 net leased properties. For the year ended December 31, 2012, the Company earned $43.1 million from its preferred equity investments, including $17.6 million in profit participation earned from 21 capital transactions. For the year ended December 31, 2011, the Company earned $35.7 million from its preferred equity investments, including $13.7 million in profit participation earned from 13 capital transactions. For the year ended December 31, 2010, the Company earned $37.6 million from its preferred equity investments, including $9.7 million in profit participation earned from nine capital transactions. During 2012, the Company amended one of its preferred equity agreements to restructure its investment, into a pari passu joint venture investment in which the Company holds a noncontrolling interest. The Company will continue to account for this investment under the equity method of accounting and from the date of the amendment will include this investment in Investments and advances in real estate joint ventures within the Company’s Consolidated Balance Sheets. Included in the capital transactions described above for the year ended December 31, 2012, is the sale of three preferred equity investments in which the Company had a $0 investment and recognized promote income of $10.0 million. In connection with this transaction, the Company provided seller financing for $7.5 million, which bears interest at a rate of 7.0% and matures in December 2013. The Company evaluated this transaction pursuant to the FASB’s real estate sales guidance and concluded that the criteria for sale recognition was met. During 2011, the Company, in separate transactions, amended three preferred equity agreements to restructure its investments, which hold investments in seven retail properties, into three pari passu joint venture investments in which the Company holds noncontrolling interests. The Company will continue to account for these investments under the equity method of accounting and from the dates of the amendments will include these investments in Investments and advances in real estate joint ventures within the Company’s Consolidated Balance Sheets (see Footnote 8). Additionally, during the year ended December 31, 2011, two properties within two of the Company’s preferred equity investments were in default of the their respective mortgages and received foreclosure notices from the respective mortgage lenders. As such, the Company recognized full impairment charges on both of the investments aggregating $2.2 million. During 2010, the Company sold 50% of a preferred equity investment in a Canadian retail operating property for CAD $31.9 million (USD $31.0 million). In connection with this sale the Company (i) recognized profit participation of CAD $1.7 million (USD $1.6 million) and (ii) amended its preferred equity agreement to restructure the Company’s remaining investment as a pari passu joint venture investment. Additionally, during 2010, the Company amended its preferred equity agreement to restructure another Canadian investment that holds investments in 12 retail properties as a pari passu joint venture investment. The Company will continue to account for both of these investments under the equity method of accounting and includes these investments in Investments and advances in real estate joint ventures within the Company’s Consolidated Balance Sheets (see Footnote 8). Also during 2010, the Company recognized an impairment charge of $3.8 million against the carrying value of its preferred equity investment in an operating property located in Tucson, AZ based on its estimated sales price. During 2010, the Company acquired the remaining ownership interest in this operating property for a purchase price of $90.0 million, including the assumption of $81.0 million in non-recourse mortgage debt, which bears interest at a rate of 6.08% and is scheduled to mature in 2016. During August 2010, this property was fully disposed of. Additionally, during the year ended December 31, 2010, the Company recognized an impairment charge of $5.0 million against the carrying value of two of its preferred equity investments, based on estimated sales prices. During 2010, the Company sold one of these preferred equity investments for a sales price of $0.3 million. The Company’s estimated fair values relating to the impairment assessments above were based upon sales prices, where applicable, or discounted cash flow models that include all estimated cash inflows and outflows over a specified holding period and where applicable, any estimated debt premiums. Capitalization rates, discount rates and credit spreads utilized in these models were based upon rates that the Company believes to be within a reasonable range of current market rates for the respective properties. During 2007, the Company invested $81.7 million of preferred equity capital in an entity which was comprised of 403 net leased properties (“Net Leased Portfolio”) which consist of 30 master leased pools with each pool leased to individual corporate operators. Each master leased pool is accounted for as a direct financing lease. These properties consist of a diverse array of free-standing restaurants, fast food restaurants, convenience and auto parts stores. As of December 31, 2012, the remaining 397 properties were encumbered by third party loans aggregating $358.9 million with interest rates ranging from 5.08% to 10.47% with a weighted-average interest rate of 9.3% and maturities ranging from one to 10 years. The Company recognized $14.0 million, $12.7 million and $12.1 million in equity in income from this investment during the years ended December 31, 2012, 2011 and 2010, respectively. The Company’s maximum exposure to losses associated with its preferred equity investments is primarily limited to its invested capital. As of December 31, 2012 and 2011, the Company’s invested capital in its preferred equity investments approximated $287.8 million and $316.0 million, respectively. Summarized financial information relating to the Company’s preferred equity investments is as follows (in millions):
|  | December 31, |
|  | 2012 |  |  | 2011 |
Assets: |  |  |  |  |  |
Real estate, net |  | $ | 824.7 |  |  | $ | 1,058.1 |
Other assets |  |  | 719.1 |  |  |  | 760.5 |
|  | $ | 1,543.8 |  |  | $ | 1,818.6 |
Liabilities and Partners’/Members’ Capital: |  |  |  |  |  |  |  |
Notes and mortgages payable |  | $ | 1,116.9 |  |  | $ | 1,338.7 |
Other liabilities |  |  | 51.8 |  |  |  | 39.9 |
Partners’/Members’ capital |  |  | 375.1 |  |  |  | 440.0 |
|  | $ | 1,543.8 |  |  | $ | 1,818.6 |
|  | Year Ended December 31, |
|  | 2012 |  |  | 2011 |  |  | 2010 |
Revenues from rental property |  | $ | 195.0 |  |  | $ | 233.1 |  |  | $ | 278.4 |
Operating expenses |  |  | (44.7 | ) |  |  | (57.0 | ) |  |  | (73.2 | )
Interest expense |  |  | (72.0 | ) |  |  | (89.5 | ) |  |  | (104.0 | )
Depreciation and amortization |  |  | (33.7 | ) |  |  | (43.6 | ) |  |  | (52.3 | )
Impairment charges (a) |  |  | (2.7 | ) |  |  | - |  |  |  | - |
Other expense, net |  |  | (8.3 | ) |  |  | (6.3 | ) |  |  | (6.3 | )
Income from continuing operations |  |  | 33.6 |  |  |  | 36.7 |  |  |  | 42.6 |
Discontinued Operations: |  |  |  |  |  |  |  |  |  |  |  |
Gain on disposition of properties |  |  | 17.5 |  |  |  | 6.2 |  |  |  | 13.7 |
Net income |  | $ | 51.1 |  |  | $ | 42.9 |  |  | $ | 56.3 |
(a) Represents an impairment charge against one master leased pool due to decline in fair market value. Other – During 2010, the Company recognized an other-than-temporary impairment charge of $2.1 million against the carrying value of an investment that owns two operating properties located in Manchester, NH and Nashua, NH. The Company determined the fair value of its investment based on an estimated sales price of the operating properties. During 2011, these two properties were sold and as a result of an adjustment to the purchase price, the Company recognized an additional $0.5 million in impairment charges. Investment in Retail Store Leases - The Company has interests in various retail store leases relating to the anchor store premises in neighborhood and community shopping centers. These premises have been sublet to retailers who lease the stores pursuant to net lease agreements. Income from the investment in these retail store leases during the years ended December 31, 2012, 2011 and 2010, was $0.9 million, $0.8 million and $1.6 million, respectively. These amounts represent sublease revenues during the years ended December 31, 2012, 2011 and 2010, of $3.9 million, $5.1 million and $5.9 million, respectively, less related expenses of $3.0 million, $4.3 million and $4.3 million, respectively. The Company's future minimum revenues under the terms of all non-cancelable tenant subleases and future minimum obligations through the remaining terms of its retail store leases, assuming no new or renegotiated leases are executed for such premises, for future years are as follows (in millions): 2013, $3.7 and $2.3; 2014, $2.9 and $1.7; 2015, $2.0 and $1.3; 2016, $1.6 and $1.0; 2017, $1.0 and $0.5, and thereafter, $0.4 and $0.04, respectively. Leveraged Lease - During June 2002, the Company acquired a 90% equity participation interest in an existing leveraged lease of 30 properties. The properties are leased under a long-term bond-type net lease whose primary term expires in 2016, with the lessee having certain renewal option rights. The Company’s cash equity investment was $4.0 million. This equity investment is reported as a net investment in leveraged lease in accordance with the FASB’s lease guidance. As of December 31, 2012, 19 of these properties were sold, whereby the proceeds from the sales were used to pay down the mortgage debt by $32.3 million and the remaining 11 properties were encumbered by third-party non-recourse debt of $21.1 million that is scheduled to fully amortize during the primary term of the lease from a portion of the periodic net rents receivable under the net lease. As an equity participant in the leveraged lease, the Company has no recourse obligation for principal or interest payments on the debt, which is collateralized by a first mortgage lien on the properties and collateral assignment of the lease. Accordingly, this obligation has been offset against the related net rental receivable under the lease. At December 31, 2012 and 2011, the Company’s net investment in the leveraged lease consisted of the following (in millions):
|  | 2012 |  |  | 2011 |
Remaining net rentals |  | $ | 24.0 |  |  | $ | 30.8 |
Estimated unguaranteed residual value |  |  | 30.3 |  |  |  | 30.3 |
Non-recourse mortgage debt |  |  | (19.0 | ) |  |  | (25.1 | )
Unearned and deferred income |  |  | (27.6 | ) |  |  | (29.9 | )
Net investment in leveraged lease |  | $ | 7.7 |  |  | $ | 6.1 |

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