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Loans Receivable, net | 12 Months Ended
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Dec. 31, 2012
Receivables [Abstract] |
Loans Receivable, net | Loans Receivable, net The following is a summary of the Company's loans receivable by class ($ in thousands):
| As of December 31,
Type of Investment | 2012 |  | 2011
Senior mortgages | $ | 1,751,256 |  |  | $ | 2,801,213 |
Subordinate mortgages | 152,737 |  |  | 211,491 |
Corporate/Partnership loans | 450,491 |  |  | 478,892 |
Total gross carrying value of loans(1) | $ | 2,354,484 |  |  | $ | 3,491,596 |
Reserves for loan losses | (524,499 | ) |  | (646,624 | )
Total carrying value of loans | $ | 1,829,985 |  |  | $ | 2,844,972 |
Other lending investments—securities | — |  |  | 15,790 |
Total loans receivable, net | $ | 1,829,985 |  |  | $ | 2,860,762 |
Explanatory Note: _______________________________________________________________________________
(1) | The Company's recorded investment in loans as of December 31, 2012 and 2011, was $2.36 billion and $3.50 billion, respectively, which consists of total gross carrying value of loans plus accrued interest of $9.8 million and $13.3 million, for the same two periods, respectively.
During the year ended December 31, 2012, the Company funded $39.6 million of loan investments and received principal repayments of $710.7 million. During the same period, the Company sold loans with a total carrying value of $53.9 million, for which it recognized charge-offs of $3.3 million and also recorded income of $6.4 million in "Other income" on the Company's Consolidated Statements of Operations. During the year ended December 31, 2012, the Company received title to properties in full or partial satisfaction of non-performing mortgage loans with a gross carrying value of $352.8 million, for which the properties had served as collateral, and recorded charge-offs totaling $85.3 million related to these loans. These properties were recorded as "Real estate, net" or "Real estate available and held for sale" on the Company's Consolidated Balance Sheets (see Note 4). Reserve for Loan Losses—Changes in the Company's reserve for loan losses were as follows ($ in thousands):
| For the Years Ended December 31,
| 2012 |  | 2011 |  | 2010
Reserve for loan losses at beginning of period | $ | 646,624 |  |  | $ | 814,625 |  |  | $ | 1,417,949 |
Provision for loan losses | 81,740 |  |  | 46,412 |  |  | 331,487 |
Charge-offs | (203,865 | ) |  | (214,413 | ) |  | (934,811 | )
Reserve for loan losses at end of period | $ | 524,499 |  |  | $ | 646,624 |  |  | $ | 814,625 |
The Company's recorded investment in loans (comprised of a loan's carrying value plus accrued interest) and the associated reserve for loan losses were as follows ($ in thousands):
| Individually Evaluated for Impairment(1) |  | Collectively Evaluated for Impairment(2) |  | Loans Acquired with Deteriorated Credit Quality(3) |  | Total
As of December 31, 2012 |  |  |  |  |  |  |
Loans | $ | 1,095,957 |  |  | $ | 1,210,077 |  |  | $ | 58,281 |  |  | $ | 2,364,315 |
Less: Reserve for loan losses | (472,058 | ) |  | (33,100 | ) |  | (19,341 | ) |  | (524,499 | )
Total | $ | 623,899 |  |  | $ | 1,176,977 |  |  | $ | 38,940 |  |  | $ | 1,839,816 |
As of December 31, 2011 |  |  |  |  |  |  |
Loans | $ | 1,525,337 |  |  | $ | 1,919,876 |  |  | $ | 59,648 |  |  | $ | 3,504,861 |
Less: Reserve for loan losses | (554,131 | ) |  | (73,500 | ) |  | (18,993 | ) |  | (646,624 | )
Total | $ | 971,206 |  |  | $ | 1,846,376 |  |  | $ | 40,655 |  |  | $ | 2,858,237 |
Explanatory Notes: _______________________________________________________________________________
(1) | The carrying value of these loans include unamortized discounts, premiums, deferred fees and costs aggregating to a net discount of $4.0 million and a net premium of $0.1 million as of December 31, 2012 and 2011, respectively. The Company's loans individually evaluated for impairment primarily represent loans on non-accrual status and therefore, the unamortized amounts associated with these loans are not currently being amortized into income.
(2) | The carrying value of these loans include unamortized discounts, premiums, deferred fees and costs aggregating to a net discount of $3.8 million and $0.2 million as of December 31, 2012 and 2011, respectively.
(3) | The carrying value of these loans include unamortized discounts, premiums, deferred fees and costs aggregating to a net premium of $0.1 million and a net discount of $15.0 million as of December 31, 2012 and 2011, respectively. These loans had cumulative principal balances of $58.8 million and $74.5 million, as of December 31, 2012 and 2011, respectively.
Credit Characteristics—As part of the Company's process for monitoring the credit quality of its loans, it performs a quarterly loan portfolio assessment and assigns risk ratings to each of its performing loans. The Company's recorded investment in performing loans, presented by class and by credit quality, as indicated by risk rating, was as follows ($ in thousands):
| As of
| December 31, 2012 |  | December 31, 2011
| Performing Loans |  | Weighted Average Risk Ratings |  | Performing Loans |  | Weighted Average Risk Ratings
Senior mortgages | $ | 840,593 |  |  | 2.75 |  |  | $ | 1,514,016 |  |  | 3.19 |
Subordinate mortgages | 99,698 |  |  | 2.27 |  |  | 190,342 |  |  | 3.36 |
Corporate/Partnership loans | 444,772 |  |  | 3.69 |  |  | 472,178 |  |  | 3.61 |
Total | $ | 1,385,063 |  |  | 3.01 |  |  | $ | 2,176,536 |  |  | 3.29 |
As of December 31, 2012, the Company's recorded investment in loans, aged by payment status and presented by class, were as follows ($ in thousands):
| Current |  | Less Than and Equal to 90 Days |  | Greater Than 90 Days |  | Total Past Due |  | Total
Senior mortgages | $ | 862,082 |  |  | $ | 62,768 |  |  | $ | 830,906 |  |  | $ | 893,674 |  |  | $ | 1,755,756 |
Subordinate mortgages | 99,698 |  |  | — |  |  | 53,979 |  |  | 53,979 |  |  | 153,677 |
Corporate/Partnership loans | 444,772 |  |  | — |  |  | 10,110 |  |  | 10,110 |  |  | 454,882 |
Total | $ | 1,406,552 |  |  | $ | 62,768 |  |  | $ | 894,995 |  |  | $ | 957,763 |  |  | $ | 2,364,315 |
Impaired Loans—The Company's recorded investment in impaired loans, presented by class, were as follows ($ in thousands)(1):
| As of December 31, 2012 |  | As of December 31, 2011
| Recorded Investment |  | Unpaid Principal Balance |  | Related Allowance |  | Recorded Investment |  | Unpaid Principal Balance |  | Related Allowance
With no related allowance recorded: |  |  |  |  |  |  |  |  |  |  |
Senior mortgages | $ | 108,077 |  |  | $ | 107,850 |  |  | $ | — |  |  | $ | 219,488 |  |  | $ | 218,612 |  |  | $ | — |
Corporate/Partnership loans | 10,110 |  |  | 10,160 |  |  | — |  |  | 10,110 |  |  | 10,160 |  |  | — |
Subtotal | $ | 118,187 |  |  | $ | 118,010 |  |  | $ | — |  |  | $ | 229,598 |  |  | $ | 228,772 |  |  | $ | — |
With an allowance recorded: |  |  |  |  |  |  |  |  |  |  |
Senior mortgages | $ | 918,975 |  |  | $ | 918,496 |  |  | $ | (442,760 | ) |  | $ | 1,268,962 |  |  | $ | 1,263,195 |  |  | $ | (540,670 | )
Subordinate mortgages | 53,979 |  |  | 53,679 |  |  | (39,579 | ) |  | 22,480 |  |  | 22,558 |  |  | (22,480 | )
Corporate/Partnership loans | 63,096 |  |  | 63,246 |  |  | (9,060 | ) |  | 62,591 |  |  | 62,845 |  |  | (9,974 | )
Subtotal | $ | 1,036,050 |  |  | $ | 1,035,421 |  |  | $ | (491,399 | ) |  | $ | 1,354,033 |  |  | $ | 1,348,598 |  |  | $ | (573,124 | )
Total: |  |  |  |  |  |  |  |  |  |  |
Senior mortgages | $ | 1,027,052 |  |  | $ | 1,026,346 |  |  | $ | (442,760 | ) |  | $ | 1,488,450 |  |  | $ | 1,481,807 |  |  | $ | (540,670 | )
Subordinate mortgages | 53,979 |  |  | 53,679 |  |  | (39,579 | ) |  | 22,480 |  |  | 22,558 |  |  | (22,480 | )
Corporate/Partnership loans | 73,206 |  |  | 73,406 |  |  | (9,060 | ) |  | 72,701 |  |  | 73,005 |  |  | (9,974 | )
Total | $ | 1,154,237 |  |  | $ | 1,153,431 |  |  | $ | (491,399 | ) |  | $ | 1,583,631 |  |  | $ | 1,577,370 |  |  | $ | (573,124 | )
Explanatory Note: _______________________________________________________________________________
(1) | All of the Company's non-accrual loans are considered impaired and included in the table above. In addition, as of December 31, 2012 and 2011, certain loans modified through troubled debt restructurings with a recorded investment of $175.0 million and $255.3 million, respectively, are also included as impaired loans in accordance with GAAP although they are performing and on accrual status.
The Company's average recorded investment in impaired loans and interest income recognized, presented by class, were as follows ($ in thousands):
| For the Years Ended December 31,
| 2012 |  | 2011 |  | 2010
| Average Recorded Investment |  | Interest Income Recognized |  | Average Recorded Investment |  | Interest Income Recognized |  | Average Recorded Investment |  | Interest Income Recognized
With no related allowance recorded: |  |  |  |  |  |  |  |  |  |  |
Senior mortgages | $ | 162,093 |  |  | $ | 2,765 |  |  | $ | 309,079 |  |  | $ | 31,799 |  |  | $ | 659,150 |  |  | $ | 20,472 |
Subordinate mortgages | — |  |  | — |  |  | — |  |  | — |  |  | 1,404 |  |  | 87 |
Corporate/Partnership loans | 10,110 |  |  | 160 |  |  | 10,110 |  |  | 680 |  |  | 27,526 |  |  | 1,868 |
Subtotal | $ | 172,203 |  |  | $ | 2,925 |  |  | $ | 319,189 |  |  | $ | 32,479 |  |  | $ | 688,080 |  |  | $ | 22,427 |
With an allowance recorded: |  |  |  |  |  |  |  |  |  |  |
Senior mortgages | $ | 1,064,045 |  |  | $ | 3,865 |  |  | $ | 1,608,486 |  |  | $ | 7,187 |  |  | $ | 2,411,735 |  |  | $ | 5,183 |
Subordinate mortgages | 52,208 |  |  | — |  |  | 19,477 |  |  | — |  |  | 77,125 |  |  | 107 |
Corporate/Partnership loans | 62,248 |  |  | 312 |  |  | 66,087 |  |  | 332 |  |  | 65,118 |  |  | — |
Subtotal | $ | 1,178,501 |  |  | $ | 4,177 |  |  | $ | 1,694,050 |  |  | $ | 7,519 |  |  | $ | 2,553,978 |  |  | $ | 5,290 |
Total: |  |  |  |  |  |  |  |  |  |  |
Senior mortgages | $ | 1,226,138 |  |  | $ | 6,630 |  |  | $ | 1,917,565 |  |  | $ | 38,986 |  |  | $ | 3,070,885 |  |  | $ | 25,655 |
Subordinate mortgages | 52,208 |  |  | — |  |  | 19,477 |  |  | — |  |  | 78,529 |  |  | 194 |
Corporate/Partnership loans | 72,358 |  |  | 472 |  |  | 76,197 |  |  | 1,012 |  |  | 92,644 |  |  | 1,868 |
Total | $ | 1,350,704 |  |  | $ | 7,102 |  |  | $ | 2,013,239 |  |  | $ | 39,998 |  |  | $ | 3,242,058 |  |  | $ | 27,717 |
During the year ended December 31, 2011, the Company recorded interest income of $26.3 million related to the resolution of certain non-performing loans. Interest income was not previously recorded while the loans were on non-accrual status. Troubled Debt Restructurings—During the years ended December 31, 2012 and 2011, the Company modified loans that were determined to be troubled debt restructurings. The recorded investment in these loans was impacted by the modifications as follows, presented by class ($ in thousands):
| For the Years Ended December 31,
| 2012 |  | 2011
| Number of Loans |  | Pre-Modification Outstanding Recorded Investment |  | Post-Modification Outstanding Recorded Investment |  | Number of Loans |  | Pre-Modification Outstanding Recorded Investment |  | Post-Modification Outstanding Recorded Investment
Senior mortgages | 8 |  |  | $ | 319,667 |  |  | $ | 272,753 |  |  | 7 |  |  | $ | 191,158 |  |  | $ | 190,893 |
Troubled debt restructurings that subsequently defaulted during the period were as follows ($ in thousands):
| For the Years Ended December 31,
| 2012 |  | 2011
| Number of Loans |  | Outstanding Recorded Investment |  | Number of Loans |  | Outstanding Recorded Investment
Senior mortgages | 1 |  |  | $ | 18,511 |  |  | 1 |  |  | $ | 28,005 |
Troubled debt restructurings that occurred during the year ended December 31, 2012 included the modifications of performing loans with a combined recorded investment of $64.1 million. The modified terms of these loans granted maturity extensions ranging from one year to three years and included conditional extension options in certain cases dependent on borrower-specific performance hurdles. In each case, the Company believes the borrowers can perform under the modified terms of the loans and continues to classify these loans as performing. Non-performing loans with a combined recorded investment of $255.6 million were also modified during the year ended December 31, 2012 and continued to be classified as non-performing subsequent to modification. Included in this balance was a loan with a recorded investment of $181.5 million prior to modification, for which the Company agreed to reduce the outstanding principal balance and recorded charge-offs totaling $45.5 million, and also reduce the loan's interest rate. The remaining non-performing loans were granted maturity extensions ranging from one month to seven months and the interest rate was reduced on one loan. Troubled debt restructurings that occurred during the year ended December 31, 2011 included the modifications of performing loans with a combined recorded investment of $129.2 million. The modified terms of these loans granted maturity extensions ranging from three months to five years and included conditional extension options in certain cases dependent on borrower-specific performance hurdles. The Company reduced the rate on loans with a combined recorded investment of $59.5 million from a combined weighted average rate of 6.2% to 4.1%. In each case, the Company believed the borrowers could perform under the modified terms of the loans and classified these loans as performing after the modification. One of these loans subsequently defaulted. Non-performing loans with a combined recorded investment of $62.0 million were also modified during the year ended December 31, 2011 and continued to be classified as non-performing subsequent to modification. Included in this balance was a loan with a recorded investment of $46.1 million, for which the Company granted a maturity extension of six months while also reducing the loan's interest rate. The Company also extended a discounted payoff option on another loan that was classified as non-performing. Generally when granting concessions, the Company will seek to protect its position by requiring incremental pay downs, additional collateral or guarantees and in some cases lookback features or equity kickers to offset concessions granted should conditions impacting the loan improve. The Company's determination of credit losses is impacted by troubled debt restructurings whereby loans that have gone through troubled debt restructurings are considered impaired, assessed for specific reserves, and are not included in the Company's assessment of general loan loss reserves. Loans previously restructured under troubled debt restructurings that subsequently default are reassessed to incorporate the Company's current assumptions on expected cash flows and additional provision expense is recorded to the extent necessary. As of December 31, 2012, the Company had $21.6 million of unfunded commitments associated with modified loans considered troubled debt restructurings.

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