Loans Receivable, net

The following is a summary of the Company's loans receivable by class ($ in thousands):



	As of
Type of Investment	March 31, 2013			December 31, 2012
Senior mortgages	$	1,580,632		$	1,751,256
Subordinate mortgages	113,754			152,737
Corporate/Partnership loans	410,065			450,491
Total gross carrying value of loans(1)	$	2,104,451		$	2,354,484
Reserves for loan losses	(521,795		)	(524,499		)
Total loans receivable, net	$	1,582,656		$	1,829,985

Explanatory Note:

_______________________________________________________________________________


(1)	The Company's recorded investment in loans as of March 31, 2013 and December 31, 2012, was $2.11 billion and $2.36 billion, respectively, which consists of total gross carrying value of loans plus accrued interest of $8.5 million and $9.8 million, for the same two periods, respectively.

During the three months ended March 31, 2013, the Company funded $13.3 million of loans and received principal repayments of $193.3 million. During the same period, the Company sold loans with a total carrying value of $38.3 million, for which it recorded net realized losses of $0.6 million. Gains and losses on sales of loans are reported in "Other income" on the Company's Consolidated Statements of Operations.

During the three months ended March 31, 2013, through a newly formed joint venture, the Company acquired, via foreclosure, title to a property previously serving as collateral on a loan receivable. The acquisition was accounted for at fair value whereby the assets acquired were $27.2 million which approximated the Company's previous loan balance and non-controlling partner's interest in the venture. This property was recorded as "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 Three Months Ended March 31,
	2013			2012
Reserve for loan losses at beginning of period	$	524,499		$	646,624
Provision for loan losses	10,206			17,500
Charge-offs	(12,910		)	(96,945		)
Reserve for loan losses at end of period	$	521,795		$	567,179

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 March 31, 2013
Loans	$	1,041,847		$	1,055,342		$	15,574		$	2,112,763
Less: Reserve for loan losses	(486,379		)	(30,900		)	(4,516		)	(521,795		)
Total	$	555,468		$	1,024,442		$	11,058		$	1,590,968
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

Explanatory Notes:

_______________________________________________________________________________

(1)

The carrying value of these loans include unamortized discounts, premiums, deferred fees and costs aggregating to a net discount of $3.5 million and $4.0 million as of March 31, 2013 and December 31, 2012, 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 $4.1 million and $3.8 million as of March 31, 2013 and December 31, 2012, 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 $0.1 million as of March 31, 2013 and December 31, 2012, respectively. These loans had cumulative principal balances of $15.9 million and $58.8 million, as of March 31, 2013 and December 31, 2012, 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
	March 31, 2013			December 31, 2012
	Performing Loans		Weighted Average Risk Ratings	Performing Loans		Weighted Average Risk Ratings
Senior mortgages	$	823,869	2.70	$	840,593	2.75
Subordinate mortgages	61,236		3.07	99,698		2.27
Corporate/Partnership loans	403,016		3.61	444,772		3.69
Total	$	1,288,121	3.00	$	1,385,063	3.01

As of March 31, 2013, 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	$	840,666	$	3,138	$	740,800	$	743,938	$	1,584,604
Subordinate mortgages	61,236		—		53,797		53,797		115,033
Corporate/Partnership loans	403,016		—		10,110		10,110		413,126
Total	$	1,304,918	$	3,138	$	804,707	$	807,845	$	2,112,763

Impaired Loans—The Company's recorded investment in impaired loans, presented by class, were as follows ($ in thousands)(1):



	As of March 31, 2013							As of December 31, 2012
	Recorded Investment		Unpaid Principal Balance		Related Allowance			Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Senior mortgages	$	18,711	$	18,591	$	—		$	108,077	$	107,850	$	—
Corporate/Partnership loans	10,110		10,160		—			10,110		10,160		—
Subtotal	$	28,821	$	28,751	$	—		$	118,187	$	118,010	$	—
With an allowance recorded:
Senior mortgages	$	903,190	$	902,077	$	(442,256	)	$	918,975	$	918,496	$	(442,760	)
Subordinate mortgages	53,797		53,260		(39,579		)	53,979		53,679		(39,579		)
Corporate/Partnership loans	61,556		61,674		(9,060		)	63,096		63,246		(9,060		)
Subtotal	$	1,018,543	$	1,017,011	$	(490,895	)	$	1,036,050	$	1,035,421	$	(491,399	)
Total:
Senior mortgages	$	921,901	$	920,668	$	(442,256	)	$	1,027,052	$	1,026,346	$	(442,760	)
Subordinate mortgages	53,797		53,260		(39,579		)	53,979		53,679		(39,579		)
Corporate/Partnership loans	71,666		71,834		(9,060		)	73,206		73,406		(9,060		)
Total	$	1,047,364	$	1,045,762	$	(490,895	)	$	1,154,237	$	1,153,431	$	(491,399	)

Explanatory Note:

_______________________________________________________________________________

(1)

All of the Company's non-accrual loans are considered impaired and included in the table above. In addition, as of March 31, 2013 and December 31, 2012, certain loans modified through troubled debt restructurings with a recorded investment of $222.7 million and $175.0 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 Three Months Ended March 31,
	2013				2012
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Senior mortgages	$	63,394	$	844	$	212,803	$	407
Corporate/Partnership loans	10,110		120		10,110		—
Subtotal	$	73,504	$	964	$	222,913	$	407
With an allowance recorded:
Senior mortgages	$	911,082	$	506	$	1,147,091	$	1,240
Subordinate mortgages	53,888		—		50,345		—
Corporate/Partnership loans	62,326		78		62,959		80
Subtotal	$	1,027,296	$	584	$	1,260,395	$	1,320
Total:
Senior mortgages	$	974,476	$	1,350	$	1,359,894	$	1,647
Subordinate mortgages	53,888		—		50,345		—
Corporate/Partnership loans	72,436		198		73,069		80
Total	$	1,100,800	$	1,548	$	1,483,308	$	1,727

Troubled Debt Restructurings—During the three months ended March 31, 2013 and 2012, 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 Three Months Ended March 31,
	2013					2012
	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	1	$	72,674	$	65,000	5	$	305,780	$	260,307

During the three months ended March 31, 2013, the Company restructured one non-performing loan with a recorded investment of $72.7 million. The Company received a $13.3 million paydown and accepted a discounted payoff option on this loan, with final payment expected to be made in July 2013, subject to conditional extension options, and the loan was reclassified from non-performing to performing status as the Company believes the borrower can perform under the modified terms of the agreement.

Troubled debt restructurings that occurred during the three months ended March 31, 2012 included the modifications of performing loans with a combined recorded investment of $58.1 million. The modified terms of these loans granted maturity extensions ranging from three months to one year 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 $247.7 million were also modified during the three months ended March 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 reduced 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.

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 March 31, 2013, the Company had $21.5 million of unfunded commitments associated with modified loans considered troubled debt restructurings.