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Other Investments | 12 Months Ended
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Dec. 31, 2014
Investments, All Other Investments [Abstract] |
Other Investments | Other Investments The Company's other investments and its proportionate share of results from equity method investments were as follows ($ in thousands):
| Carrying Value |  | Equity in Earnings
| As of December 31, |  | For the Years Ended December 31,
| 2014 |  | 2013 |  | 2014 |  | 2013 |  | 2012
Real estate equity investments | $ | 244,886 |  |  | $ | 62,205 |  |  | $ | 53,428 |  |  | $ | 2,753 |  |  | $ | 21,636 |
Madison Funds | 45,971 |  |  | 67,782 |  |  | 3,092 |  |  | 14,796 |  |  | 10,246 |
Other equity method investments(1)(2) | 30,415 |  |  | 45,954 |  |  | 35,172 |  |  | 3,332 |  |  | 4,614 |
Oak Hill Funds | 17,658 |  |  | 21,366 |  |  | 3,213 |  |  | 4,174 |  |  | 5,844 |
LNR | — |  |  | — |  |  | — |  |  | 16,465 |  |  | 60,669 |
Total equity method investments | 338,930 |  |  | 197,307 |  |  | $ | 94,905 |  |  | $ | 41,520 |  |  | $ | 103,009 |
Other | 15,189 |  |  | 9,902 |  |  |  |  |  |  |
Total other investments | $ | 354,119 |  |  | $ | 207,209 |  |  |  |  |  |  |
Explanatory Notes: _______________________________________________________________________________
(1) | During the year ended December 31, 2014, the Company recognized $23.4 million of earnings from equity method investments resulting from asset sales and a legal settlement by one of its equity method investees.
(2) | In conjunction with the sale of the Company's interests in Oak Hill Advisors, L.P. in 2011, the Company retained interests in its share of carried interest related to various funds. During the year ended December 31, 2014, the Company recognized $9.0 million of carried interest income.
Real Estate Equity Investments—During the year ended December 31, 2014, the Company partnered with a sovereign wealth fund to form a new unconsolidated entity in which the Company has a noncontrolling equity interest of approximately 51.9%. This entity is not a VIE and the Company does not have controlling interest due to substantive participating rights of its partner. The partners plan to contribute up to an aggregate $500 million of equity to acquire and develop net lease assets over time. The Company is responsible for sourcing new opportunities and managing the venture and its assets in exchange for a promote and management fee. Several of the Company's senior executives whose time is substantially devoted to the net lease venture own a total of 0.6% equity ownership in the venture via co-investment. These executives are also entitled to an amount equal to 50% of any promote payment received based on the 47.5% partner's interest. During the year ended December 31, 2014, the Company sold a net lease asset for net proceeds of $93.7 million, which approximated carrying value, to the venture. The Company also sold its 72% interest in a previously consolidated entity, which owned a net lease asset subject to a non-recourse mortgage of $26.0 million at the time of sale, to the venture for net proceeds of $10.1 million, which approximated carrying value. During the same period, the venture purchased a portfolio of 58 net lease assets for a purchase price of $200.0 million from a third party. As of December 31, 2014, the venture's carrying value of total assets was $348.1 million and the Company had a recorded equity interest in the venture of $125.4 million. During the year ended December 31, 2014, an unconsolidated entity for which the Company held a 50.0% noncontrolling equity interest sold all of its properties. As a result of the transaction, the Company received net proceeds of $48.1 million and recognized a gain of $33.3 million, which is included in "Earnings from equity method investments" in its Consolidated Statements of Operations. As of December 31, 2014 and 2013, the Company had an equity interest in the entity of $0.2 million and $16.4 million, respectively. During the year ended December 31, 2014, the Company contributed land to a newly formed unconsolidated entity in which the Company received an initial equity interest of 85.7%. This entity is a VIE and the Company does not have controlling interest due to shared power of the entity with its partner. As of December 31, 2014, the Company had a recorded equity interest of $9.4 million. Additionally, the Company committed to provide $45.7 million of mezzanine financing to the entity. As of December 31, 2014, the loan balance was $14.6 million and is included in "Loans receivable and other lending investments, net" on the Company's Consolidated Balance Sheets. During the year ended December 31, 2014, the Company and a consortium of co-lenders formed a new unconsolidated entity, in which the Company received an initial 15.7% equity interest, which acquired, via foreclosure sale, title to a land asset which previously served as collateral for a loan receivable held by the consortium. This entity is not a VIE and the Company does not have controlling interest in the entity as the Company's voting rights is based on its ownership percentage in the entity. As a result of the transaction, the Company recorded an additional provision of $2.8 million in "Provision for (recovery of) loan losses" in its Consolidated Statements of Operations. As of December 31, 2014, the Company had a recorded equity interest of $23.5 million. During the year ended December 31, 2013, the Company sold land for net proceeds of $21.4 million to a newly formed unconsolidated entity in which the Company had a preferred partnership interest and a 47.5% equity interest. This entity is a VIE and the Company does not have controlling interest due to shared power of the entity with its partner. The Company's proportionate share of the assets retained on a carryover basis on the date of sale was $10.6 million. The Company held a preferred partnership interest of $6.6 million, which was repaid and no longer outstanding at December 31, 2013. During 2014, the Company acquired an additional preferred partnership interest in the entity of $10.0 million and recognized $14.7 million of income related to sales activity, which is included in "Earnings from equity method investments" in its Consolidated Statements of Operations. As of December 31, 2014 and 2013, the Company had a recorded equity interest of $30.7 million and $5.5 million, respectively. During the year ended December 31, 2013, the Company contributed land to a newly formed unconsolidated entity in which the Company received an equity interest of 75.6%. As of December 31, 2014 and 2013, the Company had a recorded equity interest of $21.1 million and $18.0 million, respectively. In addition, during the year ended December 31, 2013, the Company contributed land to a newly formed unconsolidated entity in which the Company also received a 50.0% equity interest. As of December 31, 2014 and 2013, the Company had a recorded equity interest of $7.8 million and $3.5 million, respectively. These entities are VIEs and the Company does not have controlling interests due to shared power of the entities with its partners. As of December 31, 2014, the Company's other real estate equity investments included equity interests in real estate ventures ranging from 31% to 70%, comprised of investments of $13.2 million in operating properties and $13.8 million in land assets. As of December 31, 2013, the Company's real estate equity investments included $16.0 million in operating properties and $2.7 million in land assets. Madison Funds—As of December 31, 2014, the Company owned a 29.5% interest in Madison International Real Estate Fund II, LP, a 32.9% interest in Madison International Real Estate Liquidity Fund III, LP ("MIRELF III"), a 32.9% interest in Madison International Real Estate Liquidity Fund III AIV, LP ("MIRELF III AIV") and a 29.5% interest in Madison GP1 Investors, LP (collectively, the "Madison Funds"). The Madison Funds invest in ownership positions of entities that own real estate assets. The Company determined that these entities are VIEs and that the Company is not the primary beneficiary. Oak Hill Funds—As of December 31, 2014, the Company owned a 5.9% interest in OHA Strategic Credit Master Fund, L.P. ("OHASCF"). OHASCF was formed to acquire and manage a diverse portfolio of assets, investing in distressed, stressed and undervalued loans, bonds, equities and other investments. The Company determined that this entity is a VIE and that the Company is not the primary beneficiary. LNR—In July 2010, the Company acquired an ownership interest of approximately 24% in LNR Property Corporation ("LNR"). LNR is a servicer and special servicer of commercial mortgage loans and CMBS and a diversified real estate investment, finance and management company. In the transaction, the Company and a group of investors, including other creditors of LNR, acquired 100% of the common stock of LNR in exchange for cash and the extinguishment of existing senior notes of LNR's parent holding company (the "Holdco Notes"). The Company contributed $100.0 million aggregate principal amount of Holdco Notes and $100.0 million in cash in exchange for an equity interest of $120.0 million. Beginning in September 2012, the Company and other owners of LNR entered into negotiations with potential purchasers of LNR. After an extensive due diligence and negotiation process, the LNR owners entered into a definitive contract to sell LNR in January 2013 at a fixed sale price which, from the Company's perspective, reflected in part the Company's then-current expectations about the future results of LNR and potential volatility in its business. The definitive sale contract provided that LNR would not make cash distributions to its owners during the fourth quarter of 2012 through the closing of the sale. Notwithstanding the fixed terms of the contract, our investment balance in LNR increased due to equity in earnings recorded which resulted in our recognition of other than temporary impairment on our investment during the year ended December 31, 2013. In April 2013, the Company completed the sale of its 24% equity interest in LNR and received $220.3 million in net proceeds. Approximately $25.2 million of net proceeds, which were placed in escrow for potential indemnification obligations, were released to the Company in April 2014. The following table represents investee level summarized financial information for LNR ($ in thousands)(1):
| For the Period from October 1, 2012 to April 19, 2013 |  | For the Year Ended September 30, 2012
Income Statements |  |  |
Total revenue(2) | $ | 179,373 |  |  | $ | 332,902 |
Income tax (expense) benefit | (2,137 | ) |  | (6,731 | )
Net income attributable to LNR(3) | 113,478 |  |  | 253,039 |
iStar's ownership percentage | 24 | % |  | 24 | %
iStar's equity in earnings from LNR | $ | 45,375 |  |  | $ | 60,669 |
| For the Period from October 1, 2012 to April 19, 2013 |  | For the Year Ended September 30, 2012
Cash Flows |  |  |
Operating cash flows | $ | (127,075 | ) |  | $ | (85,909 | )
Cash flows from investing activities | (36,543 | ) |  | (55,686 | )
Cash flows from financing activities | 217,241 |  |  | 229,634 |
Net cash flows | 53,623 |  |  | 88,039 |
Cash distributions | — |  |  | 61,179 |
iStar's ownership percentage | 24 | % |  | 24 | %
Cash distributions received by iStar | $ | — |  |  | $ | 14,690 |
Explanatory Notes: _______________________________________________________________________________
(1) | The Company recorded its investment in LNR, which was sold in April 2013, on a one quarter lag. Therefore, the amounts in the Company's financial statements for the year ended December 31, 2013 was based on balances and results from LNR for the period from October 1, 2012 to April 19, 2013. The amounts in the Company's financial statements for the year ended December 31, 2012 are based on the balances and results from LNR for the year ended September 30, 2012.
(2) | LNR consolidates certain commercial mortgage-backed securities and collateralized debt obligation trusts that are considered VIEs (and for which it is the primary beneficiary), that have been included in the amounts presented above. Total revenue presented above includes $55.5 million and $95.4 million for the period from October 1, 2012 to April 19, 2013 and for the year ended September 30, 2012, respectively, of servicing fee revenue that is eliminated upon consolidation of the VIE's at the LNR level. This income is then added back through consolidation at the LNR level as an adjustment to income allocable to noncontrolling entities and has no net impact on net income attributable to LNR.
(3) | Subsequent to the sale of the Company's interest in LNR, LNR reported a reduction in their earnings of $66.2 million related to a purchase price allocation adjustment. The reduction was reflected in LNR's operations for the three months ended March 31, 2013, which resulted in a net loss for the period. Because the Company recorded its investment in LNR on a one quarter lag, the adjustment was reflected in the quarter ended June 30, 2013. There was no net impact on the Company's previously reported equity in earnings as the Company limited its proportionate share of earnings from LNR pursuant to the definitive sale agreement as described above.
The following table reconciles the activity related to the Company's investment in LNR for the three months ended March 31, 2013 and June 30, 2013, the six months ended December 31, 2013 and the year ended December 31, 2013 ($ in thousands):
| For the Three Months Ended March 31, 2013 |  | For the Three Months Ended June 30, 2013 |  | For the Six Months Ended December 31, 2013 |  | For the Year Ended December 31, 2013 |
Carrying value of LNR at beginning of period | $ | 205,773 |  |  | $ | 220,281 |  |  | $ | — |  |  | $ | 205,773 |  |
Equity in earnings of LNR for the period(1) | 45,375 |  |  | — |  |  | — |  |  | 45,375 |  | (a)
Balance before other than temporary impairment | 251,148 |  |  | 220,281 |  |  | — |  |  | 251,148 |  |
Other than temporary impairment(1) | (30,867 | ) |  | — |  |  | — |  |  | (30,867 | ) | (b)
Sales proceeds pursuant to contract | — |  |  | (220,281 | ) |  | — |  |  | (220,281 | ) |
Carrying value of LNR at end of period | 220,281 |  |  | — |  |  | — |  |  | — |  |
Explanatory Note: _______________________________________________________________________________
(1) | During the year ended December 31, 2013, the Company recorded an other than temporary impairment of $30.9 million. Subsequent to the sale of the Company's interest in LNR, LNR reported a reduction in their earnings of $66.2 million related to a purchase price allocation adjustment. The reduction was reflected in LNR's operations for the three months ended March 31, 2013, which resulted in a net loss for the period. Because the Company recorded its investment in LNR on a one quarter lag, the adjustment was reflected in the quarter ended June 30, 2013. There was no net impact on the Company's previously reported equity in earnings as the Company limited its proportionate share of earnings from LNR pursuant to the definitive sale agreement as described above.
For the year ended December 31, 2013, the amount that was recognized as income in the Company's Consolidated Statements of Operations is the sum of items (a) and (b), and $1.7 million of income recognized for the release of other comprehensive income related to LNR upon sale, or $16.5 million. Other Investments—As of December 31, 2014, the Company also had smaller investments in real estate related funds and other strategic investments in several other entities that were accounted for under the equity method or cost method. Summarized investee financial information—The following tables present the investee level summarized financial information of the Company's equity method investments, excluding LNR which is presented above ($ in thousands):
| Revenues |  | Expenses |  | Net Income Attributable to Parent Entities
For the Year Ended December 31, 2014 |  |  |  |  |
Alinda Infrastructure Fund I, L.P. ("Alinda")(1) | $ | 233,130 |  |  | $ | (15,433 | ) |  | $ | 217,697 |
Marina Palms, LLC ("Marina Palms") | 114,125 |  |  | (77,120 | ) |  | 37,005 |
OHASCF | 78,262 |  |  | (951 | ) |  | 77,311 |
Moor Park Real Estate Partners II L.P., Incorporated ("Moor Park") | 25,760 |  |  | (224 | ) |  | 25,536 |
MIRELF III | 20,293 |  |  | (1,401 | ) |  | 18,846 |
iStar Net Lease I LLC ("Net Lease Venture")(2) | 13,826 |  |  | (9,917 | ) |  | 3,691 |
Outlets at Westgate, LLC ("Westgate") | 13,118 |  |  | (9,618 | ) |  | 3,500 |
MIRELF III AIV | (1,194 | ) |  | (384 | ) |  | (1,578 | )
Other | 128,719 |  |  | (70,555 | ) |  | 58,202 |
Total | $ | 626,039 |  |  | $ | (185,603 | ) |  | $ | 440,210 |
| Revenues |  | Expenses |  | Net Income Attributable to Parent Entities
For the Year Ended December 31, 2013 |  |  |  |  |
Alinda(1) | $ | 123,447 |  |  | $ | (17,927 | ) |  | $ | 105,520 |
OHASCF | 72,313 |  |  | (1,642 | ) |  | 70,671 |
MIRELF III AIV | 26,348 |  |  | (1,167 | ) |  | 25,181 |
MIRELF III | 19,460 |  |  | (1,675 | ) |  | 17,739 |
Westgate | 12,447 |  |  | (8,889 | ) |  | 3,558 |
Moor Park | 1,373 |  |  | (304 | ) |  | 1,069 |
Marina Palms(3) | 73 |  |  | (3,525 | ) |  | (3,452 | )
Other | 29,052 |  |  | (42,504 | ) |  | (14,088 | )
Total | $ | 284,513 |  |  | $ | (77,633 | ) |  | $ | 206,198 |
For the Year Ended December 31, 2012 |  |  |  |  |
OHASCF | $ | 109,234 |  |  | $ | (2,700 | ) |  | $ | 106,534 |
Alinda(1) | 104,364 |  |  | (16,934 | ) |  | 87,430 |
MIRELF III | 13,490 |  |  | (3,894 | ) |  | 9,550 |
Westgate | 1,935 |  |  | (2,202 | ) |  | (267 | )
Moor Park | 1,225 |  |  | (435 | ) |  | 790 |
MIRELF III AIV | (12,762 | ) |  | (1,731 | ) |  | (14,493 | )
Other | 184,384 |  |  | (67,495 | ) |  | 115,416 |
Total | $ | 401,870 |  |  | $ | (95,391 | ) |  | $ | 304,960 |
Explanatory Notes: _______________________________________________________________________________
(1) | The Company recorded its 1% investment in Alinda on a quarter lag. Therefore, the amounts in the Company's financial statements for the years ended December 31, 2014, 2013 and 2012 were based on balances and results from Alinda for the years ended September 30, 2014, 2013 and 2012, respectively.
(2) | The Company began accounting for its investment in Net Lease Venture under the equity method of accounting on February 13, 2014. The amounts in the Company's financial statements for the year ended December 31, 2014 are based on the balances and results from Net Lease Venture for the period from February 13, 2014 to December 31, 2014.
(3) | The Company began accounting for its investment in Marina Palms under the equity method of accounting on April 17, 2013. The amounts in the Company's financial statements for the year ended December 31, 2013 are based on the balances and results from Marina Palms for the period from April 17, 2013 to December 31, 2013.
|  | As of December 31,
|  | 2014 |  | 2013
Balance Sheets |  |  |  |
Total assets |  | $ | 3,464,984 |  |  | $ | 2,980,737 |
Total liabilities |  | 479,298 |  |  | 303,100 |
Noncontrolling interests |  | 3,297 |  |  | 333 |
Total equity |  | 2,982,389 |  |  | 2,677,304 |

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