Drive Shack Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

SEGMENT REPORTING (Tables)

SEGMENT REPORTING (Tables)

9 Months Ended

Sep. 30, 2016

Summary financial data on Newcastle’s segments is given below, together with reconciliation to the same data for Newcastle as a whole:



	Debt Investments (A)
	CDOs			Other Debt (B)			Golf			Corporate			Total
Nine Months Ended September 30, 2016
Interest income	$	1,097		$	72,564		$	94		$	15		$	73,770
Interest expense	(491		)	(27,991		)	(8,703		)	(1,904		)	(39,089		)
Net interest income (expense)	606			44,573			(8,609		)	(1,889		)	34,681
Total impairment	110			3,454			—			—			3,564
Total operating revenues	—			—			229,804			—			229,804
Total other income (loss), net	82,130			4,782			(307		)	—			86,605
Loan and security servicing expense	30			40			—			—			70
Operating expenses - golf (C)	—			—			182,919			—			182,919
Operating expenses - golf, repairs and maintenance expenses	—			—			6,212			—			6,212
Cost of sales - golf	—			—			23,678			—			23,678
General and administrative expense	—			—			2,212			5,602			7,814
General and administrative expense - acquisition and transaction expenses (D)	—			—			2,093			371			2,464
Management fee to affiliate	—			—			—			8,027			8,027
Depreciation and amortization	—			—			19,250			—			19,250
Income tax expense	—			—			144			—			144
Income (loss) from continuing operations	82,596			45,861			(15,620		)	(15,889		)	96,948
Net income (loss)	82,596			45,861			(15,620		)	(15,889		)	96,948
Preferred dividends	—			—			—			(4,185		)	(4,185		)
Net income attributable to noncontrolling interests	—			—			(165		)	—			(165		)
Income (loss) applicable to common stockholders	$	82,596		$	45,861		$	(15,785	)	$	(20,074	)	$	92,598

Summary segment financial data (continued).



	Debt Investments (A)
	CDOs		Other Debt (B)			Golf			Corporate			Total
Three Months Ended September 30, 2016
Interest income	$	—	$	32,286		$	17		$	7		$	32,310
Interest expense	—		(9,405		)	(3,340		)	(393		)	(13,138		)
Net interest income (expense)	—		22,881			(3,323		)	(386		)	19,172
Total impairment	—		611			—			—			611
Total operating revenues	—		—			83,162			—			83,162
Total other income (loss), net	—		7,125			(15		)	—			7,110
Loan and security servicing expense	—		32			—			—			32
Operating expenses - golf (C)	—		—			65,101			—			65,101
Operating expenses - golf, repairs and maintenance expenses	—		—			1,926			—			1,926
Cost of sales - golf	—		—			8,250			—			8,250
General and administrative expense	—		—			665			1,936			2,601
General and administrative expense - acquisition and transaction expenses (D)	—		—			855			200			1,055
Management fee to affiliate	—		—			—			2,676			2,676
Depreciation and amortization	—		—			6,735			—			6,735
Income tax benefit	—		—			(38		)	—			(38		)
Income (loss) from continuing operations	—		29,363			(3,670		)	(5,198		)	20,495
Net income (loss)	—		29,363			(3,670		)	(5,198		)	20,495
Preferred dividends	—		—			—			(1,395		)	(1,395		)
Net income attributable to noncontrolling interests	—		—			(177		)	—			(177		)
Income (loss) applicable to common stockholders	$	—	$	29,363		$	(3,847	)	$	(6,593	)	$	18,923

Summary segment financial data (continued).



	Debt Investments (A)
	CDOs		Other Debt (B)		Golf			Corporate		Total
September 30, 2016
Investments	$	—	$	1,094,934	$	295,065		$	—	$	1,389,999
Cash and restricted cash	—		2,017		9,640			129,927		141,584
Other assets	—		867,921		37,359			76		905,356
Total assets	—		1,964,872		342,064			130,003		2,436,939
Debt, net	—		1,185,088		114,697			51,219		1,351,004
Other liabilities	—		666,490		157,705			4,092		828,287
Total liabilities	—		1,851,578		272,402			55,311		2,179,291
Preferred stock	—		—		—			61,583		61,583
Noncontrolling interests	—		—		(92		)	—		(92		)
Equity attributable to common stockholders	$	—	$	113,294	$	69,754		$	13,109	$	196,157

Additions to investments in real estate during the nine months ended September 30, 2016	$	—	$	—	$	15,883		$	—	$	15,883

Summary segment financial data (continued).



	Debt Investments (A)												Discontinued
	CDOs			Other Debt			Golf			Corporate			Operations		Eliminations			Total
Nine Months Ended September 30, 2015
Interest income	$	30,983		$	46,246		$	110		$	19		$	—	$	(3,005	)	$	74,353
Interest expense	(5,993		)	(28,789		)	(13,779		)	(2,836		)	—		3,005			(48,392		)
Inter-segment elimination	(3,005		)	—			3,005			—			—		—			—
Net interest income (expense)	21,985			17,457			(10,664		)	(2,817		)	—		—			25,961
Total impairment	12,569			4,975			—			—			—		—			17,544
Total operating revenues	—			—			226,493			—			—		—			226,493
Total other income (loss), net	30,271			(3,070		)	14,606			54			—		—			41,861
Loan and security servicing expense	249			6			—			—			—		—			255
Operating expenses - golf (C)	—			—			181,506			—			—		—			181,506
Operating expenses - golf, repairs and maintenance expenses	—			—			6,853			—			—		—			6,853
Cost of sales - golf	—			—			24,003			—			—		—			24,003
General and administrative expense	—			—			1,960			5,767			—		—			7,727
General and administrative expense - acquisition and transaction expenses (D)	—			60			1,239			50			—		—			1,349
Management fee to affiliate	—			—			—			8,017			—		—			8,017
Depreciation and amortization	—			—			20,983			—			—		—			20,983
Income tax expense	—			—			1,330			—			—		—			1,330
Income (loss) from continuing operations	39,438			9,346			(7,439		)	(16,597		)	—		—			24,748
Income from discontinued operations	—			—			—			—			646		—			646
Net income (loss)	39,438			9,346			(7,439		)	(16,597		)	646		—			25,394
Preferred dividends	—			—			—			(4,185		)	—		—			(4,185		)
Net loss attributable to non-controlling interests	—			—			217			—			—		—			217
Income (loss) applicable to common stockholders	$	39,438		$	9,346		$	(7,222	)	$	(20,782	)	$	646	$	—		$	21,426

Summary segment financial data (continued).



	Debt Investments (A)												Discontinued
	CDOs			Other Debt			Golf			Corporate			Operations		Total
Three Months Ended September 30, 2015
Interest income	$	1,375		$	21,587		$	38		$	10		$	—	$	23,010
Interest expense	(680		)	(9,617		)	(3,473		)	(945		)	—		(14,715		)
Net interest income (expense)	695			11,970			(3,435		)	(935		)	—		8,295
Total impairment	363			3,097			—			—			—		3,460
Total operating revenues	—			—			82,864			—			—		82,864
Total other income (loss), net	—			(2,893		)	14,834			46			—		11,987
Loan and security servicing expense	35			6			—			—			—		41
Operating expenses - golf (C)	—			—			65,518			—			—		65,518
Operating expenses - golf, repairs and maintenance expenses	—			—			2,466			—			—		2,466
Cost of sales - golf	—			—			8,842			—			—		8,842
General and administrative expense	—			—			919			1,946			—		2,865
General and administrative expense - acquisition and transaction expenses (D)	—			60			918			33			—		1,011
Management fee to affiliate	—			—			—			2,675			—		2,675
Depreciation and amortization	—			—			7,111			—			—		7,111
Income tax expense	—			—			1,257			—			—		1,257
Income (loss) from continuing operations	297			5,914			7,232			(5,543		)	—		7,900
Income from discontinued operations	—			—			—			—			7		7
Net income (loss)	297			5,914			7,232			(5,543		)	7		7,907
Preferred dividends	—			—			—			(1,395		)	—		(1,395		)
Net income attributable to non-controlling interests	—			—			(13		)	—			—		(13		)
Income (loss) applicable to common stockholders	$	297		$	5,914		$	7,219		$	(6,938	)	$	7	$	6,499

(A)

Assets held within non-recourse structures, including all of the assets in the CDO segment, are not available to satisfy obligations outside of such financings, except to the extent net cash flow distributions are received from such structures. Furthermore, creditors or beneficial interest holders of these structures generally have no recourse to the general credit of Newcastle. Therefore, the exposure to the economic losses from such structures generally is limited to invested equity in them and economically their book value cannot be less than zero. Therefore, impairment recorded in excess of Newcastle’s investment, which results in negative GAAP book value for a given non-recourse financing structure, cannot economically be incurred and will eventually be reversed through amortization, sales at gains, or as gains at the deconsolidation or termination of such non-recourse financing structure.


(B)	The following table summarizes the investments and debt in the Other Debt segment:



	September 30, 2016
	Investments				Debt
Non-Recourse	Outstanding Face Amount		Carrying Value		Outstanding Face Amount		Carrying Value
Subprime mortgage loans subject to call options	$	353,347	$	353,347	$	353,347	$	353,347
Other
Unlevered real estate securities (E)	12,464		3,430		—		—
Levered real estate securities (F)	632,206		663,559		831,741		831,741
Real estate related and other loans (G)	71,378		52,874		—		—
Other investments	N/A		21,724		—		—
	$	1,069,395	$	1,094,934	$	1,185,088	$	1,185,088


(C)	Operating expenses - golf includes rental expenses recorded under operating leases for carts and equipment in the amount of $0.9 million and $2.9 million for the three and nine months ended September 30, 2016, respectively, and $1.1 million and $3.4 million for the three and nine months ended September 30, 2015, respectively.


(D)	Includes all transaction related expenses.


(E)	Excludes 11 CDO securities with zero value, which had an aggregate face amount of $154.0 million.


(F)	These investments represent purchases that were traded on September 30, 2016 but settled on October 13, 2016. These debts represent repurchase agreements collateralized by sold investments that were traded on September 30, 2016 and settled on October 13, 2016.


(G)	Excludes two mezzanine loans with zero value, which had an aggregate face amount of $17.8 million and two corporate loans with zero value, which had an aggregate face amount of $45.7 million.

Schedule of other debt segment investments and debt

The following table summarizes the investments and debt in the Other Debt segment:



	September 30, 2016
	Investments				Debt
Non-Recourse	Outstanding Face Amount		Carrying Value		Outstanding Face Amount		Carrying Value
Subprime mortgage loans subject to call options	$	353,347	$	353,347	$	353,347	$	353,347
Other
Unlevered real estate securities (E)	12,464		3,430		—		—
Levered real estate securities (F)	632,206		663,559		831,741		831,741
Real estate related and other loans (G)	71,378		52,874		—		—
Other investments	N/A		21,724		—		—
	$	1,069,395	$	1,094,934	$	1,185,088	$	1,185,088


(C)	Operating expenses - golf includes rental expenses recorded under operating leases for carts and equipment in the amount of $0.9 million and $2.9 million for the three and nine months ended September 30, 2016, respectively, and $1.1 million and $3.4 million for the three and nine months ended September 30, 2015, respectively.


(D)	Includes all transaction related expenses.


(E)	Excludes 11 CDO securities with zero value, which had an aggregate face amount of $154.0 million.


(F)	These investments represent purchases that were traded on September 30, 2016 but settled on October 13, 2016. These debts represent repurchase agreements collateralized by sold investments that were traded on September 30, 2016 and settled on October 13, 2016.


(G)	Excludes two mezzanine loans with zero value, which had an aggregate face amount of $17.8 million and two corporate loans with zero value, which had an aggregate face amount of $45.7 million.