SEGMENT REPORTING AND VARIABLE INTEREST ENTITIES

v2.4.0.8

SEGMENT REPORTING AND VARIABLE INTEREST ENTITIES	6 Months Ended
	Jun. 30, 2014
Segment Reporting [Abstract]
SEGMENT REPORTING AND VARIABLE INTEREST ENTITIES	4.    SEGMENT REPORTING AND VARIABLE INTEREST ENTITIES   Newcastle conducts its business through the following segments: (i) investments in senior housing properties (“senior housing”), (ii) debt investments financed with collateralized debt obligations (“CDOs”), (iii) other debt investments (“other debt”), (iv) investment in golf properties and facilities (“golf”) and (v) corporate. With respect to the CDOs and other debt segments, Newcastle is generally entitled to receive net cash flows from these structures on a periodic basis.   The corporate segment consists primarily of interest income on short term investments, general and administrative expenses, interest expense on the junior subordinated notes payable and management fees pursuant to the Management Agreement.   Summary financial data on Newcastle's segments is given below, together with reconciliation to the same data for Newcastle as a whole:   Senior   Debt Investments (A)           Discontinued       Housing (A)   CDOs   Other Debt (B)   Golf   Corporate   Operations   Total Six Months Ended June 30, 2014                           Interest income $ —   $ 51,319   $ 29,353   $ 74   $ 35   $ —   $ 80,781 Inter-segment elimination —   (4,436 )   —   —   —   —   (4,436 ) Interest income, net —   46,883   29,353   74   35   —   76,345 Interest expense 27,294   12,109   23,001   9,884   1,908   —   74,196 Inter-segment elimination —   —   (1,635 )   (2,801 )   —   —   (4,436 ) Interest expense, net 27,294   12,109   21,366   7,083   1,908   —   69,760 Net interest income (expense) (27,294 )   34,774   7,987   (7,009 )   (1,873 )   —   6,585 Impairment (reversal) —   1,958   814   —   —   —   2,772 Operating revenues 117,508   —   1,104   146,663   —   —   265,275 Other income (loss) (23 )   32,895   24,630   (11 )   —   —   57,491 Loan and security servicing expense —   310   955   —   —   —   1,265 Property operating expenses 47,573   —   511   —   —   —   48,084 Operating expenses - golf (C) —   —   —   118,914   —   —   118,914 Repairs and maintenance expenses - golf —   —   —   4,602   —   —   4,602 Cost of sales - golf —   —   —   14,763   —   —   14,763 General and administrative expense 1,701   —   1,874   459   3,725   —   7,759 Acquisition and transaction expenses 8,808   —   —   1,503   775   —   11,086 Management fee to affiliate 4,323   —   —   —   11,189   —   15,512 Depreciation and amortization 46,024   —   113   15,179   74   —   61,390 Income tax expense 691   —   —   144   —   —   835 Income (loss) from continuing operations (18,929 )   65,401   29,454   (15,921 )   (17,636 )   —   42,369 Income (loss) from discontinued operations, net of tax —   —   —   —   —   (5,351 )   (5,351 ) Net income (loss) (18,929 )   65,401   29,454   (15,921 )   (17,636 )   (5,351 )   37,018 Preferred dividends —   —   —   —   (2,790 )   —   (2,790 ) Net loss attributable to noncontrolling interests —   —   —   168   —   522   690 Income (loss) applicable to common stockholders $ (18,929 )   $ 65,401   $ 29,454   $ (15,753 )   $ (20,426 )   $ (4,829 )   $ 34,918   Senior   Debt Investments (A)           Discontinued       Housing (A)   CDOs   Other Debt (B)   Golf   Corporate   Operations   Total Three Months Ended June 30, 2014                           Interest income $ —   $ 20,596   $ 12,401   $ 34   $ 25   $ —   $ 33,056 Inter-segment elimination —   (3,163 )   —   —   —   —   (3,163 ) Interest income, net —   17,433   12,401   34   25   —   29,893 Interest expense 13,592   5,983   10,338   6,202   953   —   37,068 Inter-segment elimination —   —   (362 )   (2,801 )   —   —   (3,163 ) Interest expense, net 13,592   5,983   9,976   3,401   953   —   33,905 Net interest income (expense) (13,592 )   11,450   2,425   (3,367 )   (928 )   —   (4,012 ) Impairment (reversal) —   1,526   —   —   —   —   1,526 Operating revenues 59,698   —   563   83,385   —   —   143,646 Other income (loss) (22 )   19,343   22,375   (11 )   —   —   41,685 Loan and security servicing expense —   154   254   —   —   —   408 Property operating expenses 24,053   —   227   —   —   —   24,280 Operating expenses - golf (C) —   —   —   63,094   —   —   63,094 Repairs and maintenance expenses - golf —   —   —   2,084   —   —   2,084 Cost of sales - golf —   —   —   8,807   —   —   8,807 General and administrative expense 1,493   —   1,874   153   1,629   —   5,149 Acquisition and transaction expenses 3,368   —   —   728   388   —   4,484 Management fee to affiliate 2,179   —   —   —   5,296   —   7,475 Depreciation and amortization 23,188   —   57   7,749   37   —   31,031 Income tax expense 536   —   —   4   —   —   540 Income (loss) from continuing operations (8,733 )   29,113   22,951   (2,612 )   (8,278 )   —   32,441 Income (loss) from discontinued operations, net of tax —   —   —   —   —   (46 )   (46 ) Net income (loss) (8,733 )   29,113   22,951   (2,612 )   (8,278 )   (46 )   32,395 Preferred dividends —   —   —   —   (1,395 )   —   (1,395 ) Net loss attributable to noncontrolling interests —   —   —   29   —   —   29 Income (loss) applicable to common stockholders $ (8,733 )   $ 29,113   $ 22,951   $ (2,583 )   $ (9,673 )   $ (46 )   $ 31,029   Senior   Debt Investments (A)           Discontinued       Housing (A)   CDOs   Other Debt (B)   Golf   Corporate   Operations   Total June 30, 2014                           Investments $ 1,651,251   $ 651,765   $ 457,766   $ 350,272   $ —   $ —   $ 3,111,054 Inter-segment elimination —   (38,213 )   —   —   —   —   (38,213 ) Investments, net 1,651,251   613,552   457,766   350,272   —   —   3,072,841 Cash and restricted cash 47,539   1,118   489   9,526   22,953   —   81,625 Other assets 71,111   1,959   1,250   35,113   105   —   109,538 Total assets 1,769,901   616,629   459,505   394,911   23,058   —   3,264,004 Debt 1,104,182   425,346   435,182   188,791   51,234   —   2,204,735 Inter-segment elimination —   —   (6,000 )   (32,213 )   —   —   (38,213 ) Debt, net 1,104,182   425,346   429,182   156,578   51,234   —   2,166,522 Other liabilities 79,577   7,671   1,261   175,453   41,917   —   305,879 Total liabilities 1,183,759   433,017   430,443   332,031   93,151   —   2,472,401 Preferred stock —   —   —   —   61,583   —   61,583 Noncontrolling interests —   —   —   198   —   —   198 GAAP book value $ 586,142   $ 183,612   $ 29,062   $ 62,682   $ (131,676 )   $ —   $ 729,822                             Additions to investments in real estate $ 206,181   $ —   $ 32   $ 9,670   $ —   $ —   $ 215,883   Senior   Debt Investments (A)           Discontinued       Housing (A)   CDOs   Other Debt (B)   Golf   Corporate   Operations   Total Six Months Ended June 30, 2013                           Interest income $ —   $ 68,553   $ 57,432   $ —   $ 102   $ —   $ 126,087 Inter-segment elimination —   (1,931 )   —   —   —   —   (1,931 ) Interest income, net —   66,622   57,432   —   102   —   124,156 Interest expense 2,478   13,962   28,293   —   1,906   —   46,639 Inter-segment elimination —   —   (1,931 )   —   —   —   (1,931 ) Interest expense, net 2,478   13,962   26,362   —   1,906   —   44,708 Net interest income (expense) (2,478 )   52,660   31,070   —   (1,804 )   —   79,448 Impairment (reversal) —   11,986   (6,012 )   —   —   —   5,974 Operating revenues 26,510   —   1,003   —   —   —   27,513 Other income (loss) 120   11,820   1,920   —   —   —   13,860 Loan and security servicing expense —   384   1,671   —   —   —   2,055 Property operating expenses 16,285   —   487   —   —   —   16,772 General and administrative expense 3,496   —   24   —   10,631   —   14,151 Management fee to affiliate 1,578   —   —   —   16,135   —   17,713 Depreciation and amortization 8,039   —   110   —   —   —   8,149 Income (loss) from continuing operations (5,246 )   52,110   37,713   —   (28,570 )   —   56,007 Income (loss) from discontinued operations —   —   —   —   —   35,729   35,729 Net income (loss) (5,246 )   52,110   37,713   —   (28,570 )   35,729   91,736 Preferred dividends —   —   —   —   (2,790 )   —   (2,790 ) Income (loss) applicable to common stockholders $ (5,246 )   $ 52,110   $ 37,713   $ —   $ (31,360 )   35,729   $ 88,946   Senior   Debt Investments (A)           Discontinued       Housing (A)   CDOs   Other Debt (B)   Golf   Corporate   Operations   Total Three Months Ended June 30, 2013                           Interest income   36,724   $ 27,134   —   $ 30   —   63,888 Inter-segment elimination —   (1,064 )   —   —   —   —   (1,064 ) Interest income, net —   35,660   27,134   —   30   —   62,824 Interest expense 1,246   6,826   14,036   —   954   —   23,062 Inter-segment elimination —   —   (1,064 )   —   —   —   (1,064 ) Interest expense, net 1,246   6,826   12,972   —   954   —   21,998 Net interest income (expense) (1,246 )   28,834   14,162   —   (924 )   —   40,826 Impairment (reversal) —   8,803   (5,602 )   —   —   —   3,201 Operating revenues 13,513   —   500   —   —   —   14,013 Other income (loss) 112   7,249   729   —   —   —   8,090 Loan and security servicing expense —   188   833   —   —   —   1,021 Property operating expenses 8,169   —   240   —   —   —   8,409 General and administrative expense 1,887   —   8   —   8,043   —   9,938 Management fee to affiliate 799   —   —   —   7,349   —   8,148 Depreciation and amortization 4,016   —   54   —   —   —   4,070 Income (loss) from continuing operations (2,492 )   27,092   19,858   —   (16,316 )   —   28,142 Income (loss) from discontinued operations —   —   —   —   —   25,581   25,581 Net income (loss) (2,492 )   27,092   19,858   —   (16,316 )   25,581   53,723 Preferred dividends —   —   —   —   (1,395 )   —   (1,395 ) Income (loss) applicable to common stockholders $ (2,492 )   $ 27,092   $ 19,858   $ —   $ (17,711 )   $ 25,581   $ 52,328 (A) Assets held within non-recourse structures, including all of the assets in the senior housing and CDO segments, 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:   June 30, 2014   Investments   Debt Non-Recourse OutstandingFace Amount   CarryingValue   OutstandingFace Amount*   CarryingValue* Subprime mortgage loans subject to call options $ 406,217   $ 406,217   $ 406,217   $ 406,217 Operating real estate N/A   6,515   6,000   6,000 Subtotal 406,217   412,732   412,217   412,217 Other               Unlevered real estate securities 168,201   9,912   —   — Other investments N/A   6,319   —   — Residential mortgage loans 39,785   28,803   22,965   22,965   $ 614,203   $ 457,766   $ 435,182   $ 435,182 *An aggregate face amount of $6.0 million (carrying value of $6.0 million) of debt represents intersegment financing, which is eliminated upon consolidation. (C) Operating expenses-golf includes rental expenses recorded under operating leases for carts and equipment in the amount of $1.4 million and $2.7 million for the three and six months ended June 30, 2014, respectively.   Variable Interest Entities (“VIEs”)   The VIEs in which Newcastle has a significant interest include Newcastle’s CDOs, in which Newcastle has been determined to be the primary beneficiary and therefore consolidates them (with the exception of CDO V), since it has the power to direct the activities that most significantly impact the CDOs’ economic performance and would absorb a significant portion of their expected losses and receive a significant portion of their expected residual returns. Newcastle’s CDOs are held in special purpose entities whose debt is treated as non-recourse secured borrowings of Newcastle.   Newcastle’s subprime securitizations and CDO V are also considered VIEs, but Newcastle does not control the decisions that most significantly impact their economic performance and, no longer receives a significant portion of their returns, and therefore does not consolidate them.   In addition, Newcastle’s investments in RMBS, commercial mortgage backed securities (“CMBS”), CDO securities and real estate related and other loans may be deemed to be variable interests in VIEs, depending on their structure. Newcastle monitors these investments and analyzes the potential need to consolidate the related securitization entities pursuant to the VIE consolidation requirements. These analyses require considerable judgment in determining whether an entity is a VIE and determining the primary beneficiary of a VIE since they involve subjective determinations of significance, with respect to both power and economics. The result could be the consolidation of an entity that otherwise would not have been consolidated or the de-consolidation of an entity that otherwise would have been consolidated.    As of June 30, 2014, Newcastle has not consolidated these potential VIEs. This determination is based, in part, on the assessment that Newcastle does not have the power to direct the activities that most significantly impact the economic performance of these entities, such as if Newcastle owned a majority of the currently controlling class. In addition, Newcastle is not obligated to provide, and has not provided, any financial support to these entities.   Newcastle had variable interests in the following unconsolidated VIEs at June 30, 2014, in addition to the subprime securitizations which are described in Note 6: Entity   Gross Assets (A)   Debt (A) (B)   Carrying Value of Newcastle's Investment (C) Newcastle CDO V   $ 143,578   $ 170,874   $ 5,973 (A) Face amount. (B) Newcastle CDO V includes $40.8 million face amount of debt owned by Newcastle with a carrying value of $6.0 million at June 30, 2014. (C) This amount represents Newcastle’s maximum exposure to loss from this entity.