INVESTMENTS IN REAL ESTATE

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INVESTMENTS IN REAL ESTATE	12 Months Ended
	Dec. 31, 2012
Investments In Real Estate
INVESTMENTS IN REAL ESTATE	7.  INVESTMENTS IN REAL ESTATE   In the year ended December 31, 2012, Newcastle completed three acquisitions of senior living assets as follows:   On July 18, 2012, Newcastle completed the acquisition of eight senior housing facilities (the “BPM” Portfolio) from entities owned and managed by Walter C. Bowen for an aggregate purchase price of approximately $143.3 million plus acquisition-related costs. These assets comprise more than 800 beds in senior living facilities located in California, Oregon, Utah, Arizona and Idaho.    On November 1, 2012, Newcastle completed the acquisition of three senior housing facilities (the “Utah” Portfolio) from Retirement Place, Inc. for an aggregate purchase price of approximately $22.6 million plus acquisition-related costs. These assets comprise more than 350 beds in senior living facilities located in Utah.   On December 27, 2012, Newcastle completed the acquisition of a senior housing facility (the “Courtyards” Portfolio) from Courtyards of River Park, Ltd. for an aggregate purchase price of approximately $21.5 million plus acquisition-related costs. This asset comprises more than 200 beds in a senior living facility located in Texas.   In connection with the acquisitions of the senior living assets described above, the assets acquired and the liabilities assumed were recorded at fair value. A summary of the initial recording of each of the above acquisitions is as follows:       At Acquisition       BPM     Utah     Courtyards     Total   Investment in real estate   $ 126,201     $ 18,466     $ 19,400     $ 164,067   Resident lease intangibles     17,099       3,512       2,100       22,711   Other intangibles     -       600       -       600   Prepaid expenses and other assets     110       122       56       288   Accounts payable, accrued expenses and other payables     (1,834 )     (11 )     (136 )     (1,981 )       141,576       22,689       21,420       185,685                                     Mortgage notes payable     (88,400 )     (16,000 )     (16,125 )     (120,525 ) Net cash paid for acquisition   $ 53,176     $ 6,689     $ 5,295     $ 65,160   Acquisition related costs (A)   $ 3,625     $ 869     $ 395     $ 4,889     (A)  Acquisition related costs are included within General and Administrative Expense on the income statement.   The following table sets forth certain information regarding the investments in real estate at December 31, 2012:         Initial Cost           Gross Carrying Amount (B) (F)                                       Costs                                                               Furniture,     Capitalized Subsequent                       Furniture,           Accumulated   Property Type                 Building     Fixtures and     to                 Building     Fixtures and           Depreciation   (A) City, State   Land     Building     Improvements     Equipment     Acquisition     Land     Building     Improvements     Equipment     Total     (B)(C)                                                                         Senior Living Facilities:                                                                   AL/MC Scottsdale, AZ   $ 2,307     $ 16,845     $ 146     $ 101     $ 30     $ 2,307     $ 16,845     $ 176     $ 101     $ 19,429     $ (217 ) AL/MC Citrus Heights, CA     831       3,097       87       59       4       831       3,097       105       45       4,078       (51 ) AL/MC Santa Cruz, CA     2,255       20,971       225       58       38       2,255       20,971       278       41       23,545       (273 ) AL/MC Clovis, CA     1,133       16,835       159       45       7       1,133       16,835       165       45       18,178       (209 ) IL/AL/MC Boise, ID     1,465       13,229       405       58       44       1,465       13,229       468       40       15,202       (186 ) MC Corvallis, OR     1,060       4,915       135       8       15       1,060       4,915       148       10       6,133       (64 ) AL/MC Eugene, OR     935       20,431       364       91       54       935       20,431       450       58       21,874       (267 ) AL/MC Cottonwood Heights, UT     1,496       16,201       197       58       26       1,496       16,201       207       74       17,978       (206 ) AL/MC Bountiful, UT     570       9,505       53       50       39       570       9,505       57       85       10,217       (46 ) AL Taylorsville, UT     1,111       3,042       84       39       18       1,111       3,042       86       55       4,294       (18 ) IL/AL/MC Salt Lake City, UT     700       3,262       35       15       21       700       3,262       39       31       4,032       (15 ) IL/AL Fort Worth, TX     2,130       16,343       254       672       -       2,130       16,343       254       672       19,399       (6 )                                                                                             Subtotal Senior Living Facilities   $ 15,993     $ 144,676     $ 2,144     $ 1,254     $ 296     $ 15,993     $ 144,676     $ 2,433     $ 1,257     $ 164,359     $ (1,558 )                                                                                             Other Operating Real Estate (E) (G)                                                                                         Office Building Beavercreek, OH   $ 386     $ 2,287     $ -     $ -     $ 394     $ 364     $ 2,170     $ 370     $ -     $ 2,904     $ (701 ) Office Building Beavercreek, OH     401       2,326       -       -       175       381       2,268       97       -       2,746       (476 ) Office Building Beavercreek, OH     382       2,242       -       -       458       361       2,150       359       -       2,870       (671 )                                                                                             Subtotal Other Operating Real Estate   $ 1,169     $ 6,855     $ -     $ -     $ 1,027     $ 1,106     $ 6,588     $ 826     $ -     $ 8,520     $ (1,848 )                                                                                             Total     $ 17,162     $ 151,531     $ 2,144     $ 1,254     $ 1,323     $ 17,099     $ 151,264     $ 3,259     $ 1,257     $ 172,879     $ (3,406 )           Year     No. of Beds/                   Year   Constructed/     Net Rentable     Ending         Property Type   Acquired   Renovated     Sq. Ft.     Occupancy         (A) City, State (D)   (D)     (D)     (D)     Encumbrances                                 Senior Living Facilities:                           AL/MC Scottsdale, AZ  2012     1999/2005       107       75.7%     $ 12,600   AL/MC Citrus Heights, CA  2012     1997/2011       78       93.6%       2,940   AL/MC Santa Cruz, CA  2012     1990/NA       125       95.2%       17,220   AL/MC Clovis, CA  2012     1998/2007       122       92.6%       11,700   IL/AL/MC Boise, ID  2012     1997/2011       121       95.0%       12,960   MC Corvallis, OR  2012     1999/NA       48       89.6%       3,020   AL/MC Eugene, OR  2012     1998/NA       115       91.3%       15,480   AL/MC Cottonwood Heights, UT  2012     2001/NA       115       89.6%       12,480   AL/MC Bountiful, UT  2012     1978/2000       147       83.0%       10,024   AL Taylorsville, UT  2012     1976/1994       105       88.6%       3,341   IL/AL/MC Salt Lake City, UT  2012     1984/2007       106       72.6%       2,635   IL/AL Fort Worth, TX  2012     1986/NA       221       90.0%       16,125                                         Subtotal Senior Living Facilities                             $ 120,525                                         Other Operating Real Estate (E) (G)                                   Office Building Beavercreek, OH 2006     1984/2006       55,024 Sq. Ft.       82.8%     $ -   Office Building Beavercreek, OH 2006     1985/2006       29,916 Sq. Ft.       100.0%       -   Office Building Beavercreek, OH 2006     1987/2006       45,500 Sq. Ft.       100.0%       -                                         Subtotal Other Operating Real Estate                             $ -                                         Total                               $ 120,525     (A) AL represents assisted living; MC represents memory care; IL represents independent living. (B) The following is a rollforward of the gross carrying amount and accumulated depreciation of real estate for the years ended December 31, 2012, 2011 and 2010.       Year ended December 31,       2012     2011     2010   Gross Carrying Amount                   Balance at beginning of year   $ -     $ -     $ -   Additions:                         Acquisitions of real estate     164,067       -       -   Improvements     296       -       -   Transferred from operating real estate held for sale     8,520       -       -   Disposals:                         Disposal of long-lived assets     (4 )     -       -   Balance at end of year   $ 172,879     $ -     $ -                             Accumulated Depreciation                         Balance at beginning of year   $ -     $ -     $ -   Additions:                         Depreciation expense     (2,750 )     -       -   Transferred from assets held for sale     (657 )     -       -   Disposals:                         Disposal of long-lived assets     1       -       -   Balance at end of year   $ (3,406 )   $ -     $ -     (C) Depreciation is calculated on a straight line basis using the following estimated useful lives:       Estimated       Useful Lives   Land    N/A   Buildings   40 years   Building Improvements   3-10 years   Furniture, Fixtures and Equipment   3-5 years     (D) Unaudited. (E) During the year ended December 31, 2012, Newcastle reclassified the above properties as held for use based on the decision not to proceed with the planned disposition. The decision to withdraw the Beavercreek, Ohio properties from held for sale was made as management believes that the best value can now be obtained through a hold strategy. As a result, the operating results relating to the properties in Beavercreek, Ohio has been reclassified as part of income from continuing operations for the year ended December 31, 2012 and the accompanying comparative income statements for the years ended December 31, 2011 and December 31, 2010.   The following table summarizes the financial information for the Beavercreek properties reclassified as held for use:       Year Ended December 31,       2012     2011     2010   Rental income   $ 2,049     $ 1,899     $ 1,708                             Propertiy operating expense   $ 1,404     $ 1,110     $ 1,283   Depreciation and amortization     1,191       12       79   Other operating expense     11       27       11   Total expense   $ 2,606     $ 1,149     $ 1,373                             Impairment     -       433       -   Net income (loss)   $ (557 )   $ 317     $ 335     (F) The aggregate United States federal income tax basis for Newcastle’s operating real estate at December 31, 2012 was approximately $190.1 million. (G) The other operating real estate was pledged as collateral in one of Newcastle’s non-recourse financing structures at December 31, 2012.     The following is a reconciliation of operating real estate held for sale:       Year Ended December 31,       2012     2011     2010   Operating real estate held for sale                   Balance at beginning of year   $ 7,741     $ 8,776     $ 9,966   Impairment     -       (433 )     (260 ) Leasing commission capitalized     122       -       -   Amortization of leasing commissions     -       (13 )     (90 ) Proceeds from sale of real estate held for sale     -       (650 )     (840 ) Gain on sale     -       61       -   Transferred to investments in real estate (held for use)     (7,863 )     -       -   Balance at end of year   $ -     $ 7,741     $ 8,776     The following is a schedule of the future minimum rental payments to be received under non-cancelable operating leases for the office buildings in Beavercreek, Ohio:   2013   $ 1,414   2014     1,328   2015     882   2016     819   2017     819   Thereafter     -   Total   $ 5,262     The operating leases relating to Newcastle’s senior living real estate are generally cancelable with a 30-day notice.   The following table summarizes the financial information for the discontinued operations relating to properties sold:       Year Ended December 31,       2012     2011     2010                       Rental income   $ -     $ 136     $ 427   Expenses     66       208       537   Impairment     -       -       260   Net gain on sale     -       61       -   Other income     (2 )     -       27   Net income (loss)   $ (68 )   $ (11 )   $ (343 )   No income tax related to discontinued operations was recorded for the years ended December 31, 2012, 2011 or 2010.