Drive Shack Inc. Current report filing

Current report filing

SEGMENT REPORTING AND VARIABLE INTEREST ENTITIES (Tables)

SEGMENT REPORTING AND VARIABLE INTEREST ENTITIES (Tables)

12 Months Ended

Dec. 31, 2012

Segment Reporting And Variable Interest Entities Tables

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

	Non-Recourse CDOs (A)			Unlevered CDOs (B)		Non-Recourse Senior Living			Non-Recourse Other (A)(C)			Recourse (D)			Unlevered Other (E)			Unlevered Excess MSRs			Corporate			Inter-segment Elimination (F)			Total
Year Ended December 31, 2012
Interest income	$	196,517		$	490	$	—		$	72,343		$	8,984		$	10,491		$	—		$	170		$	(6,044	)	$	282,951
Interest expense		56,607			—		1,688			51,278			2,582			—			—			3,813			(6,044	)		109,924
Net interest income (expense)		139,910			490		(1,688	)		21,065			6,402			10,491			—			(3,643	)		—			173,027
Impairment (reversal)		(7,381	)		—		—			4,119			—			(2,402	)		—			—			—			(5,664	)
Other revenues		—			—		18,026			2,049			—			—			—			—			—			20,075
Other income (loss)		259,688			337		(82	)		930			—			1,421			—			—			—			262,294
Property operating expenses		—			—		11,539			1,404			—			—			—			—			—			12,943
Depreciation and amortization		—			—		5,784			1,191			—			—			—			—			—			6,975
Other operating expenses		915			1		6,846			3,314			—			45			—			35,079			—			46,200
Income (loss) from continuing operations		406,064			826		(7,913	)		14,016			6,402			14,269			—			(38,722	)		—			394,942
Income (loss) from discontinued operations		—			—		—			—			—			(68	)		39,236			—			—			39,168
Net income (loss)		406,064			826		(7,913	)		14,016			6,402			14,201			39,236			(38,722	)		—			434,110
Preferred dividends		—			—		—			—			—			—			—			(5,580	)		—			(5,580	)
Income (loss) applicable to common stockholders	$	406,064		$	826	$	(7,913	)	$	14,016		$	6,402		$	14,201		$	39,236		$	(44,302	)	$	—		$	428,530

December 31, 2012
Investments	$	1,411,731		$	5,998	$	181,887		$	755,421		$	1,049,029		$	107,189		$	—		$	—		$	(62,336	)	$	3,448,919
Cash and restricted cash		2,064			—		9,720			—			—			—			—			222,178			—			233,962
Derivative assets		—			—		165			—			—			—			—			—			—			165
Other assets		7,422			7		4,946			113			2,740			1,924			—			202			(157	)		17,197
Assets in discontinued operations		—			—		—			—			—			—			245,069			—			—			245,069
Total assets		1,421,217			6,005		196,718			755,534			1,051,769			109,113			245,069			222,380			(62,493	)		3,945,312
Debt		(1,095,598	)		—		(120,525	)		(651,540	)		(925,191	)		—			—			(51,243	)		62,336			(2,781,761	)
Derivative liabilities		(31,576	)		—		—			—			—			—			—			—			—			(31,576	)
Other liabilities		(5,681	)		—		(5,084	)		(2,684	)		(171	)		(3	)		—			(44,969	)		157			(58,435	)
Liabilities in discontinued operations		—			—		—			—			—			(74	)		(406	)		—			—			(480	)
Total liabilities		(1,132,855	)		—		(125,609	)		(654,224	)		(925,362	)		(77	)		(406	)		(96,212	)		62,493			(2,872,252	)
Preferred stock		—			—		—			—			—			—			—			(61,583	)		—			(61,583	)
GAAP book value	$	288,362		$	6,005	$	71,109		$	101,310		$	126,407		$	109,036		$	244,663		$	64,585		$	—		$	1,011,477

	Non-Recourse CDOs (A)			Unlevered CDOs (B)		Non-Recourse Senior Living		Non-Recourse Other (A)(C)			Recourse (D)			Unlevered Other (E)			Unlevered Excess MSRs			Corporate			Inter-segment Elimination (F)			Total
Year Ended December 31, 2011
Interest income	$	218,131		$	344	$	—	$	73,364		$	2,234		$	2,636		$	—		$	167		$	(5,840	)	$	291,036
Interest expense		86,110			—		—		53,252			693			5			—			3,815			(5,840	)		138,035
Net interest income (expense)		132,021			344		—		20,112			1,541			2,631			—			(3,648	)		—			153,001
Impairment (reversal)		(3,876	)		—		—		8,469			—			(3,483	)		—			—			—			1,110
Other revenues		—			—		—		1,899			—			—			—			—			—			1,899
Other income (loss)		171,963			3,739		—		2,561			—			2,232			—			—			—			180,495
Property operating expenses		—			—		—		1,110			—			—			—			—			—			1,110
Depreciation and amortization		—			—		—		12			—			—			—			—			—			12
Other operating expenses		1,058			—		—		3,603			—			19			—			24,525			—			29,205
Income (loss) from continuing operations		306,802			4,083		—		11,378			1,541			8,327			—			(28,173	)		—			303,958
Income (loss) from discontinued operations		—			—		—		46			—			(57	)		572			—			—			561
Net income (loss)		306,802			4,083		—		11,424			1,541			8,270			572			(28,173	)		—			304,519
Preferred dividends		—			—		—		—			—			—			—			(5,580	)		—			(5,580	)
Income (loss) applicable to common stockholders	$	306,802		$	4,083	$	—	$	11,424		$	1,541		$	8,270		$	572		$	(33,753	)	$	—		$	298,939

December 31, 2011
Investments	$	2,408,252		$	3,940	$	—	$	783,777		$	244,916		$	18,751		$	—		$	—		$	(143,018	)	$	3,316,618
Cash and restricted cash		105,040			—		—		—			—			—			—			157,347			—			262,387
Derivative assets		1,954			—		—		—			—			—			—			—			—			1,954
Other assets		23,203			8		—		116			593			2,079			—			1,208			(353	)		26,854
Assets of discontinued operations		—			—		—		—			—			15			43,971			—			—			43,986
Total assets		2,538,449			3,948		—		783,893			245,509			20,845			43,971			158,555			(143,371	)		3,651,799
Debt		(2,410,151	)		—		—		(748,118	)		(233,194	)		—			—			(51,248	)		143,018			(3,299,693	)
Derivative liabilities		(119,320	)		—		—		—			—			—			—			—			—			(119,320	)
Other liabilities		(12,705	)		—		—		(3,407	)		(23	)		(5	)		—			(20,680	)		353			(36,467	)
Liabilities of discontinued operations		—			—		—		—			—			(44	)		(4,186	)		—			—			(4,230	)
Total liabilities		(2,542,176	)		—		—		(751,525	)		(233,217	)		(49	)		(4,186	)		(71,928	)		143,371			(3,459,710	)
Preferred stock		—			—		—		—			—			—			—			(61,583	)		—			(61,583	)
GAAP book value	$	(3,727	)	$	3,948	$	—	$	32,368		$	12,292		$	20,796		$	39,785		$	25,044		$	—		$	130,506

	Non-Recourse CDOs (A)			Unlevered CDOs (B)		Non-Recourse Senior Living		Non-Recourse Other (A)(C)			Recourse			Unlevered Other (E)			Unlevered Excess MSRs		Corporate			Inter-segment Elimination (F)			Total
Year Ended December 31, 2010
Interest income	$	226,717		$	—	$	—	$	72,773		$	976		$	1,653		$	—	$	68		$	(1,915	)	$	300,272
Interest expense		108,437			—		—		60,705			656			356		—			3,980			(1,915	)		172,219
Net interest income (expense)		118,280			—		—		12,068			320			1,297		—			(3,912	)		—			128,053
Impairment, net of the reversal of prior valuation allowances on loans		(173,223	)		16		—		(38,561	)		(60	)		(29,030	)	—			—			—			(240,858	)
Other revenues		—			—		—		1,708			—			—		—			—			—			1,708
Other income (loss)		289,158			475		—		(5,491	)		(663	)		(1,269	)	—			77			—			282,287
Property operating expenses		—			—		—		1,283			—			—		—			—			—			1,283
Depreciation and amortization		—			—		—		79			—			—		—			—			—			79
Other operating expenses		1,483			—		—		3,160			4			(197	)	—			25,089			—			29,539
Income (loss) from continuing operations		579,178			459		—		42,324			(287	)		29,255		—			(28,924	)		—			622,005
Income (loss) from discontinued operations		—			—		—		(536	)		—			193		—			—			—			(343	)
Net income (loss)		579,178			459		—		41,788			(287	)		29,448		—			(28,924	)		—			621,662
Preferred dividends		—			—		—		—			—			—		—			(7,453	)		—			(7,453	)

Excess of carrying amount of exchanged preferred stock over fair value of consideration paid		—			—		—		—			—			—		—			43,043			—			43,043
Income (loss) applicable to common stockholders	$	579,178		$	459	$	—	$	41,788		$	(287	)	$	29,448		$	—	$	6,666		$	—		$	657,252

(A)

Assets held within CDOs and other non-recourse structures are not available to satisfy obligations outside of such financings, except to the extent Newcastle receives net cash flow distributions from such structures. Furthermore, creditors or beneficial interest holders of these structures have no recourse to the general credit of Newcastle. Therefore, Newcastle’s exposure to the economic losses from such structures is limited to its 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)	Represents unlevered investments in CDO securities issued by Newcastle. These CDOs have been deconsolidated as Newcastle does not have the power to direct the relevant activities of the CDOs.

(C)	The following table summarizes the investments and debt in the other non-recourse segment:

	December 31, 2012								December 31, 2011
	Investments				Debt				Investments				Debt
	Outstanding		Carrying		Outstanding		Carrying		Outstanding		Carrying		Outstanding		Carrying
	Face Amount		Value		Face Amount*		Value*		Face Amount		Value		Face Amount*		Value*
Manufactured housing loan portfolio I	$	118,746	$	100,124	$	90,551	$	81,963	$	135,209	$	112,316	$	107,032	$	97,631
Manufactured housing loan portfolio II		153,193		150,123		117,907		117,191		178,603		175,120		143,869		142,589
Residential mortgage loans		52,352		38,709		—		—		56,377		40,380		54,842		53,771
Subprime mortgage loans subject to call options		406,217		405,814		406,217		405,814		406,217		404,723		406,217		404,723
Real estate securities		63,505		53,979		44,585		40,572		67,965		43,497		47,697		43,404
Operating real estate		N/A		6,672		6,000		6,000		N/A		7,741		6,000		6,000
	$	794,013	$	755,421	$	665,260	$	651,540	$	844,371	$	783,777	$	765,657	$	748,118

As of December 31, 2012 and December 31, 2011, aggregate face amounts of $71.1 million and $157.0 million (carrying values of $62.3 million and $143.0 million), respectively, of debt represents financing provided by the CDO segment (and included as investments in the CDO segment), which is eliminated upon consolidation.

(D)

The $925.2 million of recourse debt is comprised of (i) a $772.9 million repurchase agreement secured by $820.5 million carrying value of FNMA/FHLMC securities, (ii) a $1.4 million repurchase agreement secured by $21.0 million face amount of senior notes issued by Newcastle CDO VI, which was repurchased by Newcastle and is eliminated in consolidation and (iii) a $150.9 million repurchase agreement secured by $228.5 million carrying value of non-agency residential mortgage backed securities (“RMBS”).

(E)	The following table summarizes the investments in the unlevered other segment:

	December 31, 2012						December 31, 2011
	Outstanding Face Amount		Carrying Value		Number of Investments		Outstanding Face Amount		Carrying Value		Number of Investments
Real estate securities*	$	229,299	$	68,863		38	$	141,903	$	3,674		21
Real estate related loans		80,298		29,831		2		24,543		6,366		1
Residential mortgage loans		3,645		2,471		130		5,227		2,687		170
Other investments		N/A		6,024		1		N/A		6,024		1
	$	313,242	$	107,189		171	$	171,673	$	18,751		193

* During the year ended December 31, 2012, Newcastle purchased 17 non-agency RMBS with an aggregate face amount of $90.9 million for an aggregate purchase price of approximately $61.7 million, or an average price of 67.9% of par. As of December 31, 2012, these securities had an aggregate face amount of $89.3 million and a carrying value of $61.3 million.

(F)	Represents the elimination of investments and financings and their related income and expenses between the CDO segment and other non-recourse segment as the corresponding inter-segment investments and financings are presented on a gross basis within each of these segments.

Schedule of Segment Other Non-Recourse Investments and Debt

(C)	The following table summarizes the investments and debt in the other non-recourse segment:

	December 31, 2012								December 31, 2011
	Investments				Debt				Investments				Debt
	Outstanding		Carrying		Outstanding		Carrying		Outstanding		Carrying		Outstanding		Carrying
	Face Amount		Value		Face Amount*		Value*		Face Amount		Value		Face Amount*		Value*
Manufactured housing loan portfolio I	$	118,746	$	100,124	$	90,551	$	81,963	$	135,209	$	112,316	$	107,032	$	97,631
Manufactured housing loan portfolio II		153,193		150,123		117,907		117,191		178,603		175,120		143,869		142,589
Residential mortgage loans		52,352		38,709		—		—		56,377		40,380		54,842		53,771
Subprime mortgage loans subject to call options		406,217		405,814		406,217		405,814		406,217		404,723		406,217		404,723
Real estate securities		63,505		53,979		44,585		40,572		67,965		43,497		47,697		43,404
Operating real estate		N/A		6,672		6,000		6,000		N/A		7,741		6,000		6,000
	$	794,013	$	755,421	$	665,260	$	651,540	$	844,371	$	783,777	$	765,657	$	748,118

Schedule of Segment Reporting Investments in Unlevered Other Segment

(E)	The following table summarizes the investments in the unlevered other segment:

	December 31, 2012						December 31, 2011
	Outstanding Face Amount		Carrying Value		Number of Investments		Outstanding Face Amount		Carrying Value		Number of Investments
Real estate securities*	$	229,299	$	68,863		38	$	141,903	$	3,674		21
Real estate related loans		80,298		29,831		2		24,543		6,366		1
Residential mortgage loans		3,645		2,471		130		5,227		2,687		170
Other investments		N/A		6,024		1		N/A		6,024		1
	$	313,242	$	107,189		171	$	171,673	$	18,751		193

Schedule of Holdings in Variable Interest Entities

Newcastle has interests in the following unconsolidated VIE at December 31, 2012, in addition to the subprime securitizations which are described in Note 6:

Entity		Gross Assets (A)				Debt (B)				Carrying Value of Newcastle’s Investment (C)
CDO V		$	264,246			$	280,503			$	5,998

(A)	Face amount.

(B)	Includes $42.7 million face amount of debt owned by Newcastle with a carrying value of $6.0 million at December 31, 2012.

(C)	This amount represents Newcastle’s maximum exposure to loss from this entity, which was its fair value at December 31, 2012, related to $18.8 million face amount of CDO V Class I, III and IV-FL notes.