Annual report pursuant to Section 13 and 15(d)

FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

v2.4.0.8
FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)
 12 Months Ended
Dec. 31, 2013
Fair Value Of Financial Instruments Tables  
Schedule of carrying value and estimated fair value of assets and liabilities

The carrying values and estimated fair values of Newcastle’s assets and liabilities at December 31, 2013 and 2012 were as follows:

                                                   
    December 31, 2013   December 31, 2012  
    Principal
Balance or
Notional
Amount 		  Carrying
Value 		  Estimated
Fair Value 		  Fair Value Method (A)   Weighted
Average
Yield/Funding
Cost 		  Weighted
Average
Maturity
(Years) 		  Carrying
Value 		  Estimated
Fair Value 		 
Assets                                                  
Financial instruments:                                                  
Real estate securities, available-for-sale*   $ 1,170,905   $ 984,263   $ 984,263     Broker quotations, counterparty quotations, pricing services, pricing models     5.44 %   2.9   $ 1,691,575   $ 1,691,575  
Real estate related and other loans, held-for-sale, net     567,829     437,530     456,535     Broker quotations, counterparty quotations, pricing services, pricing models     13.92 %   1.1     843,132     853,102  
Residential mortgage loans, held-for-investment, net     277,624     255,450     252,039     Pricing models     8.50 %   5.4     292,461     297,030  
Residential mortgage loans, held-for-sale, net     3,129     2,185     2,185     Pricing models     19.34 %   4.4     2,471     2,471  
Subprime mortgage loans subject to call option (B)     406,217     406,217     406,217     (B)     9.09 %   (B )   405,814     405,814  
Restricted cash*           12,366     12,366                       2,064     2,064  
Cash and cash equivalents*           105,944     105,944                       231,898     231,898  
Non-hedge derivative assets(D)(E)*     116,806     43,662     43,662     Counterparty quotations     N/A     (D )   165     165  
Investments in senior housing real estate, net           1,362,900                             162,801        
Investments in other real estate, net           266,170                             6,672        
Property, plant and equipment, net           270,188                             —        
Goodwill and intangibles           471,811                             19,086        
Other investments           25,468                             24,907        
Receivables and other assets           208,409                             17,197        
Assets of discontinued operations           —                             245,069        
          $ 4,852,563                           $ 3,945,312        
Liabilities                                                  
Financial instruments:                                                  
CDO bonds payable (F)   $ 543,516   $ 544,525   $ 395,689     Pricing models     2.26 %   1.9   $ 1,091,354   $ 781,856  
Other bonds and notes payable (F)     243,745     230,279     235,464     Broker quotations, pricing models     3.50 %   3.1     183,390     190,302  
Repurchase agreements     556,347     556,347     556,347     Market comparables     0.52 %   0.1     929,435     929,435  
Mortgage notes payable     1,077,163     1,076,828     1,075,390     Pricing models     4.75 %   6.8     120,525     120,525  
Credit facilities, media and golf     335,498     334,514     334,514     (G)     6.68 %   4.4              
Financing of subprime mortgage loans subject to call option (B)     406,217     406,217     406,217     (B)     9.09 %   (B )   405,814     405,814  
Junior subordinated notes payable     51,004     51,237     35,479     Pricing models     7.39 %   21.3     51,243     31,545  
Interest rate swaps, treated as hedges (C)(E)*     105,031     6,203     6,203     Counterparty quotations     N/A     (C )   12,175     12,175  
Non-hedge derivatives(D)(E)*     185,871     7,592     7,592     Counterparty quotations     N/A     (D )   19,401     19,401  
Dividends payable, accounts payable, accrued expenses and other liabilities           412,697                             58,435        
Liabilities of discontinued operations           —                             480        
          $ 3,626,439                           $ 2,872,252        

*Measured at fair value on a recurring basis.

 

  (A) Methods are listed in order of priority. In the case of real estate securities and real estate related and other loans, broker quotations are obtained if available and practicable, otherwise counterparty quotations or pricing service valuations are obtained or, finally, internal pricing models are used. Internal pricing models are only used for (i) securities and loans that are not traded in an active market, and, therefore, have little or no price transparency, and for which significant unobservable inputs must be used in estimating fair value, or (ii) loans or debt obligations which are private and untraded.
     
  (B) These two items results from an option, not an obligation, to repurchase loans from Newcastle’s subprime mortgage loan securitizations (Note 7), are noneconomic until such option is exercised, and are equal and offsetting.
     
  (C) Represents derivative agreements as follows:
                             
Year of Maturity   Weighted Average
Month of Maturity 		  Aggregate Notional
Amount 		  Weighted Average Fixed
Pay Rate / Cap Rate 		  Aggregate Fair Value
Asset / (Liability) 		   
                             
Interest rate swap agreements which receive 1-Month LIBOR:                            
2016     Apr   $ 105,031     5.04% $ (6,203 )  
     
  (D) This represents a linked transaction entered into in June 2013 with $116.8 million face amount of underlying financial securities. This derivative agreement was not designated as a hedge for accounting purposes as of December 31, 2013.
     
  (E) Newcastle’s derivatives fall into two categories. As of December 31, 2013, all derivatives liabilities, which represent three interest rate swaps, were held within Newcastle’s nonrecourse structures. An aggregate notional balance of $290.9 million, is only subject to the credit risks of the respective CDO structures. As they are senior to all the debt obligations of the respective CDOs and the fair value of each of the CDOs’ total investments exceeded the fair value of each of the CDOs’ derivative liabilities, no credit valuation adjustments were recorded. A derivative asset with an aggregate notional balance of $116.8 million, represents linked transactions with $116.8 million face amount of underlying financed securities. Newcastle’s interest rate swap counterparties include Bank of America and Bank of New York Mellon. Newcastle’s derivatives are included in other assets or other liabilities in the consolidated balance sheets, as applicable.
     
  (F) Newcastle notes that the unrealized gain on the liabilities within such structures cannot be fully realized. Assets held within CDOs and other non- recourse structures are generally 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. As a result, the fair value of Newcastle’s net investments in these non-recourse financing structures is equal to the present value of their expected future net cash flows.
     
  (G) These credit facilities were entered into late in the fourth quarter of 2013 and Newcastle believes their terms are market terms as of December 31, 2013.
Schedule of fair value of derivative assets
Represents derivative agreements as follows:
                             
Year of Maturity   Weighted Average
Month of Maturity 		  Aggregate Notional
Amount 		  Weighted Average Fixed
Pay Rate / Cap Rate 		  Aggregate Fair Value
Asset / (Liability) 		   
                             
Interest rate swap agreements which receive 1-Month LIBOR:                            
2016     Apr   $ 105,031     5.04% $ (6,203 )  
     
Schedule of fair value of assets and liabilities measured on a recurring basis

The following table summarizes financial assets and liabilities measured at fair value on a recurring basis at December 31, 2013:

                                 
                Fair Value  
    Principal Balance or
Notional Amount		   Carrying Value   Level 2   Level 3   Total  
Assets:                                
Real estate securities, available for sale:                                
CMBS   $ 333,121   $ 284,469   $ —   $ 284,469   $ 284,469  
REIT debt     29,200     31,186     31,186     —     31,186  
Non-Agency RMBS     96,762     57,581     —     57,581     57,581  
ABS - other real estate     8,464     —     —     —     —  
FNMA / FHLMC     514,994     551,270     551,270     —     551,270  
CDO     188,364     59,757     —     59,757     59,757  
Real estate securities total   $ 1,170,905     984,263     582,456     401,807     984,263  
                                 
Derivative assets:                                
Linked transactions at fair value   $ 116,806   $ 43,662   $ —   $ 43,662   $ 43,662  
Derivative assets total   $ 116,806   $ 43,662   $ —   $ 43,662   $ 43,662  
Liabilities:                                
Derivative Liabilities:                                
Interest rate swaps, treated as hedges   $ 105,031   $ 6,203   $ 6,203   $ —   $ 6,203  
Interest rate swaps, not treated as hedges     185,871     7,592     7,592     —     7,592  
Derivative liabilities total   $ 290,902   $ 13,795   $ 13,795   $ —   $ 13,795
Schedule of change in fair value of Level 3 investments

Newcastle’s investments in instruments measured at fair value on a recurring basis using Level 3 inputs changed as follows:

                                             
    Level 3 Assets  
    CMBS   ABS   Equity/Other   Linked        
    Conduit   Other   Subprime   Other   Securities   Transactions   Total  
                         

 

                  
Balance at December 31, 2011   $ 956,905   $ 171,913   $ 128,622   $ 38,107   $ 55,986   $ —   $ 1,351,533  
CDO X Deconsolidation (A)     (767,660 )   (40,172 )   (86,704 )   (26,174 )   —     —     (920,710 )
Total gains (losses) (B)                                            
Included in net income (loss) (C)     (4,947 )   (396 )   828     (4,092 )   —     —     (8,607 )
Included in other comprehensive income (loss)     22,537     12,515     28,573     1,739     15,125     —     80,489  
Amortization included in interest income     33,538     1,777     17,691     288     5,657     —     58,951  
Purchases, sales and settlements                                            
Purchases     116,087     —     315,475     —     —     —     431,562  
Proceeds from sales     (43,259 )   —     (3,295 )   (3,743 )   —     —     (50,297 )
Proceeds from repayments     (58,432 )   (24,015 )   (45,215 )   (4,650 )   (5,743 )   —     (138,055 )
Balance at December 31, 2012   $ 254,769   $ 121,622   $ 355,975   $ 1,475   $ 71,025   $ —   $ 804,866  
Spin-off of New Residential (A)     —     —     (560,783 )   —     —     —     (560,783 )
Total gains (losses) (B)                                            
Included in net income (loss) (C)     348     (331 )   2,372     (82 )   1,638     1,168     5,113  
Included in other comprehensive income (loss)     14,999     2,168     24,755     73     (726 )   —     41,269  
Amortization included in interest income     11,880     969     17,981     331     5,265     —     36,426  
Purchases, sales and settlements                                            
Purchases     —     —     267,160     —     —     43,172     310,332  
Proceeds from sales     (73,576 )   (31,989 )   (11,181 )   (1,359 )   (8,156 )   —     (126,261 )
Proceeds from repayments     (9,485 )   (6,905 )   (38,698 )   (438 )   (9,289 )   (678 )   (65,493 )
Balance at December 31, 2013   $ 198,935   $ 85,534   $ 57,581   $ —   $ 59,757   $ 43,662   $ 445,469  
   
(A) CDO X was deconsolidated on September 12, 2012 and the spin-off of New Residential occurred on May 15, 2013.
(B) None of the gains (losses) recorded in earnings during the periods is attributable to the change in unrealized gains (losses) relating to Level 3 assets still held at the reporting dates.
(C) These gains (losses) are recorded in the following line items in the consolidated statements of income:
                 
      Year Ended December 31,  
      2013   2012  
  Gain (loss) on settlement of investments, net   $ 5,367   $ 10,196  
  Other income (loss), net     1,168     —  
  OTTI     (1,422 )   (18,803 )
  Total   $ 5,113   $ (8,607 )
  Gain (loss) on sale of investments, net, from investments transferred into Level 3 during the period   $ —   $ —  
Schedule of gains losses on fair value of RE securities
These gains (losses) are recorded in the following line items in the consolidated statements of income:
                 
      Year Ended December 31,  
      2013   2012  
  Gain (loss) on settlement of investments, net   $ 5,367   $ 10,196  
  Other income (loss), net     1,168     —  
  OTTI     (1,422 )   (18,803 )
  Total   $ 5,113   $ (8,607 )
  Gain (loss) on sale of investments, net, from investments transferred into Level 3 during the period   $ —   $ —  
Schedule of securities valuation methodology and results
As of December 31, 2013, Newcastle’s securities valuation methodology and results are further detailed as follows:  
   
                Fair Value  
    Outstanding   Amortized           Internal        
    Face   Cost   Multiple   Single   Pricing        
Asset Type   Amount (A)   Basis (B)   Quotes (C)   Quote (D)   Models (E)   Total  
                                       
CMBS   $ 333,121   $ 227,878   $ 240,358   $ 42,341   $ 1,770   $ 284,469  
REIT debt     29,200     28,667     31,186     —     —     31,186  
Non-Agency RMBS     96,762     40,675     57,581     —     —     57,581  
ABS - other real estate     8,464     —     —     —     —     —  
FNMA / FHLMC     514,994     547,639     551,270     —     —     551,270  
CDO     188,364     56,996     —     57,755     2,002     59,757  
Total   $ 1,170,905   $ 901,855   $ 880,395   $ 100,096   $ 3,772   $ 984,263  
   
(A) Net of incurred losses.
(B) Net of discounts (or gross premiums) and after OTTI, including impairment taken during the period ended December 31, 2013.
(C) Management generally obtained pricing service quotations or broker quotations from at least two sources, one of which was generally the seller (the party that sold the security). Management selected one of the quotes received as being most representative of fair value and did not use an average of the quotes. Even if Newcastle receives two or more quotes on a particular security that come from non-selling brokers or pricing services, it does not use an average because management believes using an actual quote more closely represents a transactable price for the security than an average level. Furthermore, in some cases there is a wide disparity between the quotes Newcastle receives. Management believes using an average of the quotes in these cases would generally not represent the fair value of the asset. Based on Newcastle’s own fair value analysis using internal models, management selects one of the quotes which is believed to more accurately reflect fair value. Newcastle never adjusts quotes received. These quotations are generally received via email and contain disclaimers which state that they are “indicative” and not “actionable” – meaning that the party giving the quotation is not bound to actually purchase the security at the quoted price.
 
(D) Management was unable to obtain quotations from more than one source on these securities. The one source was generally the seller (the party that sold the security) or a pricing service.
 
(E) Securities whose fair value was estimated based on internal pricing models are further detailed as follows:
                                                   
                      Unrealized
Gains (Losses)
in Accumulated
OCI		                          
Asset Type   Amortized
Cost
Basis (B)		   Fair
Value		   Impairment
Recorded in
Current Year		     Weighted Average Significant Input  
      Discount
Rate		   Prepayment
Speed (F)		   Cumulative
Default Rate		   Loss
Severity		  
                                                   
CMBS - conduit   $ 738   $ 1,770   $ 76   $ 1,032     8.0 %   N/A     99.5 %   27.6 %
CDO     —     2,002     —     2,002     35.0 %   3.5 %   17.5 %   73.5 %
Total   $ 738   $ 3,772   $ 76   $ 3,034                          
   
 
  All of the assumptions listed have some degree of market observability, based on Newcastle’s knowledge of the market, relationships with market participants, and use of common market data sources. Collateral prepayment, default and loss severity projections are in the form of “curves” or “vectors” that vary for each monthly collateral cash flow projection. Methods used to develop these projections vary by asset class (e.g., CMBS projections are developed differently than home equity ABS projections) but conform to industry conventions. Newcastle uses assumptions that generate its best estimate of future cash flows of each respective security.
   
  The prepayment vector specifies the percentage of the collateral balance that is expected to voluntarily pay off at each point in the future. The prepayment vector is based on projections from a widely published investment bank model, which considers factors such as collateral FICO score, loan-to-value ratio, debt-to-income ratio, and vintage on a loan level basis. This vector is scaled up or down to match recent collateral-specific prepayment experience, as obtained from remittance reports and market data services.
   
  Loss severities are based on recent collateral-specific experience with additional consideration given to collateral characteristics. Collateral age is taken into consideration because severities tend to initially increase with collateral age before eventually stabilizing. Newcastle typically uses projected severities that are higher than the historic experience for collateral that is relatively new to account for this effect. Collateral characteristics such as loan size, lien position, and location (state) also effect loss severity. Newcastle considers whether a collateral pool has experienced a significant change in its composition with respect to these factors when assigning severity projections.
   
  Default rates are determined from the current “pipeline” of loans that are more than 90 days delinquent, in foreclosure, or are REO. These significantly delinquent loans determine the first 24 months of the default vector. Beyond month 24, the default vector transitions to a steady-state value that is generally equal to or greater than that given by the widely published investment bank model.
   
  The discount rates Newcastle uses are derived from a range of observable pricing on securities backed by similar collateral and offered in a live market. As the markets in which Newcastle transacts have become less liquid, Newcastle has had to rely on fewer data points in this analysis.
   
(F) Projected annualized average prepayment rate.
Schedule of securities valued based on internal pricing models
Securities whose fair value was estimated based on internal pricing models are further detailed as follows:
                                                   
                      Unrealized
Gains (Losses)
in Accumulated
OCI		                          
Asset Type   Amortized
Cost
Basis (B)		   Fair
Value		   Impairment
Recorded in
Current Year		     Weighted Average Significant Input  
      Discount
Rate		   Prepayment
Speed (F)		   Cumulative
Default Rate		   Loss
Severity		  
                                                   
CMBS - conduit   $ 738   $ 1,770   $ 76   $ 1,032     8.0 %   N/A     99.5 %   27.6 %
CDO     —     2,002     —     2,002     35.0 %   3.5 %   17.5 %   73.5 %
Total   $ 738   $ 3,772   $ 76   $ 3,034                          
   
 
  All of the assumptions listed have some degree of market observability, based on Newcastle’s knowledge of the market, relationships with market participants, and use of common market data sources. Collateral prepayment, default and loss severity projections are in the form of “curves” or “vectors” that vary for each monthly collateral cash flow projection. Methods used to develop these projections vary by asset class (e.g., CMBS projections are developed differently than home equity ABS projections) but conform to industry conventions. Newcastle uses assumptions that generate its best estimate of future cash flows of each respective security.
   
  The prepayment vector specifies the percentage of the collateral balance that is expected to voluntarily pay off at each point in the future. The prepayment vector is based on projections from a widely published investment bank model, which considers factors such as collateral FICO score, loan-to-value ratio, debt-to-income ratio, and vintage on a loan level basis. This vector is scaled up or down to match recent collateral-specific prepayment experience, as obtained from remittance reports and market data services.
   
  Loss severities are based on recent collateral-specific experience with additional consideration given to collateral characteristics. Collateral age is taken into consideration because severities tend to initially increase with collateral age before eventually stabilizing. Newcastle typically uses projected severities that are higher than the historic experience for collateral that is relatively new to account for this effect. Collateral characteristics such as loan size, lien position, and location (state) also effect loss severity. Newcastle considers whether a collateral pool has experienced a significant change in its composition with respect to these factors when assigning severity projections.
   
  Default rates are determined from the current “pipeline” of loans that are more than 90 days delinquent, in foreclosure, or are REO. These significantly delinquent loans determine the first 24 months of the default vector. Beyond month 24, the default vector transitions to a steady-state value that is generally equal to or greater than that given by the widely published investment bank model.
   
  The discount rates Newcastle uses are derived from a range of observable pricing on securities backed by similar collateral and offered in a live market. As the markets in which Newcastle transacts have become less liquid, Newcastle has had to rely on fewer data points in this analysis.
Schedule of fair value for real estate related loans and residential mortgage loans held for sale

The following tables summarize certain information for real estate related and other loans and residential mortgage loans held-for-sale as of December 31, 2013:

                                                   
                      Valuation   Significant Input  
    Outstanding               Allowance/   Range   Weighted Average  
    Face   Carrying   Fair   (Reversal) In   Discount   Loss   Discount   Loss  
Loan Type   Amount   Value   Value   Current Year   Rate   Severity   Rate   Severity  
Mezzanine   $ 172,197   $ 139,720   $ 143,217   $ (14,246 )   3.4% - 9.0 %   0.0% - 100.0 %   6.6 %   17.3 %
Bank Loan     256,594     166,710     180,945     (3,610 )   13.1% - 33.8 %   0.0% - 100.0 %   24.2 %   23.1 %
B-Note     109,323     101,385     102,645     (1,623 )   5.0% - 12.0 %   0.0 %   10.1 %   0.0 %
Whole Loan     29,715     29,715     29,728     —     3.7% - 4.0 %   0.0% - 15.5 %   3.7 %   15.1 %
Total Real Estate Related and Other Loans Held for Sale, Net   $ 567,829   $ 437,530   $ 456,535   $ (19,479 )                        

 

                                                   
                      Valuation                          
    Outstanding               Allowance/   Significant Input (Weighted Average)  
    Face   Carrying   Fair   (Reversal) In   Discount   Prepayment   Constant   Loss  
Loan Type   Amount   Value   Value   Current Year   Rate   Speed   Default Rate   Severity  
Non-securitized Manufactured Housing Loans Portfolio I   $ 501   $ 130   $ 130   $ (58 )   81.8 %   5.0 %   11.6 %   65.0 %
Non-securitized Manufactured Housing Loans Portfolio II     2,628     2,055     2,055     (47 )   15.4 %   5.0 %   3.5 %   60.0 %
Total Residential Mortgage Loans Held for Sale, Net   $ 3,129   $ 2,185   $ 2,185   $ (105 )                        
Schedule of fair value for residential mortgage loans held for investment

The following table summarizes certain information for residential mortgage loans held-for-investment as of December 31,

2013: 

                                                   
                            Significant Input (Weighted Average)  
                      Valuation                          
                      Allowance/                          
    Outstanding   Carrying       (Reversal) In   Discount   Prepayment   Constant        
Loan Type   Face Amount   Value   Fair Value   Current Year   Rate   Speed   Default Rate   Loss Severity  
Securitized Manufactured Housing Loans Portfolio I   $ 102,681   $ 91,924   $ 89,674   $ (5,465 )   9.4 %   6.0 %   3.0 %   65.0 %
Securitized Manufactured Housing Loans Portfolio II     128,975     128,117     123,471     840     8.1 %   7.0 %   3.5 %   60.0 %
Residential Loans     45,968     35,409     38,894     (826 )   7.5 %   4.6 %   2.8 %   45.9 %
Total Residential Mortgage Loans, Held-for-Investment, Net   $ 277,624   $ 255,450   $ 252,039   $ (5,451 )                        
Schedule of fair value of derivatives

Newcastle’s derivatives are recorded on its balance sheet as follows:

                   
        Fair Value  
        December 31,  
    Balance sheet location   2013   2012  
Derivative Assets                  
Linked transaction at fair value   Receivables and other assets   $ 43,662   $ —  
Interest rate caps, not designated as hedges   Receivables and other assets     —     165  
        $ 43,662   $ 165  
Derivative Liabilities                  
Interest rate swaps, designated as hedges   Accounts payable, accrued expenses and other liabilities   $ 6,203   $ 12,175  
                   
Interest rate swaps, not designated as hedges   Accounts payable, accrued expenses and other liabilities     7,592     19,401  
        $ 13,795   $ 31,576  
Schedule of outstanding derivatives
The following table summarizes information related to derivatives:
               
    December 31,  
    2013   2012  
Cash flow hedges              
Notional amount of interest rate swap agreements   $ 105,031   $ 154,450  
Amount of (loss) recognized in other comprehensive income on effective portion     (6,117 )   (12,050 )
Deferred hedge gain (loss) related to anticipated financings, which have subsequently occurred, net of amortization     170     237  
               
Deferred hedge gain (loss) related to designation, net of amortization     (45 )   (210 )
Expected reclassification of deferred hedges from accumulated other comprehensive income (“AOCI”) into earnings over the next 12 months     53     4  
Expected reclassification of current hedges from AOCI into earnings over the next 12 months     (3,915 )   (6,259 )
               
Non-hedge Derivatives              
Notional amount of interest rate swap agreements     185,871     294,203  
Notional amount of interest rate cap agreements     —     23,400  
Notional amount of linked transactions (A)     116,806     —  

 

(A) This represents the current face amount of the underlying financial securities comprising linked transactions.
Schedule of gain loss on derivatives

The following table summarizes gains (losses) recorded in relation to derivatives:

                         
    Income Statement Location   Year Ended December 31,  
Cash flow hedges       2013   2012   2011  
Gain (loss) on the ineffective portion   Other income (loss)   $ —   $ 483   $  (917 )
    Gain (loss) on sale of                    
Loss immediately recognized at dedesignation   investments, Other income (loss)     (110 )   (7,036 )   (13,939 )
Amount of loss reclassified from AOCI into income, related to effective portion   Interest expense     (6,128 )   (30,631 )   (63,350 )
Deferred hedge gain reclassified from AOCI into income, related to anticipated financings   Interest expense     67     61     58  
Deferred hedge (loss) gain reclassified from AOCI into income, related to effective portion of dedesignated hedges   Interest expense     (56 )   1,189     2,259  
                         
Non-hedge derivatives gain (loss)                        
Interest rate swaps   Other income (loss)     10,577     9,101     3,284  
Linked transactions   Interest expense     (236 )   —     —  
Schedule of net assets recognized as linked transactions

The following table presents both gross and net information about linked transactions:

               
    As of December 31,  
    2013   2012  
Real estate securities-available for sale (A)   $ 104,308   $ —  
Repurchase agreements (B)     (60,646 )   —  
Net assets recognized as linked transactions   $ 43,662   $ —  
     
  (A) Represents the fair value of the securities accounted for as part of linked transactions.
  (B) Represents the carrying value, which approximates fair value, of the repurchase agreements accounted for as part of linked transactions.