COMMITMENTS AND CONTINGENCIES
|12 Months Ended
Dec. 31, 2015
|Commitments and Contingencies Disclosure [Abstract]
|COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES
Litigation — Newcastle is and may become, from time to time, involved in legal actions in the ordinary course of business, including governmental and administrative investigations, inquiries and proceedings concerning employment, labor, environmental and other claims. Although management is unable to predict with certainty the eventual outcome of any legal action, management believes the ultimate liability arising from such actions, individually and in the aggregate, which existed at December 31, 2015, if any, will not materially affect Newcastle’s consolidated results of operations, financial position or cash flow. Given the inherent unpredictability of these types of proceedings, however, it is possible that future adverse outcomes could have a material effect on our financial results.
Environmental Costs — As a commercial real estate owner, Newcastle is subject to potential environmental costs. At December 31, 2015, management of Newcastle is not aware of any environmental concerns that would have a material adverse effect on Newcastle’s consolidated financial position or results of operations.
Debt Covenants — Newcastle’s debt obligations contain various customary loan covenants. See Note 11.
Subprime Securitizations — Newcastle has no obligation to repurchase any loans from either of its subprime securitizations. Therefore, it is expected that Newcastle’s exposure to loss is limited to the carrying amount of its retained interests in the securitization entities (Note 6). A subsidiary of Newcastle gave limited representations and warranties with respect to the second securitization; however, it has no assets and does not have recourse to the general credit of Newcastle.
Operating lease obligations – The Golf business leases many of its golf courses and related facilities under long-term operating leases, including triple net leases. In addition to minimum payments, certain leases require the payment of the excess of various percentages of gross revenue or net operating income over the minimum rental payments. The triple net leases require the payment of taxes assessed against the leased property and the cost of insurance and maintenance. The majority of the lease terms range from 10 to 20 years and, typically, the leases contain renewal options. Certain leases include minimum scheduled increases in rental payments at various times during the term of the lease. These scheduled rent increases are recognized on a straight-line basis over the term of the lease, resulting in an accrual, which is included in accounts payable, accrued expenses and other liabilities, for the amount by which the cumulative straight-line rent exceeds the contractual cash rent.
The Golf business is required to maintain bonds under certain third-party agreements, as requested by certain utility providers, and under the rules and regulations of licensing authorities and other governmental agencies. The Golf business had bonds outstanding of approximately $0.9 million as of December 31, 2015.
Rental expenses recorded under operating leases for carts and equipment were $4.6 million and $5.0 million for the years ended December 31, 2015 and 2014, respectively.
The Golf business has three month-to-month leases with an aggregate monthly expense of $0.1 million, which are cancellable by the parties with 30 days written notice. The future minimum rental commitments under non-cancellable leases, net of subleases, as of December 31, 2015 were as follows:
Membership Deposit Liability – In the Golf business, private country club members generally pay an advance initiation fee deposit upon their acceptance as a member to the respective country club. Initiation fee deposits are refundable 30 years after the date of acceptance as a member. As of December 31, 2015, the total face amount of initiation fee deposits was approximately $242.0 million.
Restricted Cash – Approximately $3.3 million of restricted cash at December 31, 2015 is used as credit enhancement for the Golf business’s obligations related to the performance of lease agreements and certain insurance claims.