Exhibit 99.2

LNR Property LLC and Subsidiaries

Consolidated Financial Statements

as of and for the years ended December 31, 2012 and 2011,

and Independent Auditors’ Report

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors and Members of
LNR Property LLC and Subsidiaries
Miami Beach, Florida

We have audited the accompanying consolidated financial statements of LNR Property LLC and Subsidiaries (the “Company”), which comprise the consolidated balance sheets as of December 31, 2012 and 2011, and the related consolidated statements of earnings, comprehensive earnings, members’ equity and cash flows for the years then ended, and the related notes to the consolidated financial statements.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of LNR Property LLC and Subsidiaries as of December 31, 2012 and 2011, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

Certified Public Accountants

Miami, Florida

March 21, 2013

LNR PROPERTY LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

See accompanying notes to consolidated financial statements.

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LNR PROPERTY LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands)

See accompanying notes to consolidated financial statements.

4

LNR PROPERTY LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(In thousands)

See accompanying notes to consolidated financial statements.

5

LNR PROPERTY LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF MEMBERS’ EQUITY

(In thousands)

See accompanying notes to consolidated financial statements.

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LNR PROPERTY LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

See accompanying notes to consolidated financial statements.

7

LNR PROPERTY LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued

(In thousands)

See accompanying notes to consolidated financial statements.

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LNR PROPERTY LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    Summary of Organization, Business and Significant Accounting Policies

Ownership and Organization

LNR Property LLC (collectively with its subsidiaries referred to as the “Company”) was originally organized as a corporation under the laws of Delaware as LNR Property Corporation (“LNRPC”) and was subsequently converted to a limited liability company after completion of a comprehensive balance sheet recapitalization (the “Recapitalization”) on July 29, 2010.  In order to effectuate the Recapitalization on July 29, 2010, the Board of Directors of LNR Property Holdings Ltd. (collectively with its subsidiaries referred to as the “Predecessor”), the former parent of LNRPC, approved a plan whereby a group of five investors (the “Lead Investors”) acquired all of the outstanding shares of LNRPC from its direct parent, Riley Holdco Corp (“Holdco”), in exchange for the conversion of Holdco’s debt to equity of $84.0 million and a new equity issuance by LNRPC for $416.5 million in cash.  These amounts, in addition to a $0.5 million reissuance of equity awards, reflect total consideration for the Recapitalization of $501.0 million.  In connection with the Recapitalization, we elected push down accounting, pursuant to which the acquisition method of accounting was applied.  See further discussion in Note 2.

The Lead Investors and their ownerships interests as of December 31, 2012 and 2011 were as follows:

The Lead Investors have extensive experience in owning and managing commercial real estate.  VNO LNR Holdco LLC is an affiliate of Vornado Realty Trust (“Vornado”), a publicly traded real estate investment trust which is one of the largest owners and managers of commercial real estate in the United States.  iStar Marlin LLC is an affiliate of iStar Financial Inc. (“iStar”), a publicly traded finance company focused on the commercial real estate industry.  CBR I LLC is a fund managed by Cerberus Capital Management, L.P. (“Cerberus”), one of the world’s leading private investment firms.  Aozora Investments LLC is an entity managed by Aozora Bank, Ltd. (“Aozora”), a Japanese bank.  Opps VIIb LProp, L.P. is an affiliate of Oaktree Capital Management (“Oaktree”), an investment firm which specializes in less efficient markets and alternative investments.

See Note 20 for a discussion of potential ownership changes subsequent to December 31, 2012.

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Description of Business

We are a real estate investment, finance, management and development company that operates the following businesses: (i) a servicing business that manages  and works out problem assets, (ii) a finance business that is focused on selectively acquiring and managing real estate finance investments, including unrated, investment grade and non-investment grade rated commercial mortgage backed securities (“CMBS”), subordinated interests of securitization and resecuritization transactions, and high yielding real estate loans, either directly or through ventures in which we hold an interest; (iii) a mortgage loan business which originates conduit loans for the primary purpose of selling these loans into securitization transactions; (iv) a small balance commercial loan business which acquires, manages and services portfolios of small balance commercial mortgage loans; and (v) a real estate business which is involved in acquiring, developing, repositioning, managing and selling commercial, multi-family residential and residential land, either directly or through ventures in which we hold an interest.

Basis of Presentation and Consolidation

The accompanying consolidated financial statements include our accounts, those of our wholly owned subsidiaries and certain other entities we are required to consolidate. We consolidate the assets, liabilities, and results of operations of entities (corporations, partnerships and variable interest entities) in accordance with ASC Topic 810.

Entities not deemed to be variable interest entities (“VIEs”) are consolidated if we own a majority of the voting securities or interests or hold the general partnership interest, except in those instances in which the minority voting interest owner effectively participates through substantive participative rights. Substantive participative rights include the ability to select, terminate and set compensation of the investee’s management, if applicable, and the ability to participate in capital and operating decisions of the investee, including budgets, in the ordinary course of business.

We invest in entities with varying structures, many of which do not have voting securities or interests, such as general partnerships, limited partnerships, and limited liability companies. In many of these structures, control of the entity rests with the general partners or managing members, while other members hold passive interests. The general partner or managing member may hold anywhere from a relatively small percentage of the total financial interests to a majority of the financial interests. For entities not deemed to be VIEs, where we serve as the sole general partner or managing member, we are considered to have the controlling financial interest and therefore the entity is consolidated, regardless of our financial interest percentage, unless there are other limited partners or investing members that effectively participate through substantive participative rights. In those circumstances where we, as majority controlling interest owner, cannot cause the entity to take actions that are significant in the ordinary course of business, because such actions could be vetoed by the minority controlling interest owner, we do not consolidate the entity.

VIEs are entities that, by design, either (1) lack sufficient equity to permit the entity to finance its activities without additional subordinated financial support from other parties, or (2) have equity investors that do not have the ability to make significant decisions relating to the entity’s operations through voting rights, or do not have the obligation to absorb the expected losses, or do not have the right to receive the residual returns of the entity.

The most common type of VIE is a special purpose entity (“SPE”). SPEs are commonly used in securitization transactions in order to isolate certain assets and distribute the cash flows from those assets to investors. SPEs are an important part of the financial markets, including the mortgage- and asset-backed securities and commercial paper markets, as they provide market liquidity by facilitating investors’ access to specific portfolios of assets and risks. SPEs may be organized as trusts, partnerships or corporations and are typically established for a single, discrete purpose. SPEs are not typically

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operating entities and usually have a limited life and no employees. The basic SPE structure involves a company selling assets to the SPE; the SPE funds the purchase of those assets by issuing securities to investors. The legal documents that govern the transaction specify how the cash earned on the assets must be allocated to the SPE’s investors and other parties that have rights to those cash flows. SPEs are generally structured to insulate investors from claims on the SPE’s assets by creditors of other entities, including the creditors of the seller of the assets.

The primary beneficiary of a VIE is required to consolidate the VIE.  The primary beneficiary is the party that has both (1) the power to direct the activities of an entity that most significantly impact the VIE’s economic performance; and (2) through its interest in the VIE, the obligation to absorb losses or the right to receive benefits from the VIE that could be potentially significant to the VIE.  For further details regarding our interests in VIEs, see Notes 9 and 21.

When we consolidate entities other than SPEs, the ownership interests of any minority parties are reflected as noncontrolling interests.  When we consolidate SPEs, beneficial interests payable to third parties are reflected as liabilities when the interests are legally issued in the form of debt.  Investments in entities which are not consolidated are accounted for by the equity method or by the cost method if either our investment is considered to be minor or we lack significant influence over the investee.

All intercompany transactions and balances among consolidated entities have been eliminated in consolidation.

Deconsolidation and Discontinued Operations

We previously consolidated the LNR Archetype Real Estate Debt Fund, L.P. (the “Archetype Fund”), an entity in which we held an approximately 48% ownership interest.  On December 29, 2011, we sold all of our limited partner and general partner interests in the Archetype Fund and therefore no longer have a controlling, or any, financial interest in this entity.  As a result, we deconsolidated the Archetype Fund from our financial statements.  Consistent with ASC 205, “Presentation of Financial Statements,” the statement of earnings for the year ended December 31, 2011 include the results of operations of the Archetype Fund, including any gain or loss recognized, in discontinued operations.

Business Combinations

Under ASC Topic 805, “Business Combinations” (“ASC Topic 805”), the acquirer in a business combination must recognize, with certain exceptions, 100% of the fair values of assets acquired, liabilities assumed, and noncontrolling interests in acquisitions of less than 100% controlling interest when the acquisition constitutes a change in control of the acquired entity. As goodwill is calculated as a residual, all goodwill of the acquired business, not just the acquirer’s share, is recognized under this “full goodwill” approach.

We also apply the provisions of ASC Topic 805 in accounting for the acquisition of a controlling interest in a previously unconsolidated entity.  Such transactions are treated as a business combination achieved in stages, whereby the acquirer remeasures its previously held equity interest in the acquiree at its acquisition-date fair value and recognizes the resulting gain or loss in earnings.

We applied the provisions of ASC Topic 805 in accounting for the Recapitalization.  In doing so, we recorded provisional amounts for certain items as of the date of the Recapitalization, including our provision for income taxes.  During the measurement period, a period which shall not exceed one year, we retrospectively adjust the provisional amounts recognized at the Recapitalization date to reflect new information obtained about facts and circumstances that existed as of such date that, if known, would have affected the measurement of the amounts recognized. See further discussion in Note 2.

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Comprehensive Earnings

Comprehensive earnings consists of net income and other comprehensive earnings, which are primarily net unrealized gains or losses on available-for-sale securities, foreign currency translation and derivative financial instruments adjusted for amounts attributable to noncontrolling interests. Comprehensive earnings is presented separately in our consolidated statements of comprehensive earnings. The change in accumulated other comprehensive earnings is reflected in our consolidated statements of members’ equity.

Cash and Cash Equivalents and Restricted Cash

We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Our cash equivalent investments are classified as held-to-maturity based on our positive intent and ability to hold the securities to maturity. These investments include securities held in commercial paper, money market accounts and bank certificates of deposit and are stated at amortized cost. Due to the short maturity period of cash equivalents, the carrying amount of these instruments approximates fair value. Income related to these securities is reported as a component of interest income. Restricted cash primarily relates to cash collateral required under derivative instruments.

Concentration of Credit Risk

We maintain all of our operating cash accounts with Bank of America, N.A and U.S. Bank N.A. These accounts are insured by the Federal Deposit Insurance Corporation (“FDIC”), up to certain limits. We seek to invest operating cash in excess of FDIC insured limits in United States Treasury securities, though from time to time, we may have cash on deposit with banks in excess of amounts insured by the FDIC.

Investment Securities

Investment securities consist principally of CMBS and the retained interests of resecuritization transactions. Those securities for which the intent and ability to hold to maturity exists are designated as held-to-maturity, while all others are classified as available-for-sale.

Securities classified as available-for-sale are recorded at fair value. Changes in fair value of unimpaired available-for-sale securities for which the fair value option is not elected are reported in members’ equity, net of the related tax effects, as a component of accumulated other comprehensive earnings until realized.  Changes in fair value of available-for-sale securities for which the fair value option is elected are reflected in earnings.

If any available-for-sale investments for which we have not elected the fair value option have unrealized losses and we intend to sell or it is more likely than not that we will be required to sell the security prior to the recovery of amortized cost, the other than temporary impairment (“OTTI”) is recognized in our consolidated statements of earnings. If we do not have the intent to sell a security or it is not more likely than not that we will be required to sell the security, and the security is not accounted for under the cost recovery method or fair value option, the amount of OTTI is segregated into two components: (1) the portion representing a credit loss, which is reflected in our consolidated statements of earnings; and (2) the portion relating to other factors, which is reflected within accumulated other comprehensive earnings. In these instances, the credit impairment is measured as the excess of the amortized cost basis of the security over the current period’s estimate of cash flows discounted at the rate last used to accrete the beneficial interest.

Unrealized losses are considered to be other than temporary if (a) the present value of the currently estimated total cash flows related to the security is less than the present value of the previous period’s

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estimated total cash flows of that security and the decline in the present value is due to adverse changes in the projected cash flows; or (b) we are unable to hold the security until recovery of its amortized cost basis. For these securities, total OTTI is the amount by which the fair value of the security has declined below its amortized cost.

We account for interest income on securities for which the fair value option is not elected using a level yield method. In doing so, if the projected timing and/or amount of projected cash flows on a particular security become subject to significant uncertainty, the security is accounted for using the cost recovery method. Under the cost recovery method, we record no interest income and apply all cash received to reduce the amortized cost of such securities until such time as we are able to project cash flows with greater certainty, or the investment balance is reduced to zero.  Interest income on securities for which the fair value option is elected is recognized based on contractual rates.  See further discussion of revenue recognition under the Revenue and Income Recognition section.

In order to recognize a portion of OTTI as a non-credit loss in OCI, management must be able to estimate future cash flows.  Because securities on cost recovery inherently contain cash flows that cannot be reliably estimated, whether the uncertainty arises from timing or amount, we are unable to assert that a portion of an OTTI is a non-credit loss.  In these instances, an impairment loss equal to the difference between amortized cost and fair value of the security at the date on which the security is placed on cost recovery is recognized in our consolidated statements of earnings.  Any subsequent decline in the fair value of a debt security placed on cost recovery will result in an additional OTTI in the consolidated statements of earnings.

Fair Value Option

The guidance in ASC Topic 825, “Financial Instruments,” provides a fair value option election that allows entities to make an irrevocable election of fair value as the initial and subsequent measurement attribute for certain eligible financial assets and liabilities.  Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings.  The decision to elect the fair value option is determined on an instrument by instrument basis and must be applied to an entire instrument and is irrevocable once elected.  Assets and liabilities measured at fair value pursuant to this guidance are required to be reported separately in our consolidated balance sheets from those instruments using another accounting method.  We have elected the fair value option for eligible financial assets and liabilities of our consolidated VIEs, mortgage loans held for sale, short-term mortgage loans held for investment, purchased investment securities issued by VIEs we expect to consolidate in the future, and the securitized financial assets and liabilities of Madison Square Company LLC (“Madison”).  The fair value elections for VIE and securitization related items were made in order to mitigate accounting mismatches between the carrying value of the instruments and the related assets and liabilities that we consolidate at fair value.   The fair value elections for mortgage loans held for sale and short-term mortgage loans held for investment were made due to the short-term nature of these instruments.

Fair Value

We measure all assets acquired, liabilities assumed, and noncontrolling interests included in an acquisition which is subject to the acquisition method of accounting at fair value.  We also measure our available-for-sale CMBS, derivative assets and liabilities, domestic servicing rights intangible and any assets or liabilities where we have elected the fair value option at fair value. When actively quoted observable prices are not available, we either use implied pricing from similar assets and liabilities or valuation models based on net present value of estimated future cash flows, adjusted as appropriate for liquidity, credit, market and/or other risk factors.

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As discussed above, we measure the assets and liabilities of consolidated VIEs at fair value pursuant to our election of the fair value option.  The VIEs in which we invest are “static”; that is, no reinvestment is permitted, and there is no active management of the underlying assets.  In determining the fair value of the assets and liabilities of the VIE, we maximize the use of observable inputs over unobservable inputs.  We also acknowledge that our principal market for selling CMBS assets is the securitization market where the market participant is considered to be a CMBS trust or a collateralized debt obligation (“CDO”).  This methodology results in the fair value of the assets of a static CMBS trust being equal to the fair value of its liabilities.

Mortgage Loans

Loans for which we have the intent and ability to hold for the foreseeable future or until maturity or payoff are reflected in mortgage loans held for investment on our consolidated balance sheets.  Loans held for investment with original maturities of one year or less are accounted for pursuant to the fair value option.  Loans held for investment with original maturities of greater than one year are recorded at their outstanding principal amount adjusted for any charge offs, allowances, deferred fees or costs, and any unamortized premiums or discounts. Unaccreted discounts or premiums are accreted to income utilizing a methodology that results in a level yield.

We provide an allowance for credit losses for mortgage loans held for investment that are considered to be impaired. The allowance for losses is based on our evaluation of various factors, including our historical loss experience, fair value of the collateral, operating performance of the collateral, strength of the borrower, and other factors, and is charged to earnings. Realized credit losses on loans are deducted from the allowance when they occur. Any loan recoveries are recorded as an increase to the allowance for losses when received.

Any loans for which management believes the collection of interest or principal pursuant according to the contractual terms of the loan documents is considered doubtful are placed on nonaccrual status.  For these loans, any cash receipts are treated first as a reduction of principal with income recognized only after cash receipts have reduced the principal balance of the loan to zero.  Among the factors we consider in making this determination are the financial condition of the borrower, the status of the underlying collateral and anticipated future events.

Loans for which we have the intent to sell or securitize are classified as held for sale.  We have elected the fair value option for all mortgage loans held for sale, resulting in the loans being carried at fair value with changes in fair value reflected in earnings.  Fair value of our held for sale mortgage loan portfolio is determined using securitized pricing, if available, otherwise a whole-loan pricing methodology is applied.  Interest income on all mortgage loans where we have exercised the fair value option is recognized based on contractual rates.

Land Held for Investment

Land held for investment is recorded at cost. We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is measured by comparing the carrying amount of an asset to the undiscounted future net cash flows expected to be generated by the asset. If such carrying amounts exceed the expected undiscounted future net cash flows, we adjust the carrying amount of the asset to its estimated fair value. For land under development or repositioning, fair value is determined using discounted expected future cash flows.

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Debt Issuance Costs

We incur structuring fees and other costs in connection with the issuance of our debt facilities, including our repurchase facilities. Such costs are deferred when incurred and amortized to interest expense over the term of the underlying debt or commitment period using either the effective interest method or the straight-line method in those cases where such method approximates the effective interest method.

Investments in Unconsolidated Entities

Investments in which we maintain an interest in excess of 20%, but not more than 50%, and/or have significant influence over the investee are accounted for in accordance with the equity method of accounting.  Differences, if any, between our carrying value and the underlying equity in the net assets of the investee are accounted for as if the investee were a consolidated subsidiary.  All other investments in unconsolidated entities are accounted for pursuant to the cost method of accounting.  We assess our ability to recover the carrying amounts of our investments in unconsolidated entities whenever events or changes in circumstances indicate that the carrying amount of the investments may not be recoverable. If the fair value of the investment is less than the carrying value and the decline in value is considered to be other than temporary, a write-down is recorded through equity in earnings of unconsolidated entities. Because no active market exists for our investees’ ownership interests, the determination of fair value is based on valuation methodologies, including discounted cash flows, and the ability of the investee to sustain an earnings capacity that justifies the carrying amount of the investment.

Goodwill and Intangible Assets

Goodwill is not amortized, but rather tested for impairment annually during the fourth quarter of each fiscal year, or more frequently if events or changes in circumstances indicate potential impairment. Goodwill at December 31, 2012 and 2011 represents the excess of the consideration paid in connection with the Recapitalization over the fair value of net assets acquired.

In testing goodwill for impairment, we follow Accounting Standards Update (“ASU”) No. 2011-08, “Testing Goodwill for Impairment.” The standard permits a qualitative assessment of whether it is more likely than not that the fair value of a reporting unit is less than its carrying value including goodwill.  If the qualitative assessment determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying value including goodwill, then no impairment is determined to exist for the reporting unit.  However, if the qualitative assessment determines that it is more likely than not that the fair value of the reporting unit is less than its carrying value including goodwill, we compare the fair value of that reporting unit with its carrying value, including goodwill. If the carrying value of a reporting unit exceeds its fair value, goodwill is considered impaired with the impairment loss equal to the amount by which the carrying value of the goodwill exceeds the implied fair value of that goodwill.

Our identifiable intangible assets consist of special servicing rights for both our domestic and European servicing operations.  The fair value measurement method has been elected for measurement of our domestic servicing asset.  Election of this method is necessary to conform to our election of the fair value option for measuring the assets and liabilities of the VIEs consolidated pursuant to ASC Topic 810.  The amortization method has been elected for our European servicing asset.  This asset is amortized in proportion to and over the period of estimated net servicing income, and is tested for potential impairment whenever events or changes in circumstances suggest that its carrying value may not be recoverable.

For purposes of testing our European servicing intangible for impairment, we first determine whether facts and circumstances exist that would suggest the carrying value of the intangible is not recoverable.  If so, we then compare the fair value of the servicing intangible with its carrying value. The estimated fair value of the intangible is determined using discounted cash flow modeling techniques which require

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management to make estimates regarding future net servicing cash flows, taking into consideration historical and forecasted loan defeasance rates, delinquency rates and anticipated maturity defaults. If the carrying value of the intangible exceeds its fair value, the intangible is considered impaired and an impairment loss is recognized for the amount by which carrying value exceeds fair value.

Variable Interest Entities

We evaluate all of our interests in VIEs for consolidation.  As part of this analysis, we first determine whether these interests represent variable interests.  When our interests are determined to be variable interests, we assess whether we are deemed to be the primary beneficiary of the VIE.   ASC 810 defines the primary beneficiary as the party that has both (i) the power to direct the activities of the VIE that most significantly impact its economic performance, and (ii) the obligation to absorb losses and the right to receive benefits from the VIE which could be potentially significant.  We consider our variable interests as well as any variable interests of our related parties in making this determination.  Where both of these factors are present, we are deemed to be the primary beneficiary and we consolidate the VIE.  Where either one of these factors is not present, we are not the primary beneficiary and do not consolidate the VIE.

To assess whether we have the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, we consider all facts and circumstances, including our role in establishing the VIE and our ongoing rights and responsibilities.  This assessment includes first, identifying the activities that most significantly impact the VIE’s economic performance; and second, identifying which party, if any, has power over those activities. In general, the parties that make the most significant decisions affecting the VIE or have the right to unilaterally remove those decision makers are deemed to have the power to direct the activities of a VIE.

To assess whether we have the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE, we consider all of our economic interests, including debt and equity investments, servicing fees, and other arrangements deemed to be variable interests in the VIE. This assessment requires that we apply judgment in determining whether these interests, in the aggregate, are considered potentially significant to the VIE. Factors considered in assessing significance include: the design of the VIE, including its capitalization structure; subordination of interests; payment priority; relative share of interests held across various classes within the VIE’s capital structure; and the reasons why the interests are held by us.

Our purchased investment securities include CMBS which are primarily comprised of the unrated and non-investment grade rated securities issued by CMBS trusts.  In certain cases, we may contract to provide special servicing activities for these CMBS trusts, or, as holder of the controlling class, we may have the right to name and remove the special servicer for these trusts.  In our role as special servicer, we provide services on defaulted loans within the trusts, such as foreclosure or work-out procedures, as permitted by the underlying contractual agreements.  In exchange for these services, we receive a fee.    These rights give us the ability to direct activities that could significantly impact the trust’s economic performance.  However, in those instances where an unrelated third party has the right to unilaterally remove us as special servicer, we do not have the power to direct activities that most significantly impact the trust’s economic performance.  We evaluated all of our positions in such investments for consolidation.

We also hold retained interests in securitization transactions which are CDOs, where CMBS assets from our balance sheet were transferred to an SPE, which then issued to investors various forms of interests in those assets.  We received cash and/or other interests in the SPE as proceeds for the assets transferred.  We generally serve as collateral administrator of these CDOs.  In this role, we perform certain administrative tasks as defined in the indenture in exchange for a fee.  This role also provides us with

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certain rights, including a right to purchase impaired assets from the trust if an event of default has not occurred.  Given the nature of the entity, its activities are relatively static until an event of default occurs.  At that time, the trustee or the senior note holders are allowed to exercise certain rights, including liquidation of the CDO’s collateral.

We assessed the variable interests we hold in CDO structures and determined that we are the primary beneficiary of certain of these structures.  This determination was based on the presumption that from inception of the CDO through the date of default, the most significant activity impacting the CDO’s economic performance is its initial structure.  Given our involvement in structuring the entity at inception and our subsequent role as collateral administrator, we have the power to direct activities that most significantly impact the CDO’s economic performance until an event of default occurs.  In addition, through our retention of the residual equity interest in the CDO at inception, we have the obligation to absorb losses or the right to receive benefits from the VIE that could be potentially significant to the VIE. Where both of these factors are present, we are deemed the primary beneficiary.

For VIEs in which we are determined to be the primary beneficiary, all of the underlying assets, liabilities and equity of the structures are recorded on our books, and the initial investment, along with any associated unrealized holding gains and losses, are eliminated in consolidation.  Similarly, the interest income earned from these structures, as well as the fees paid by these trusts to us in our capacity as special servicer, are eliminated in consolidation.  Further, an allocable portion of the identified servicing intangible asset associated with the servicing fee streams, and the corresponding allocable amortization or change in fair value of the servicing intangible asset are also eliminated in consolidation.  See Note 9 for further discussion regarding the impact to our financial statements from these consolidations.

We perform ongoing reassessments of: 1) whether any entities previously evaluated under the majority voting interest framework have become VIEs, based on certain events, and therefore subject to the VIE consolidation framework, and 2) whether changes in the facts and circumstances regarding our involvement with a VIE causes our consolidation conclusion regarding the VIE to change.

As stated in the Fair Value Option section above, we have elected the fair value option pursuant to ASC 825, Financial Instruments, in measuring the assets and liabilities of any VIEs we consolidate.  Fluctuations in the fair values of the VIE assets and liabilities, along with trust interest income and trust interest and administrative expenses, are presented net in income of consolidated VIEs in our consolidated statements of earnings.

Derivative Financial Instruments

Each derivative instrument is reflected as either an asset or liability in the consolidated balance sheets at its fair value. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated in a qualifying hedging relationship. Certain criteria must be met before an interest rate swap or other derivative instrument is accounted for as a hedge. This includes formal documentation at hedge inception of (i) the hedging relationship and our risk management objective and strategy for undertaking the hedge and (ii) an indication that the hedging relationship is expected to be highly effective in hedging the designated risk during the term of the hedge. Effectiveness is tested periodically, and at least quarterly.

We periodically enter into derivative financial instruments to hedge unpredictable changes in fair values related to our investment securities and mortgage loans held for sale. These derivatives hedge value changes resulting from both interest rates and credit quality and are reported in the consolidated balance sheets at fair value with changes in the fair value recognized in our consolidated statements of earnings.  Cash paid for such instruments, if any, is reflected as a derivative asset upon acquisition.

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We analyze our retained interests in CDO transactions and report any resulting embedded derivatives in the balance sheets at fair value, with any changes in fair value recorded in earnings.  A residual instrument is deemed to have an embedded interest rate derivative to the extent that a shortfall of cash flow could exist after the senior interest holders are paid due to adverse changes in interest rates.

Our derivative instruments are not leveraged or held-for-trading purposes. See Note 5 for further discussion of derivative financial instruments and hedging activities.

Foreign Currency

The assets and liabilities held by our foreign entities with a functional currency other than the U.S. dollar are translated into U.S. dollars at exchange rates in effect at the end of each reporting period. Foreign entity revenues and expenses are translated into U.S. dollars at the average rates that prevailed during the period. The resulting net translation gains and losses are reported as foreign currency translation adjustments, net of the related tax effect, in members’ equity as a component of accumulated other comprehensive earnings. At December 31, 2012 and 2011, accumulated other comprehensive earnings included $5.4 million and $3.4 million related to foreign currency translation adjustments. Realized foreign currency gains and losses and changes in the value of foreign currency monetary assets and liabilities are included in the determination of net income and are reported as foreign currency loss in our consolidated statements of earnings.

Upon sale or upon complete or substantially complete liquidation of an investment in a foreign entity, the amount attributable to that entity and accumulated in the translation adjustment component of other comprehensive earnings shall be removed from other comprehensive earnings and shall be reported as part of the gain or loss on sale or liquidation of the investment for the period during which the sale or liquidation occurs.

Revenue and Income Recognition

We typically seek to be the special servicer on CMBS transactions in which we invest. When we are appointed to serve in this capacity, we earn special servicing fees from the related activities performed, which consist primarily of overseeing the workout of under-performing and non-performing loans underlying the CMBS transactions. In addition, we receive management, asset acquisition, development and master servicing fees from third parties and unconsolidated affiliates. These fees are recognized in income in the period in which the services are performed and the revenue recognition criteria have been met. Development fees received from unconsolidated affiliates during the development period are recognized as revenue only to the extent of third party ownership interests in such unconsolidated entities.

Interest income on CMBS for which the fair value option has not been elected is recognized in accordance with the accounting guidance governing beneficial interests in securitized financial assets, whereby we estimate all cash flows attributable to an investment security on the date the security is acquired. The amount by which estimated cash flows exceed the initial investment is recognized as interest income over the life of the security using the effective interest method. Changes in expected cash flows result in prospective adjustments to interest income. Interest income on mortgage loans for which the fair value option is not elected is comprised of interest received plus the accretion of discount, if any, between the carrying value and unpaid principal balance using a methodology that results in a level yield.  Interest income on CMBS and mortgage loans for which the fair value option is elected is recognized based on the contractual rate of interest.

Revenues from sales of real estate including land held for investment and interests in unconsolidated entities are recognized using the full accrual method provided that various criteria relating to the terms of the transactions and our subsequent involvement with the sold real estate are met. Revenues relating to

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transactions that do not meet the established criteria are deferred and recognized when the criteria are met. Revenue from sales of real estate to unconsolidated affiliates is recognized only to the extent of the third party ownership interests in such unconsolidated entities.

Transfers of investment securities, mortgage loans, and investments in unconsolidated entities are accounted for as sales pursuant to the accounting guidance governing transfers and servicing of financial assets, providing that we have surrendered control over the assets and to the extent that we received consideration other than beneficial interests in the assets.  The cost of assets sold is based on the specific identification method.

Rental income is recognized on a straight-line basis over the respective lease term, commencing on the date that the lessee is granted access to the property. Contingent rents are not recognized until realized, which is when the tenant exceeds certain contractual thresholds specified in the lease.

Income Taxes

Following the Recapitalization, we completed a reorganization through which the majority of our subsidiaries converted to Delaware LLCs.  Accordingly, we are not generally subject to income taxes, as our income is taxed directly to our owners.  However, certain of our subsidiaries may still be subject to income taxes in certain jurisdictions.  Additionally, we retained the net tax liabilities of the Predecessor as of the date of the Recapitalization, which principally related to uncertain tax positions of the Predecessor.  Recognition of an uncertain tax position is based on an evaluation of whether the position meets the more likely than not threshold for recognition. Amounts recorded are based on our best estimate of the ultimate settlement of the positions.

We recognize tax positions in the financial statements only when it is more likely than not that the position will be sustained upon examination of the relevant taxing authority, based on the technical merits of the tax position.  A tax position is measured at the largest amount of benefit that will more likely than not be realized upon settlement. A liability is established for the differences between positions taken in a tax return and amounts recognized in the financial statements and no portion of the benefit is recognized in the consolidated statements of earnings. We report interest and penalties related to income tax matters as a component of income tax expense.

From time to time, certain of our subsidiaries may be subject to audits covering a variety of tax matters by taxing authorities in any taxing jurisdiction where we conduct our business. Additionally, there are several open tax years of the Predecessor that may be selected for audit.  While we believe that the tax returns filed by the Predecessor and any tax positions taken are supportable and accurate, some tax authorities may not agree with those positions. This can give rise to tax uncertainties which, upon audit, may not be resolved in our favor. Our Predecessor established accruals for various tax uncertainties that we believe are probable and reasonably estimable, and these accruals were retained by the Company following the Recapitalization. These accruals are based on certain assumptions, estimates and judgments, including estimates of amounts for settlements, associated interest and penalties.

Share-Based Compensation

In a business combination, share-based payments held by employees on the acquisition date that are not formally exchanged or replaced, but that continue under their original terms after the business combination, are accounted for as if the acquirer was obligated to issue replacement awards.  The portion of the deemed replacement awards attributable to precombination service is included in the consideration transferred for the acquiree, while the portion attributable to postcombination service is recognized as compensation expense in our postcombination financial statements with an equal offsetting increase to members’ equity.

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Share awards issued postcombination are measured at their respective fair values at the date of grant.  This fair value is expensed as compensation expense, based on our estimate of shares that will eventually vest, on a straight-line or accelerated basis over the vesting period. The fair value is determined using an income-based approach to measuring enterprise value.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. On a regular basis, management evaluates its estimates. Actual results could differ from those estimates.

Reclassification

Loan application fees previously reported as other income in the consolidated statement of earnings for the year ended December 31, 2011, have been reclassified to other fees to conform to the current year presentation.

New Accounting Pronouncements

In July 2012, the FASB issued ASU No. 2012-02, “Intangibles — Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment,” which provides entities the option of performing a qualitative assessment of whether it is more likely than not that an indefinite-lived intangible asset is impaired.  If the qualitative assessment determines that it is not more likely than not that the indefinite-lived intangible asset is impaired, then no impairment is determined to exist.  However, if the qualitative assessment determines that it is more likely than not that the indefinite-lived intangible asset is impaired, then the entity must quantitatively assess whether the asset is impaired by measuring the fair value of the asset.  If the carrying value of the indefinite-lived intangible asset exceeds its fair value then the asset is considered impaired. ASU No. 2012-02 is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012 with early adoption permitted.  Because we carry no indefinite-lived intangibles, this ASU will have no effect on our financial condition, results of operations or cash flows.

In December 2011, the FASB issued ASU 2011-11, “Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities” which requires new disclosures about balance sheet offsetting and related arrangements. For derivatives and financial assets and liabilities, the ASU requires disclosure of gross asset and liability amounts, amounts offset on the balance sheet, and amounts subject to the offsetting requirements but not offset on the balance sheet. In January 2013, the FASB issued ASU No. 2013-01 which amends this ASU to address implementation issues. The amendments clarify that the scope of ASU 2011-11 applies to derivatives accounted for in accordance with ASC Topic 815, “Derivatives and Hedging”, that are either offset in accordance with Section 210-20-45 or Section 815-10-45 or subject to an enforceable master netting arrangement or similar agreement. The guidance is effective January 1, 2013 and is to be applied retrospectively. Because this ASU impacts disclosures only, it will have no effect on our financial condition, results of operations or cash flows.

In February 2013, the FASB issued ASU No. 2013-02, “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income.” The objective of this ASU is to improve the reporting of reclassifications out of accumulated other comprehensive income. The amendments in this ASU require an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required under U.S. generally accepted accounting principles (“GAAP”) to be reclassified in its entirety to net income. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other

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disclosures required under U.S. GAAP that provide additional detail about those amounts. For nonpublic entities, the amendments are effective prospectively for reporting periods beginning after December 15, 2013. Early adoption is permitted.  We do not expect this ASU to have a significant impact on our consolidated financial statements.

2.    Recapitalization Transaction

As described in Note 1, we completed the Recapitalization on July 29, 2010.   Prior to this date, certain of the Lead Investors were already holders of notes representing approximately 74% of the Predecessor’s unsecured senior subordinated loan (the “Subordinated Loan”).  Concurrent with the new equity raise by the Lead Investors of $416.5 million, on the closing date, these Lead Investors acquired from the remaining note holders the approximately 26% balance of the Subordinated Loan, for a total cash payment to those remaining note holders of $25.0 million.  They then exchanged 100% of the outstanding Subordinated Loan, including accrued and unpaid interest, for equity interests in Holdco’s subsidiary, LNRPC, and the Subordinated Loan was extinguished.  As a result of this transaction, LNRPC became wholly owned by the Lead Investors.  Subsequent to the transaction, LNRPC reorganized as a Delaware LLC, as did the majority of its consolidated subsidiaries.

Due to our election of push down accounting, we accounted for the Recapitalization under the acquisition method of accounting.  Accordingly, the assets acquired and liabilities assumed as well as noncontrolling interests were recorded at 100% of their fair values at the Recapitalization date.  The purchase price was first allocated to the identified assets acquired and liabilities assumed based on their estimated fair values at the date of the transaction, and the excess was allocated to goodwill.  The consideration exchanged in the transaction and allocated pursuant to the acquisition method of accounting totaled $501.0 million, representing the new equity raise of $416.5 million, the debt to equity conversion of $84.0 million, and the portion of a vested share based payment awards deemed replaced of $0.5 million.  The following table summarizes the estimate of amounts of identified assets acquired and liabilities assumed at the Recapitalization date, before consolidation of securitization VIEs (in thousands):

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During the year ended December 31, 2011, we recognized $1.7 million in adjustments to the accrual for income taxes, which is included within accrued expenses and other liabilities in our consolidated balance sheets, and a corresponding adjustment to goodwill.  These adjustments related to the finalization of the income tax returns for our Predecessor.

3.    Restricted Cash

The following table provides a summary of restricted cash (in thousands):

4.    Investment Securities

Investment securities consist of investments in investment grade, unrated and non-investment grade rated portions of various issues of CMBS and the retained interests of non-investment grade rated notes and preferred interests issued through resecuritization transactions. Except for the consolidated securities held by Madison, which are classified as held-to-maturity, all of our investment securities are classified as available-for-sale.  As discussed in Notes 1 and 9, the majority of our investment securities, including all of Madison’s investment securities, are eliminated as a result of our consolidation of securitization VIEs.  As a result of this consolidation, we have elected the fair value option for the vast majority of our investment securities.

In general, principal payments on each class of security are made in order of seniority. Each class of security is, in effect, subordinate to all classes with earlier designations. The principal repayments on a particular class are dependent upon collections on the underlying mortgages, which are affected by prepayments, extensions and defaults. As a result, the actual maturity of any class of securities may differ from its stated maturity. We continue to receive principal payments from some of our securities, and some have matured entirely. At December 31, 2012, the stated maturities of our available-for-sale investment securities extended through 2051 and their weighted average coupon rates ranged from zero to 6.8%. Our potential yield, however, may be substantially greater than the coupon rates, because we purchase our investment securities at substantial discounts from the face amounts.  During the years ended December 31, 2012 and 2011, we sold investment securities for proceeds of $46.9 million and $62.5 million, respectively. Of these amounts, $21.5 million and $61.1 million during the years ended December 31, 2012 and 2011, respectively, relate to interests in VIEs which are eliminated in consolidation.  As such, these proceeds are included in issuances of debt of consolidated VIEs in our consolidated statements of cash flows.

Our investment securities are collateralized by pools of mortgage loans on commercial and multi-family residential real estate assets.  The risk associated with the performance of these mortgages is partially mitigated by the existence of our right to be the special servicer for certain of the securitization vehicles in

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which we invest. As special servicer, we impact the performance of the securitization by using our loan workout and asset management expertise to resolve non-performing loans.

The following table presents information about our consolidated available-for-sale and held-to-maturity investment securities (in thousands):

Activity related to credit losses:

During the years ended December 31, 2012 and 2011, we recorded OTTI of $0.1 million and $0.8 million, respectively, in our consolidated statements of earnings. There were no investment securities for which OTTI was bifurcated between earnings and accumulated other comprehensive income.

Securities with gross unrealized losses, and the length of time these investments have been in a continuous unrealized loss position:

As of December 31, 2012 and 2011, there were zero and $0.4 million, respectively, of investment securities that were in a continuous unrealized loss position for less than 12 months and no investment securities in a continuous unrealized loss position for 12 months or more.  Total unrealized losses on these securities as of December 31, 2011 were not material.

5.    Derivative Financial Instruments and Hedging Activities

The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated in a qualifying hedging relationship. There were no qualifying hedging relationships in place as of December 31, 2012 or 2011.  The following tables summarize our non-qualifying derivative assets and liabilities (in thousands):

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*100,000 SPDR S&P 500 ETF Trust shares

Hedging Objectives and Strategies

We do not enter into derivative instruments for speculative purposes. The counterparties to our arrangements are major financial institutions with which we and our affiliates may also have other financial relationships. These counterparties potentially expose us to loss in the event of their non-performance.  Generally, our derivative instruments with counterparties contain provisions that require us to post collateral when the derivatives are in a net liability position.  The provisions are generally dependent upon the dollar amounts in a liability position at any given time which exceed specific thresholds, as indicated in the relevant contracts.  In these circumstances, the counterparties could require additional collateral.  See Note 3 for amounts held as collateral related to our derivatives in a net liability position.

Cash Flow Hedging Instruments

We previously entered into interest rate swap agreements, to manage fluctuations in cash flows resulting from interest rate risk on our former credit facility. These swap agreements effectively changed the variable-rate cash flows on that debt obligation to fixed-rate cash flows.  In connection with those agreements, we were required to pay the counterparty a predetermined fixed stream of payments in exchange for a floating rate stream from the counterparty through each swap’s maturity date. The net amount paid to the counterparty totaled zero and $3.1 million for the years ended December 31, 2012 and 2011, respectively. Payments to the counterparty are reflected as an increase to interest expense and receipts as a reduction of interest expense.  There were no qualifying cash flow hedges during the years ended December 31, 2012 and 2011.

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Fair Value Hedging Instruments

To manage the risk associated with unpredictable changes in asset fair values related to our fixed-rate mortgage loans held for sale or fixed-rate available-for-sale securities, we periodically use derivative financial instruments, primarily interest rate swap agreements or credit index instruments.  During the years ended December 31, 2012 and 2011, we paid cash of $1.6 million and $12.9 million, respectively, to enter into credit index instruments.  For interest rate swap agreements, the net amount paid to the counterparty is reflected as loss on derivative financial instruments in our consolidated statements of  earnings.  There were no qualifying fair value hedges during the years ended December 31, 2012 and 2011 as these hedging instruments were either not designated in a qualifying hedge relationship at purchase or no longer met the criteria necessary to continue in a qualifying fair value hedging relationship.

During the year ended December 31, 2011, we terminated the majority of interest rate swaps originally intended to hedge our available-for-sale securities, as these hedges were no longer effective at hedging changes in fair value of these instruments.  In connection with these terminations, we paid $24.4 million to the respective swap counterparties.  In addition, we terminated an interest rate swap in the Archetype Fund in connection with the sale of our interests in this venture (see Note 9).  We paid $2.4 million to the swap counterparty to terminate this swap.

Financial Instruments Not Designated

The following table presents the effect of our non-qualifying derivative financial instruments on our consolidated statements of earnings (in thousands):