Question-and-Answer Session
Operator
(Operator instructions) Your first question comes from Douglas Harter – Credit Suisse.
Douglas Harter – Credit Suisse
Could you walk us through the valuation you’re carrying on the JV investments?
Mike Angerthal
As you know we have eight joint ventures. We invested $77million of equity in those eight joint ventures. Right now the carrying value is approximately $64 million. We’ve depreciated and amortized some of the costs through the income statement over time. And we’ve gone through our standard quarterly process to evaluate the carrying amount on each of those so I think the carrying value is reflective of the fair value of those assets.
Douglas Harter – Credit Suisse
Status as to where any of those properties are as far as generating positive cash flow, back towards you guys?
Mike Angerthal
On an AFFO contribution basis, they’re literally performing at about a break even mark from cash flow. And there are some pluses and minuses. As you know the strategy there was to do turnaround over a two to four year period of time, there would be modest contribution on an ongoing basis and then any return would be recognized upon the exit.
And as you know, we announced earlier that we’re not going to be investing in this time of product. We’re also looking to opportunisticly exit these given the market environment we’re being selective on how and when we exit and we do see some opportunities that we think will contribute over the course of the next two quarters, a quarter or two and we’ll look to protect our capital when we exit opportunities.
Operator
Your last question comes from [Tim Wengert] – Deutsche Bank.
[Tim Wengert] – Deutsche Bank
I was wondering if you could talk about your new risk rating system and how that went this quarter as you reviewed all of your assets and are you quantifying it and what did you learn by doing it?
Ken Witkin
Initially since all risk rating systems, at least my previous experience, we had no risk rating system at the company and so initially we really put in place a very basic of a one to five scale. Five being non-performer, one being excellent performer, low leverage.
We sort of calibrated each level each level of the risk rating system to various financial benchmarks. What we did was we rated every loan in a portfolio. What this has allowed us to do, which is typical of these systems is I have a portfolio review meeting every two weeks and we focus on the fives, obviously the most troubled assets and the fours which are our watch list.
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