Contribution Transactions. We completed a transaction we refer to as the Contribution Transactions, creating Tiptree's current capital and ownership structure on July 1, 2013. TFP and Care Inc. each contributed substantially all of their assets to Operating Company in exchange for ownership in Operating Company. We operate our business through Operating Company, which directly or indirectly owns all of our assets. Operating Company is owned 25% by Tiptree and 75% by TFP. Beginning on July 1, 2014, partnership units of TFP are redeemable for Class A common stock of Tiptree. See Notes 1 and 15 to the financial statements for further details.
Total revenue for the year ended December 31, 2013 was $100.9 million, compared to $70.2 million for 2012, an increase of $30.7 million, or 43.7%. This increase was primarily due to an increase in administrative service fees of $26.5 million, interest income of $6.5 million, and rental revenue of $4.0 million, partially offset by a decrease in realized and unrealized gains of $7.4 million.
Values TAMCO at the lower of cost or market, and reflects the valuation of the purchase price based on the value of the partnership units issued in consideration for TAMCO.
On September 18, 2013, Operating Company entered into a Credit Agreement with Fortress and borrowed $50.0 million under the Credit Agreement. The Credit Agreement also includes an option for Operating Company to borrow additional amounts up to a maximum aggregate of $125.0 million, subject to satisfaction of certain customary conditions.
On July 25, 2013, Tiptree’s subsidiary Siena closed on a line of credit with Wells Fargo Bank. This non-recourse revolving line is for $65.0 million with an interest rate of LIBOR plus 250 basis points and a maturity date of January 25, 2017. As of December 31, 2013 there was $5.4 million outstanding on this line.
In accordance with ASC 740, the Company establishes valuation allowances for deferred tax assets when, in its judgment, it concludes that it is more likely than not that the deferred tax assets will not be realized. These judgments are based on projections of future income, including tax-planning strategies, by individual tax jurisdiction. Changes in economic conditions and the competitive environment may impact the accuracy of the Company’s projections. In accordance with ASC 740, on a quarterly basis, the Company assesses the likelihood that its deferred tax assets will be realized and determines if adjustments to the Company’s valuation allowance is appropriate. As a result of this assessment, as of December 31, 2013, the consolidated valuation allowance for Tiptree was $1.5 million. The increase and/or decrease in valuation allowance could have a significant negative or positive impact on our current and future earnings. In 2013, the Company recorded a net reduction of valuation allowances of $6.8 million. In 2012, the Company recorded net changes in valuation allowances of $1.8 million.
We conducted our audits in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
The Company has determined that the measurement date for restricted shares and options awarded to nonemployees occurs when the restricted shares and options vest. The Company initially measures the cost of an award of restricted share units and options to nonemployees at the fair value of the restricted share units on the date awarded and subsequently measures the cost of the restricted shares and options at their fair value at each vesting and reporting date throughout the vesting period. The initial compensation cost and subsequent changes thereto are charged to expense over the vesting period with a corresponding credit to capital.
On June 24, 2013 the Company terminated an interest rate swap contract with a notional amount of $20,000. In November and December 2013, the Company entered into six new interest rate swaps with a combined notional amount of $43,988 in order to hedge interest rate risk associated with its real estate portfolio. All of these swaps have the same counterparty. These swaps are included as a component of trading investments on the Company’s consolidated balance sheet.
In August 2011, the Company acquired a 27.59% interest in Star Asia Opportunity, LLC (SAO). SAO initially held a portfolio of six Japanese commercial real estate properties. During 2012, these properties were sold and the Company received distributions totaling $4,982. The remaining residual interest in SAO is expected to be distributed in 2014 at which time SAO will be dissolved.
Also included in debt are any warehouse lines outstanding associated with the Company’s CLOs. As of December 31, 2013 there was $133,715 outstanding for Telos 5.
In December 2013, affiliates of Care refinanced an internal bridge loan for the Terraces Portfolio, by entering into two separate loans from First Niagara Bank with an aggregate balance of $15,975 as of December 31, 2013. Both of these loans amortize over a twenty-five year period at a weighted average floating rate of LIBOR + 2.50%. These loans are secured by separate first priority mortgages on each of the properties. A breach of representations or covenants could result in a default under each of these loans, which would result in all amounts owing under applicable loan to become immediately due and payable.
The following table summarizes the balance of the Company’s debt holdings excluding notes payable of consolidated VIE CLOs at (See Note 3 for notes payable of the consolidated VIE CLOs):
Note payable relates to PFG’s acquisition of the administrative services rights from The Hartford and TFP payment for Series A preferred stock and common shares of PFG (See Note 12-Debt).
On March 14, 2014, 28,869 shares of immediately vested Class A Common Stock with an aggregate market value of $216 were issued to employees and persons providing services to the Company as incentive compensation for 2013 under the 2013 Equity Plan.