Variable Interest Entities

9 Months Ended

Sep. 30, 2020

Variable Interest Entities [Abstract]

Other Real Estate Partnerships

The Other Real Estate Partnerships are variable interest entities ("VIEs") of the Operating Partnership and the Operating Partnership is the primary beneficiary, thus causing the Other Real Estate Partnerships to be consolidated by the Operating Partnership. In addition, the Operating Partnership is a VIE of the Company and the Company is the primary beneficiary.

The following table summarizes the assets and liabilities of the Other Real Estate Partnerships included in our consolidated balance sheets, net of intercompany amounts:


	September 30, 2020		December 31, 2019
ASSETS
Assets:
Net Investment in Real Estate	$	244,914	$	240,847


Other Assets, Net	42,778		69,982
Total Assets	$	287,692	$	310,829
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage Loans Payable, Net	$	6,334	$	11,009
Other Liabilities, Net	24,066		21,088
Partners' Capital	257,292		278,732
Total Liabilities and Partners' Capital	$	287,692	$	310,829

Joint Ventures

Through a wholly-owned TRS of the Operating Partnership, we own a 49% interest in a joint venture with a third party partner for the purpose of developing, leasing, operating and potentially selling land located in the Phoenix, Arizona metropolitan area ("Joint Venture I").

During the three months ended September 30, 2020, we entered into a second joint venture with third party partners for the purpose of developing, leasing, operating and potentially selling land in the Phoenix, Arizona metropolitan area ("Joint Venture II", and together with Joint Venture I, collectively, the "Joint Ventures"). The purchase price of the land was $70,530 and was acquired by Joint Venture II via cash equity contributions from us and our joint venture partners. Through a wholly-owned TRS of the Operating Partnership, we own a 43% interest in Joint Venture II. See Note 6.

Under the operating agreements for each of the Joint Ventures, we act as the managing member of each Joint Venture and are entitled to receive fees for providing management, leasing, development, construction supervision, disposition and asset management services to each Joint Venture. In addition, both of the Joint Ventures' operating agreements provide us the ability to earn incentive fees based on the ultimate financial performance of the Joint Ventures.

Joint Venture I has a 0.6 million square foot building under development (the "Project") at September 30, 2020. In connection with the Project, the Joint Venture I entered into a construction loan with a capacity of $28,000 with a third party lender (the "Joint Venture I Loan") during the nine months ended September 30, 2020. At September 30, 2020, the Joint Venture I Loan has a $4,826 outstanding balance. With respect to Joint Venture I Loan, we provided a guarantee to the lender, which, upon default of the loan, would require us to pay up to six months of interest and Project operating expenses with a maximum obligation of $500. Additionally, we provided the lender and our third party joint venture partner guarantees that require timely completion of construction of the Project as well as the payment, subject to certain exceptions, of cost overruns incurred in the development of the Project. Total estimated investment for the Project is $41,500 and Joint Venture I is using a third-party contractor to develop the building pursuant to a guaranteed maximum price contract. Lastly, we provided a guarantee to the lender related to typical non-recourse exceptions and an environmental indemnity. It is not possible to estimate the amount of additional costs, if any, that we may incur in connection with our completion guarantees to the third party lender and/or our joint venture partner as well as the non-recourse exception and environmental indemnity guarantees, however, we do not expect that we will be required to make any significant payments in satisfaction of these guarantees.

During the three and nine months ended September 30, 2020, we recognized fees of $166 and $353 from the Joint Ventures related to asset management and development services we provided to the Joint Ventures. At September 30, 2020, we had an aggregate receivable from the Joint Ventures of $262.

As part of our assessment of the appropriate accounting treatment for the Joint Ventures, we reviewed the operating agreements of each Joint Venture in order to determine our rights and the rights of our joint venture partners, including whether those rights are protective or participating. We found each operating agreement contains certain protective rights, such as the requirement of both members' approvals to sell, finance or refinance the property and to pay capital expenditures and operating expenditures outside of the approved budget; however, we also found that we and our joint venture partners jointly (i) approve the annual budget, (ii) approve certain expenditures, (iii) review and approve the Joint Venture's tax return before filing, and (iv) approve each lease at a developed property. We consider the latter rights substantive participation rights that result in shared, joint power over the activities that most significantly impact the performance of each Joint Venture. As such, we concluded to account for our investments in each Joint Venture under the equity method of accounting.