Variable Interest Entities

12 Months Ended

Dec. 31, 2021

Variable Interest Entities [Abstract]

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:


	December 31, 2021		December 31, 2020
ASSETS
Assets:
Net Investment in Real Estate	$	277,984	$	245,396


Operating Lease Right-of-Use Assets	13,087		13,173
Cash and Cash Equivalents	9,126		4,090


Deferred Rent Receivable	10,984		9,219

Prepaid Expenses and Other Assets, Net	9,480		8,077

Total Assets	$	320,661	$	279,955
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage Loans Payable, Net	$	—	$	6,292
Accounts Payable, Accrued Expenses and Other Liabilities	9,496		10,067
Operating Lease Liabilities	10,277		10,304
Rents Received in Advance and Security Deposits	7,470		4,130

Partners' Capital	293,418		249,162
Total Liabilities and Partners' Capital	$	320,661	$	279,955

Joint Ventures

Through a wholly-owned TRS of the Operating Partnership, we own a 49% interest in a joint venture ("Joint Venture I") and 43% interest in another joint venture ("Joint Venture II", together with Joint Venture I, the "Joint Ventures"). The Joint Ventures were both formed for the purpose of developing, leasing, operating and potentially selling land located in the Phoenix, Arizona metropolitan area. During the year ended December 31, 2021, Joint Venture I sold its remaining acres of land and ceased operations.

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

During the years ended December 31, 2021 and 2020, we earned fees of $407 and $951, respectively, from the Joint Ventures related to asset management and development services we provided to the Joint Ventures, of which we deferred recognition of $86 and $361, respectively, due to our economic interest in the Joint Ventures. These fees are recorded in the Other Revenue line item in the consolidated statements of operations. At December 31, 2021 and 2020, we had a receivable from the Joint Ventures of $56 and $90, respectively.

Net income of the Joint Ventures for the years ended December 31, 2021 and 2020 was $14,905 and $13,568, respectively. Included in net income during the year ended December 31, 2021 is gain on sale of real estate of $15,160 related to the sale of 138 net developable acres of land for which our economic share of the gain on sale, inclusive of incentive fees, is $10,166. However, since the Company was the purchaser of the 138 net developable acres from Joint Venture I, we netted our portion of gain on sale and incentive fees against the basis of the land acquired. Included in net income during the year ended December 31, 2020 is gain on sale of real estate of $13,932 related to the sale of a 0.6 million square foot building as well as 93 net developable acres of land for which our economic share of the gain on sale, inclusive of incentive fees, is $9,501. However, since the Company was the purchaser of the 0.6 million square foot building from Joint Venture I, we netted our portion of gain on sale and incentive fees of $4,781 against the basis of the real estate acquired.

For the period ended May 11, 2021 and the year ended December 31, 2020, we earned incentive fees of $3,024 and $2,674, respectively, from Joint Venture I, for which $3,024 and $1,338, respectively, was netted against the basis of the real estate we acquired from Joint Venture I. The incentive fees not netted against the basis of the real estate are reflected in the Equity In Income of Joint Ventures line item in the consolidated statements of operations.

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. Each operating agreement contains certain protective rights, such as the requirement of both members' approval to sell, finance or refinance the property and to pay capital expenditures and operating expenditures outside of the approved budget. Also, 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.