XML 66 R11.htm IDEA: XBRL DOCUMENT v3.10.0.1
Consolidated and unconsolidated real estate joint ventures (Notes)
12 Months Ended
Dec. 31, 2018
Equity Method Investments and Joint Ventures [Abstract]  
Investments in Unconsolidated Real Estate Joint Ventures

From time to time, we enter into joint venture agreements through which we own a partial interest in real estate entities that own, develop, and operate real estate properties. As of December 31, 2018, we had the following properties that were held by our real estate joint ventures:
 
Property
 
Market
 
Submarket
 
Our Ownership Interest
 
RSF
Consolidated joint ventures:(1)
 
 
 
 
 
 
 
 
 
 
 
 
225 Binney Street
 
Greater Boston
 
Cambridge
 
 
30.0
%
 
 
305,212

 
 
409 and 499 Illinois Street
 
San Francisco
 
Mission Bay/SoMa
 
 
60.0
%
 
 
455,069

 
 
1500 Owens Street
 
San Francisco
 
Mission Bay/SoMa
 
 
50.1
%
 
 
158,267

 
 
Campus Pointe by Alexandria(2)
 
San Diego
 
University Town Center
 
 
55.0
%
 
 
798,799

 
 
9625 Towne Centre Drive
 
San Diego
 
University Town Center
 
 
50.1
%
 
 
163,648

 
Unconsolidated joint ventures:(1)
 
 
 
 
 
 
 
 
 
 
 
 
Menlo Gateway
 
San Francisco
 
Greater Stanford
 
 
38.5
%
(3) 
 
772,983

 
 
1401/1413 Research Boulevard
 
Maryland
 
Rockville
 
 
65.0
%
(4) 
 
(5)
 
704 Quince Orchard Road
 
Maryland
 
Gaithersburg
 
 
56.8
%
(4) 
 
79,931

 
 
1655 and 1725 Third Street
 
San Francisco
 
Mission Bay/SoMa
 
 
10.0
%
 
 
593,765

 

(1)
In addition to the consolidated real estate joint ventures listed, various partners hold insignificant noncontrolling interests in four other joint ventures in North America, and we hold an insignificant noncontrolling interest in one unconsolidated real estate joint venture in North America.
(2)
Includes only 10290 and 10300 Campus Point Drive and 4110 Campus Point Court in our University Town Center submarket. Excludes 10260 Campus Point Drive and 4161 Campus Point Court.
(3)
As of December 31, 2018, we have an ownership interest in Menlo Gateway of 38.5% and expect our ownership to increase to 49% through future funding of construction costs in 2019.
(4)
Represents our ownership interest; our voting interest is limited to 50%.
(5)
Joint venture with a distinguished retail real estate developer for the development of an approximate 90,000 RSF retail shopping center.

Our consolidation policy is fully described under the “Consolidation” section within Note 2 – “Summary of Significant Accounting Policies” to our consolidated financial statements. Consolidation accounting is highly technical, but its framework is primarily based on the controlling financial interests and benefits of the joint ventures. We generally consolidate a joint venture that is a legal entity that we control (i.e., we have the power to direct the activities of the joint venture that most significantly affect its economic performance) through contractual rights, regardless of our ownership interest, and where we determine that we have benefits through the allocation of earnings or losses and fees paid to us that could be significant to the joint venture (the “VIE model”). We also generally consolidate joint ventures when we have a controlling financial interest through voting rights and where our voting interest is greater than 50% (the “voting model”). Voting interest differs from ownership interest for some joint ventures. We account for joint ventures that do not meet the consolidation criteria under the equity method of accounting by recognizing our share of income and losses. The table below shows our categorization of our existing significant joint ventures under the consolidation framework:
Property
 
Consolidation Model
 
Voting Interest
 
Consolidation Analysis
 
Conclusion
 
 
 
 
 
 
 
 
 
225 Binney Street
 
VIE model

 
Not applicable under VIE model
 
We have control and benefits that can be significant to the joint venture; therefore, we are the primary beneficiary of each VIE
 
Consolidated
409 and 499 Illinois Street
 
1500 Owens Street
 
Campus Pointe by Alexandria
 
9625 Towne Centre Drive
 
Menlo Gateway
 
 
We do not control the joint venture and are therefore not the primary beneficiary
Equity method of accounting
1401/1413 Research Boulevard
 
704 Quince Orchard Road
 
Voting model
 
Does not exceed 50%
Our voting interest is 50% or less
 
1655 and 1725 Third Street
 

Consolidated VIEs’ balance sheet information

The table below aggregates the balance sheet information of our consolidated VIEs as of December 31, 2018 and 2017 (in thousands):

 
 
December 31,
 
 
2018
 
2017
Investments in real estate
 
$
1,108,385

 
$
1,047,472

Cash and cash equivalents
 
42,178

 
41,112

Other assets
 
74,901

 
68,754

Total assets
 
$
1,225,464

 
$
1,157,338

 
 
 
 
 
Secured notes payable
 
$

 
$

Other liabilities
 
59,336

 
52,201

Total liabilities
 
59,336

 
52,201

Redeemable noncontrolling interests
 
874

 

Alexandria Real Estate Equities, Inc.’s share of equity
 
624,349

 
584,160

Noncontrolling interests’ share of equity
 
540,905

 
520,977

Total liabilities and equity
 
$
1,225,464

 
$
1,157,338

 
 
 
 
 


In determining whether to aggregate the balance sheet information of our consolidated VIEs, we considered the similarity of each VIE, including the primary purpose of these entities to own, manage, operate, and lease real estate properties owned by the VIEs, and the similar nature of our involvement in each VIE as a managing member. Due to the similarity of the characteristics, we present the balance sheet information of these entities on an aggregated basis. For each of our consolidated VIEs, none of its assets have restrictions that limit their use to settle specific obligations of the VIE. There are no creditors or other partners of our consolidated VIEs that have recourse to our general credit. Our maximum exposure to our consolidated VIEs is limited to our variable interests in each VIE.

Unconsolidated real estate joint ventures

As of December 31, 2018 and 2017, our investments in unconsolidated real estate joint ventures accounted for under the equity method of accounting presented in our consolidated balance sheet consist of the following (in thousands):
Property
 
December 31, 2018
 
December 31, 2017
Menlo Gateway
 
$
186,504

 
$
78,070

1401/1413 Research Boulevard
 
8,197

 
7,308

360 Longwood Avenue
 

 
25,240

704 Quince Orchard Road
 
4,547

 

1655 and 1725 Third Street
 
34,917

 

Other
 
3,342

 

 
 
$
237,507

 
$
110,618

    
Our maximum exposure to our unconsolidated VIEs is limited to our investment in each VIE.

We had a 27.5% ownership interest in an unconsolidated real estate joint venture that owned a building aggregating 210,709 RSF, located in the Longwood Medical Area submarket of Greater Boston. In September 2018, we sold our partial interest in this unconsolidated real estate joint venture for a contractual sales price, net of debt repaid, of $70.0 million, which represents a gross sales price of $1,659 per RSF. We received proceeds of $68.6 million, net of closing costs. We have elected as an accounting policy to reflect unconsolidated joint venture distributions in our consolidated statements of cash flows using the nature of the distribution approach. Accordingly, the net proceeds were classified as return of capital from unconsolidated real estate joint ventures within the investing activities section of our consolidated statements of cash flows for the year ended December 31, 2018. For the year ended December 31, 2018, in connection with the sale, we recognized a gain of $35.7 million, net of closing costs and other liabilities of the joint venture, which is reflected in equity in earnings of unconsolidated real estate joint ventures.

In August 2018, our unconsolidated real estate joint venture at Menlo Gateway, located in our Greater Stanford submarket of San Francisco, refinanced the secured note payable related to Phase I of the project. The new $145.0 million loan bears interest at a fixed rate of 4.15%, and the net proceeds were used to repay the outstanding balance of $133.1 million of the previous secured note payable. For the year ended December 31, 2018, in connection with the refinancing, we recognized a gain on early extinguishment of debt of $761 thousand related to our share of the write-off of unamortized premiums, which is reflected in equity in earnings of unconsolidated real estate joint ventures.

As of December 31, 2018, our unconsolidated real estate joint ventures have the following non-recourse secured loans that include the following key terms (dollars in thousands):
 
 
 
 
Maturity Date
 
Stated Interest Rate
 
Interest Rate(1)
 
100% at Joint Venture Level
 
Unconsolidated Joint Venture
 
Our Share
 
 
 
 
Debt Balance(2)
 
Remaining Commitments
 
1401/1413 Research Boulevard
 
65.0%
 
 
5/17/20
 
 
L+2.50%
 
5.87%
 
$
20,181

 
$
7,435

 
1655 and 1725 Third Street
 
10.0%
 
 
6/29/21
 
 
L+3.70%
 
6.05%
 
168,366

 
206,634

 
704 Quince Orchard Road
 
56.8%
 
 
3/16/23
 
 
L+1.95%
 
4.66%
 
4,903

 
9,940

 
Menlo Gateway, Phase II
 
38.5%
 
 
5/1/35
 
 
4.53%
 
N/A
 

 
157,270

 
Menlo Gateway, Phase I
 
38.5%
 
 
8/10/35
 
 
4.15%
 
4.18%
 
144,338

 
N/A

 
 
 
 
 
 
 
 
 
 
 
 
 
$
337,788

 
$
381,279

 

(1)
Includes interest expense, amortization of loan fees, and amortization of premiums (discounts) as of December 31, 2018.
(2)
Represents outstanding principal, net of unamortized deferred financing costs and premiums (discounts) as of December 31, 2018.