Investments in Unconsolidated Joint Ventures

3 Months Ended

Mar. 31, 2020

Equity Method Investments and Joint Ventures [Abstract]

Investments in Unconsolidated Joint Ventures

We have investments in several real estate joint ventures with various partners. As of March 31, 2020, the book value of these investments was $2.8 billion, net of investments with negative book values totaling $80.0 million for which we have an implicit commitment to fund future capital needs.

As of March 31, 2020 and December 31, 2019, 800 Third Avenue, 21 East 66th Street, 605 West 42nd Street, 333 East 22nd Street, and certain properties within the Stonehenge Portfolio are VIEs in which we are not the primary beneficiary. Our net equity investment in these VIEs was $138.1 million and $145.9 million as of March 31, 2020 and December 31, 2019, respectively. Our maximum loss is limited to the amount of our equity investment in these VIEs. See the "Principles of Consolidation" section of Note 2, "Significant Accounting Policies". All other investments below are voting interest entities. As we do not control the joint ventures listed below, we account for them under the equity method of accounting.

The table below provides general information on each of our joint ventures as of March 31, 2020:



Property	Partner	Ownership Interest⁽¹⁾	Economic Interest⁽¹⁾	Unaudited Approximate Square Feet
100 Park Avenue	Prudential Real Estate Investors	49.90%	49.90%	834,000
717 Fifth Avenue	Wharton Properties/Private Investor	10.92%	10.92%	119,500
800 Third Avenue	Private Investors	60.52%	60.52%	526,000
919 Third Avenue	New York State Teacher's Retirement System	51.00%	51.00%	1,454,000
11 West 34th Street	Private Investor/Wharton Properties	30.00%	30.00%	17,150
280 Park Avenue	Vornado Realty Trust	50.00%	50.00%	1,219,158
1552-1560 Broadway⁽²⁾	Wharton Properties	50.00%	50.00%	57,718
10 East 53rd Street	Canadian Pension Plan Investment Board	55.00%	55.00%	354,300
21 East 66th Street⁽³⁾	Private Investors	32.28%	32.28%	13,069
650 Fifth Avenue⁽⁴⁾	Wharton Properties	50.00%	50.00%	69,214
121 Greene Street	Wharton Properties	50.00%	50.00%	7,131
55 West 46th Street	Prudential Real Estate Investors	25.00%	25.00%	347,000
Stonehenge Portfolio	Various	Various	Various	1,439,016
605 West 42nd Street	The Moinian Group	20.00%	20.00%	927,358
11 Madison Avenue	PGIM Real Estate	60.00%	60.00%	2,314,000
333 East 22nd Street	Private Investors	33.33%	33.33%	26,926
400 East 57th Street⁽⁵⁾	BlackRock, Inc and Stonehenge Partners	51.00%	41.00%	290,482
One Vanderbilt	National Pension Service of Korea/Hines Interest LP	71.01%	71.01%	—
Worldwide Plaza	RXR Realty / New York REIT / Private Investor	24.35%	24.35%	2,048,725
1515 Broadway	Allianz Real Estate of America	56.87%	56.87%	1,750,000
2 Herald Square	Israeli Institutional Investor	51.00%	51.00%	369,000
115 Spring Street	Private Investor	51.00%	51.00%	5,218


(1)	Ownership interest and economic interest represent the Company's interests in the joint venture as of March 31, 2020. Changes in ownership or economic interests within the current year are disclosed in the notes below.

(2)

The acquisition price represents only the purchase of the 1552 Broadway interest, which comprised approximately 13,045 square feet. The joint venture also owns a long-term leasehold interest in the retail space and certain other spaces at 1560 Broadway, which is adjacent to 1552 Broadway. Beginning in April 2020, debt service and ground rent payments for this investment were not made primarily as a result of the failure of the primary tenant to pay rent. The Company, on behalf of the venture, is in discussions with the lessor and lender.


(3)	We hold a 32.28% interest in three retail units and one residential unit at the property and a 16.14% interest in three residential units at the property.


(4)	The joint venture owns a long-term leasehold interest in the retail space at 650 Fifth Avenue.

(5)

In October 2016, we sold a 49% interest in this property. Our interest in the property was sold within a consolidated joint venture owned 90% by the Company and 10% by Stonehenge. The transaction resulted in the deconsolidation of the venture's remaining 51% interest in the property. Our joint venture with Stonehenge remains consolidated resulting in the combined 51% interest being shown within investments in unconsolidated joint ventures on our balance sheet.

Disposition of Joint Venture Interests or Properties

We did not dispose of any investments in unconsolidated joint ventures during the three months ended March 31, 2020:

Joint Venture Mortgages and Other Loans Payable

We generally finance our joint ventures with non-recourse debt. In certain cases we may provide guarantees or master leases for tenant space, which terminate upon the satisfaction of specified circumstances or repayment of the underlying loans. The mortgage notes and other loans payable collateralized by the respective joint venture properties and assignment of leases at March 31, 2020 and December 31, 2019, respectively, are as follows (dollars in thousands):



Property	Economic Interest ⁽¹⁾		Initial Maturity Date	Final Maturity Date ⁽²⁾	Interest Rate ⁽³⁾			March 31, 2020		December 31, 2019
Fixed Rate Debt:
717 Fifth Avenue (mortgage)	10.92	%	July 2022	July 2022		4.45	%	$	300,000	$	300,000



Property	Economic Interest ⁽¹⁾		Initial Maturity Date	Final Maturity Date ⁽²⁾	Interest Rate ⁽³⁾			March 31, 2020			December 31, 2019
717 Fifth Avenue (mezzanine)	10.92	%	July 2022	July 2022		5.50	%	355,328			355,328
650 Fifth Avenue (mortgage)	50.00	%	October 2022	October 2022		4.46	%	210,000			210,000
650 Fifth Avenue (mezzanine)	50.00	%	October 2022	October 2022		5.45	%	65,000			65,000
21 East 66th Street	32.28	%	April 2023	April 2028		3.60	%	12,000			12,000
919 Third Avenue	51.00	%	June 2023	June 2023		5.12	%	500,000			500,000
1515 Broadway	56.87	%	March 2025	March 2025		3.93	%	834,084			838,546
11 Madison Avenue	60.00	%	September 2025	September 2025		3.84	%	1,400,000			1,400,000
800 Third Avenue	60.52	%	February 2026	February 2026		3.37	%	177,000			177,000
400 East 57th Street	41.00	%	November 2026	November 2026		3.00	%	97,202			97,735
Worldwide Plaza	24.35	%	November 2027	November 2027		3.98	%	1,200,000			1,200,000
Stonehenge Portfolio ⁽⁴⁾	Various		Various	Various		3.50	%	196,112			196,112
Total fixed rate debt								$	5,346,726		$	5,351,721
Floating Rate Debt:
280 Park Avenue	50.00	%	September 2020	September 2024	L+	1.73	%	$	1,200,000		$	1,200,000
1552 Broadway ⁽⁵⁾	50.00	%	October 2020	October 2022	L+	2.65	%	195,000			195,000
121 Greene Street	50.00	%	November 2020	November 2021	L+	1.50	%	15,000			15,000
11 West 34th Street	30.00	%	January 2021	January 2023	L+	1.45	%	23,000			23,000
100 Park Avenue	49.90	%	February 2021	February 2021	L+	1.75	%	356,027			356,972
One Vanderbilt ⁽⁶⁾	71.01	%	September 2021	September 2023	L+	2.50	%	838,936			732,928
2 Herald Square	51.00	%	November 2021	November 2023	L+	1.55	%	198,629			190,000
55 West 46th Street ⁽⁷⁾	25.00	%	August 2022	August 2024	L+	1.25	%	192,524			192,524
115 Spring Street	51.00	%	September 2023	September 2023	L+	3.40	%	65,550			65,550
10 East 53rd Street	55.00	%	February 2025	February 2025	L+	1.35	%	220,000			170,000
605 West 42nd Street	20.00	%	August 2027	August 2027	L+	1.44	%	550,000			550,000
21 East 66th Street	32.28	%	June 2033	June 2033	1 Year Treasury+	2.75	%	708			712
Total floating rate debt								$	3,855,374		$	3,691,686
Total joint venture mortgages and other loans payable								$	9,202,100		$	9,043,407
Deferred financing costs, net								(85,928		)	(91,538		)
Total joint venture mortgages and other loans payable, net								$	9,116,172		$	8,951,869


(1)	Economic interest represents the Company's interests in the joint venture as of March 31, 2020. Changes in ownership or economic interests, if any, within the current year are disclosed in the notes to the investment in unconsolidated joint ventures table above.


(2)	Reflects exercise of all available extension options. The ability to exercise extension options may be subject to certain tests based on the operating performance of the property.


(3)	Interest rates as of March 31, 2020, taking into account interest rate hedges in effect during the period. Floating rate debt is presented with the stated spread over the 30-day LIBOR, unless otherwise specified.


(4)	Amount is comprised of three mortgages totaling $132.6 million that mature in April 2028 and two mortgages totaling $63.5 million that mature in July 2029.


(5)	Beginning in April 2020, debt service and ground rent payments for this investment were not made primarily as a result of the failure of the primary tenant to pay rent. The Company, on behalf of the venture, is in discussions with the lessor and lender.


(6)	This loan is a $1.75 billion construction facility with reductions in interest cost based on meeting conditions, the first of which has been satisfied, and has an initial five-year term with two one-year extension options. Advances under the loan are subject to costs incurred.


(7)	This loan has a committed amount of $198.0 million, of which $5.5 million was unfunded as of March 31, 2020.

We are entitled to receive fees for providing management, leasing, construction supervision and asset management services to certain of our joint ventures. We earned $2.2 million from these services, net of our ownership share of the joint ventures, for the three months ended March 31, 2020. We earned $2.5 million from these services, net of our ownership share of the joint ventures, for the three months ended March 31, 2019. In addition, we have the ability to earn incentive fees based on the ultimate financial performance of certain of the joint venture properties.

The combined balance sheets for the unconsolidated joint ventures, at March 31, 2020 and December 31, 2019 are as follows (in thousands):



	March 31, 2020		December 31, 2019
Assets ⁽¹⁾
Commercial real estate property, net	$	14,392,907	$	14,349,628
Cash and restricted cash	329,205		336,189
Tenant and other receivables, related party receivables, and deferred rents receivable	346,837		371,065
Other assets	1,997,553		2,039,429
Total assets	$	17,066,502	$	17,096,311
Liabilities and equity ⁽¹⁾
Mortgages and other loans payable, net	$	9,116,172	$	8,951,869
Deferred revenue	1,459,796		1,501,616
Lease liabilities	902,161		897,380
Other liabilities	284,364		308,304
Equity	5,304,009		5,437,142
Total liabilities and equity	$	17,066,502	$	17,096,311
Company's investments in unconsolidated joint ventures	$	2,848,363	$	2,912,842

(1)

The combined assets, liabilities and equity for the unconsolidated joint ventures reflects the effect of step ups in basis on the retained, non-controlling interests in deconsolidated investments as a result of the adoption of ASC 610-20 in January 2018. In addition, at March 31, 2020, $122.6 million of net unamortized basis differences between the amount at which our investments are carried and our share of equity in net assets of the underlying property will be amortized through equity in net income (loss) from unconsolidated joint ventures over the remaining life of the underlying items having given rise to the differences.

The combined statements of operations for the unconsolidated joint ventures, from acquisition date through the three months ended March 31, 2020 and 2019, are as follows (in thousands):



	Three Months Ended March 31,
	2020			2019
Total revenues	$	282,520		$	307,519
Operating expenses	51,590			54,124
Real estate taxes	53,372			54,236
Operating lease rent	6,361			5,901
Interest expense, net of interest income	86,324			96,623
Amortization of deferred financing costs	4,814			5,216
Depreciation and amortization	98,584			104,331
Total expenses	301,045			320,431
Net loss before gain on sale ⁽¹⁾	$	(18,525	)	$	(12,912	)
Company's equity in net loss from unconsolidated joint ventures ⁽¹⁾	$	(12,814	)	$	(5,234	)

(1)

The combined statements of operations and the Company's equity in net loss for the unconsolidated joint ventures reflects the effect of step ups in basis on the retained non-controlling interests in deconsolidated investments as a result of the adoption of ASC 610-20 in January 2018.