Investments in Equity Affiliates

12 Months Ended

Dec. 31, 2021

Investments in Equity Affiliates

Investments in Equity Affiliates

Note 8 —Investments in Equity Affiliates

We account for all investments in equity affiliates under the equity method. A summary of these investments is as follows (in thousands):

					UPB of Loans to
	Investments in Equity Affiliates at				Equity Affiliates at
Equity Affiliates	December 31, 2021		December 31, 2020		December 31, 2021
Arbor Residential Investor LLC	$	65,756	$	59,150	$	—
AMAC Holdings III LLC		13,772		10,308		—
Fifth Wall Ventures III		5,409		—		—
North Vermont Avenue		2,419		2,496		—
Lightstone Value Plus REIT L.P.		1,895		1,895		—
JT Prime		425		425		—
West Shore Café		—		—		1,687
Lexford Portfolio		—		—		—
East River Portfolio		—		—		—
Total	$	89,676	$	74,274	$	1,687

Arbor Residential Investor LLC (“ARI”). We invested $9.6 million for a 50% interest in ARI, with our former manager (ACM) holding the remaining 50%. ARI was formed to hold a 50% interest in Wakefield Investment Holdings LLC (“Wakefield”), an entity that was formed with a third-party to hold a controlling interest (65%) in a residential mortgage banking business. ARI has no other assets, liabilities or activity other than its investment in Wakefield. In January 2021, an equity investor in the underlying residential mortgage banking business exercised their right to purchase an additional interest in this investment, which decreased our indirect interest from 16.3% to 12.3%. The allocation of income is based on the underlying agreements, which may be different than our indirect interest, and was 9.2% as of December 31, 2021. We account for our ownership interest in ARI under the equity method of accounting and ARI accounts for its ownership interest in Wakefield under the equity method of accounting. During 2021, 2020 and 2019, we recorded income of $34.6 million, $75.7 million and $7.2 million, respectively, to income from equity affiliates in the consolidated statements of income. We also received $28.0 million and $43.2 million in cash distributions from this investment during 2021 and 2020, respectively, which were classified as returns of capital. We have included the audited financial statements of Wakefield in this report.

AMAC Holdings III LLC (“AMAC III”). We committed to a $30.0 million investment (of which $20.3 million was funded as of December 31, 2021) for an 18% interest in a multifamily-focused commercial real estate investment fund that is sponsored and managed by our chief executive officer and one of his immediate family members. During 2021 and 2020, the loss recorded from this investment was $1.3 million and $0.9 million, respectively, and the operating results for 2019 were de minimus. During 2021 and 2020, we received cash distributions from this investment totaling $3.8 million and $0.1 million, respectively, which were classified as returns of capital.

Fifth Wall Ventures III. During the fourth quarter of 2021, we committed to a $25.0 million investment (of which $5.4 million was funded as of December 31, 2021) for a 7.6% interest in two related private equity funds whose investment objective is to invest primarily in technology, technology-enabled or technology-related companies that are relevant or complementary to the build environment, including real estate or real estate related industries. We have no role in the management of the investment funds. Operating results from this investment were de minimis in 2021.

North Vermont Avenue. We invested $2.4 million for an initial 85% noncontrolling interest in a joint venture that acquired three parcels of land with multiple structures. The joint venture intends to tear down the existing structures and construct a new 202-unit multifamily complex with ground floor retail. Operating results from this investment were de minimis for all periods presented.

Lightstone Value Plus REIT L.P. / JT Prime. We own a $1.9 million interest in a joint venture that holds common operating partnership units of Lightstone Value Plus REIT L.P. (“Lightstone”). We also own a 50% noncontrolling interest in a joint venture, JT Prime, which holds common operating partnership units of Lightstone at a carrying value of $0.4 million. Operating results from these investments were de minimis for all periods presented.

West Shore Café. We own a 50% noncontrolling interest in the West Shore Lake Café, a restaurant/inn lakefront property in Lake Tahoe, California. We provided a $1.7 million first mortgage loan to an affiliated entity to acquire property adjacent to the original property, which is scheduled to mature in September 2025 and bears interest at LIBOR plus 4.0%. During 2018, we determined that this investment exhibited indicators of impairment and recorded an other-than-temporary impairment of $2.2 million for the full carrying amount of this investment and fully reserved the $1.7 million first mortgage loan.

Lexford Portfolio. We own a less than $0.1 million noncontrolling equity interest in Lexford, a portfolio of multifamily assets. In 2020 and 2019, we received distributions from this investment and recognized income totaling $1.1 million and $3.5 million, net of expenses, respectively. As a result of COVID-19, Lexford did not make any distributions to its equity holders in 2021.

East River Portfolio. We invested $0.1 million for a 5% interest in a joint venture that owns two multifamily properties. The joint venture is comprised of a consortium of investors (which includes, among other unaffiliated investors, certain of our officers, our chief executive officer and certain other related parties) who together own an interest of 95%. Operating results from this investment were de minimis for all periods presented.

Tapestry on the River. During the third quarter of 2021, we invested $14.0 million for a 48.9% equity interest in a joint venture with a third-party that was formed to invest in an apartment community. During the fourth quarter of 2021, this joint venture was dissolved, and we received a $14.7 million distribution and recorded a $0.7 million gain.

Emerson at Forney. During the third quarter of 2021, we invested $3.0 million for an 11.1% equity interest in a joint venture with a third-party that was formed to invest in an apartment community. During the fourth quarter of 2021, this joint venture was dissolved, and we received a $3.2 million distribution and recorded a $0.2 million gain.

Century Summerfield Apartments. During the first quarter of 2021, we funded $17.0 million of a total committed investment of $20.0 million for a 50% equity interest in a joint venture with a third-party that was formed to invest in an apartment community. During the second quarter of 2021, this joint venture was dissolved, and we received a $17.2 million distribution and recorded a $0.2 million gain.

See Note 18 for details of certain investments described above.