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Variable Interest Entities
12 Months Ended
Dec. 31, 2013
Variable Interest Entities
7. Variable Interest Entities

Consolidated VIEs — The Company has nine wholly-owned subsidiaries, which are VIEs due to following:

 

  (1) Three of these subsidiaries are single property entities, designed to own and lease their respective properties to single tenants, for which buy-out options are held by the respective tenants that are formula based.

 

  (2) Three of these subsidiaries are single property entities, designed to own and lease their respective properties to multiple tenants, which are subject to either a ground lease or an air rights lease that include buy-out and put options held by either the tenant or landlord under the applicable lease.

 

  (3) Three of these subsidiaries are development entities in which the third-party developers have an opportunity to earn promoted interest payments after certain net operating income targets and internal rate of return targets have been met.

The Company determined it is the primary beneficiary and holds a controlling financial interest in each of the aforementioned property and development entities due to the Company’s power to direct the activities that most significantly impact the economic performance of the entities, as well as its obligation to absorb the losses and its right to receive benefits from these entities that could potentially be significant to these entities. As such, the transactions and accounts of these VIEs are included in the accompanying condensed consolidated financial statements. The Company did not own these entities as of December 31, 2012.

The aggregate carrying amount and major classifications of the consolidated assets that can be used to settle obligations of the VIEs and liabilities of the consolidated VIEs that are non-recourse to the Company as of December 31, 2013 and 2012 are as follows (in thousands):

 

     December 31,
2013
     December 31,
2012
 

Assets:

     

Real estate investment properties, net

   $ 72,053       $ —     
  

 

 

    

 

 

 

Real estate under development, including land

   $ 16,210       $ 8,399   
  

 

 

    

 

 

 

Intangibles, net

   $ 4,535       $ —     
  

 

 

    

 

 

 

Cash

   $ 727       $ 9   
  

 

 

    

 

 

 

Loan costs, net

   $ 912       $ 548   
  

 

 

    

 

 

 

Other

   $ 382       $ 467   
  

 

 

    

 

 

 

Liabilities:

     

Mortgages and other notes payable

   $ 52,596       $ 2   
  

 

 

    

 

 

 

Accounts payable and accrued expenses

   $ 309       $ 7   
  

 

 

    

 

 

 

Accrued development costs

   $ 7,047       $ 311   
  

 

 

    

 

 

 

Other liabilities

   $ 939       $ —     
  

 

 

    

 

 

 

Due to related parties

   $ 112       $ 71   
  

 

 

    

 

 

 

The Company’s maximum exposure to loss as a result of its involvement with these VIEs is limited to its net investment in these entities which totaled approximately $33.8 million as of December 31, 2013. The Company’s exposure is limited because of the non-recourse nature of the borrowings of the VIEs.

Unconsolidated VIEs — The Company determined that the borrowing entity under its note receivable from related party represents a VIE due to the transaction structure; refer to Note 11, “Related Party Arrangements” for additional information.