REDEEMABLE NONCONTROLLING INTERESTS

6 Months Ended

Jun. 30, 2024

REDEEMABLE NONCONTROLLING INTERESTS [Abstract]

REDEEMABLE NONCONTROLLING INTERESTS

9. REDEEMABLE NONCONTROLLING INTERESTS

The Operating Partnership’s net income and loss will generally be allocated to the general partner and the limited partners in accordance with the respective percentage interest in the OP Units issued by the Operating Partnership.

The Operating Partnership issued OP Units to the Advisor and BCI IV Advisors Group LLC (the “Former Sponsor”) as payment of the performance participation allocation (also referred to as the performance component of the advisory fee) pursuant to that certain advisory agreement by and among the Company, the Operating Partnership and the Advisor (the “Advisory Agreement”). We have classified these OP Units as redeemable noncontrolling interests in mezzanine equity on the condensed consolidated balance sheets. The redeemable noncontrolling interests are recorded at the greater of the carrying amount, adjusted for its share of the allocation of income or loss and dividends, or the redemption value, which is equivalent to fair value, of such OP Units at the end of each measurement period.

The following table summarizes the redeemable noncontrolling interests activity for the six months ended June 30, 2024 and 2023:

	For the Six Months Ended June 30, 2024			For the Six Months Ended June 30, 2023
($ and units in thousands)	$		Units	$		Units
Balance at beginning of the year	$	114,310	8,346	$	69,553	4,532
Settlement of prior year performance participation allocation (1)		—	—		62,667	4,106
Distributions to redeemable noncontrolling interests		(2,504)	—		(2,284)	—
Redemptions of redeemable noncontrolling interests		(1,000)	(79)		—	—
Net loss attributable to redeemable noncontrolling interests		(1,586)	—		(3,018)	—
Change from cash flow hedging activities and available-for-sale debt securities attributable to redeemable noncontrolling interests		487	—		59	—
Redemption value allocation adjustment to redeemable noncontrolling interests (2)		(1,715)	—		(911)	—
Ending balance	$	107,992	8,267	$	126,066	8,638

(1) The performance hurdle was not met for the year ended December 31, 2023 and no performance participation allocation expense was recognized. The 2022 performance participation allocation in the amount of $140.5 million became payable on December 31, 2022, and the Advisor elected to settle a portion of the amount owed in cash in the amount of $77.8 million, and the remainder in 4.1 million Class I OP Units in January 2023 to the holder of a separate series of partnership interests in the Operating Partnership with special distribution rights (the “Special Units”), AIREIT Incentive Fee LP (the “Special Unit Holder”).

(2) Represents the adjustment recorded to mark to the redemption value, which is equivalent to fair value, as of June 30, 2024 and 2023.