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Related-Party Transactions
6 Months Ended
Jun. 30, 2024
Related-Party Transactions  
Related-Party Transactions

12. Related-Party Transactions

The Company has not historically operated as a standalone business and has various relationships with HHH whereby HHH provides services to the Company. The Company also engages in transactions with CCMC and generates rental revenue by leasing space to equity method investees, which are related parties, as described below.

Net Transfers from Parent As discussed in Note 1 – Summary of Significant Accounting Policies in the basis of presentation section and below, net parent investment is primarily impacted by allocation of expenses for certain services related to shared functions provided by HHH and contributions from HHH which are the result of net funding provided by or distributed to HHH. The components of net parent investment are:

    

Three months ended

    

Six months ended

June 30, 

June 30, 

in thousands

    

2024

    

2023

    

2024

    

2023

Net transfers from Parent as reflected in the Unaudited Condensed Combined Statements of Cash Flows

$

27,188

$

27,235

$

74,847

$

49,477

Non-cash stock compensation expense

 

(592)

 

242

 

66

 

534

Net transfers from Parent as reflected in the Unaudited Condensed Combined Statements of Equity

$

26,596

$

27,477

$

74,913

$

50,011

Corporate Overhead and Other Allocations HHH provides the Company certain services, including (1) certain support functions that are provided on a centralized basis within HHH, including, but not limited to executive oversight, treasury, accounting, finance, internal audit, legal, information technology, human resources, communications, and risk management; and (2) employee benefits and compensation, including stock-based compensation. The Company’s Unaudited Condensed Combined Financial Statements reflect an allocation of these costs. When specific identification or a direct attribution of costs based on time incurred for the Company’s benefit is not practicable, a proportional cost method is used, primarily based on revenue, headcount, payroll costs or other applicable measures.

The allocation of expenses, net of amounts capitalized, from HHH to the Company were reflected as follows in the Unaudited Condensed Combined Statements of Operations:

Three months ended June 30, 

    

Six months ended June 30, 

in thousands

    

2024

    

2023

    

2024

    

2023

Operating costs

 

321

 

148

521

 

281

General and administrative

 

3,568

 

3,630

6,994

 

6,457

Other income, net

 

(8)

 

(7)

(16)

 

(15)

Total

 

3,881

 

3,771

7,499

 

6,723

Allocated expenses recorded in operating costs, general and administrative expenses, and other income, net in the table above primarily include the allocation of employee benefits and compensation costs, including stock compensation expense, as well as overhead and other costs for shared support functions provided by HHH on a centralized basis. Operating costs as provided in the table above include immaterial expenses recorded to hospitality costs and sponsorships, events, and entertainment costs with the remainder recorded to operating costs. During the six months ended June 30, 2024, the Company capitalized costs of $0.3 million and $0.2 million that were incurred by HHH for the Company’s benefit in Developments and Buildings and equipment, respectively. During the six months ended June 30, 2023, the Company capitalized costs of $1.0 million and $0.2 million that were incurred by HHH for the Company’s benefit in Developments and Building and equipment, respectively.

The financial information herein may not necessarily reflect the combined financial position, results of operations, and cash flows of the Company in the future or what they would have been had the Company been a separate, standalone entity during the periods presented. Management believes that the methods used to allocate expenses to the Company are reasonable; however, the allocations may not be indicative of actual expenses that would have been incurred had the Company operated as an independent, publicly traded company for the periods presented. Actual costs that the Company may have incurred had it been a standalone company would depend on a number of factors, including the chosen organizational structure, whether functions were outsourced or performed by the Company employees and strategic decisions made in areas such as executive leadership, corporate infrastructure, and information technology.

Unless otherwise stated, these intercompany transactions between the Company and HHH have been included in these Unaudited Condensed Combined Financial Statements and are considered to be effectively settled at the time the transaction is recorded. The total net effect of the settlement of these intercompany transactions is reflected in the Unaudited Condensed Combined Statements of Cash Flows as a financing activity and in the Unaudited Condensed Combined Balance Sheets as net parent investment.

Stock Compensation The Company’s employees participate in HHH’s stock-compensation plan and the Company is allocated a portion of stock compensation expense based on the services provided to the Company. The non-cash stock compensation expense (income) for employee services directly attributable to the Company totaled ($0.6) million for the three months ended June 30, 2024, and $0.1 million for the six months ended June 30, 2024, compared to $0.2 million for the three months ended June 30, 2023, and $0.5 million for the six months ended June 30, 2023, and is included within general and administrative expenses in the Unaudited Condensed Combined Statements of Operations and included in the table above. These expenses are presented net of ($0.1) million and $0.1 million capitalized to development projects during the three months ended June 30, 2024, and 2023, respectively, and $0.3 million and $0.3 million capitalized to development projects during the six months ended June 30, 2024, and 2023, respectively. The $0.6 million of stock compensation income recognized in the three months ended June 30, 2024, is due to forfeitures of stock awards during the current period and the reversal of previously recognized expense. Employee benefits and compensation expense, including stock-based compensation expense, related to the HHH employees who provide shared services to the Company have also been allocated to the Company and is recorded in general and administrative expenses in the Unaudited Condensed Combined Statements of Operations and included in the table above.

Related-party Management Fees HHH provides management services to the Company for managing its real estate assets and the Company reimburses HHH for expenses incurred and pays HHH a management fee for services provided. The amounts outstanding pursuant to the management fee agreement between the Company and HHH are cash settled each month and are reflected in the Unaudited Condensed Combined Balance Sheets as related-party payables to the extent unpaid as of each balance sheet date. During the six months ended June 30, 2024, and 2023, the Unaudited Condensed Combined Balance Sheets reflects immaterial outstanding payables due to HHH with respect to the landlord management fees. These landlord management fees amounted to $0.1 million for the three months ended June 30, 2024, and 2023, and $0.2 million for the six months ended June 30, 2024, and 2023.

As discussed in Note 2 – Investments in Unconsolidated Ventures, CCMC, a wholly owned subsidiary of Jean-Georges Restaurants, which is a related party of the Company, also provides management services for certain of the Company’s retail and food and beverage businesses, either wholly owned or through partnerships with third parties. The Company’s businesses managed by CCMC include, but are not limited to, locations such as The Tin Building by Jean-Georges, The Fulton, and Malibu Farm. Pursuant to the various management agreements, CCMC is responsible for employment and supervision of all employees providing services for the food and beverage operations and restaurant as well as the day-to-day operations and accounting for the food and beverage operations. As of June 30, 2024, and December 31, 2023, the Unaudited Condensed Combined Balance Sheets reflect receivables for funds provided to CCMC to fund operations of $2.1 million and $1.2 million, respectively and accounts payable of $0.4 million and $0.2 million, respectively due to CCMC with respect to reimbursable expenses to be funded by the Company. The Company’s related-party management fees due to CCMC amounted to $0.6 million during the three months ended June 30, 2024, and $1.1 million during the six months ended June 30, 2024, compared to $0.6 million during the three months ended June 30, 2023, and $1.1 million during the six months ended June 30, 2023.

Related-party Rental Revenue  The Company owns the real estate assets that are leased by Lawn Club and the Tin Building by Jean-Georges. As discussed in Note 2 – Investments in Unconsolidated Ventures, the Company owns a noncontrolling interest in these ventures and accounts for its interests in accordance with the equity method.

As of June 30, 2024, and December 31, 2023, the Unaudited Condensed Combined Balance Sheets reflect accounts receivable of $1.5 million and $0.1 million, respectively, due from these ventures generated by rental revenue earned by the Company.

During the three months ended June 30, 2024, and 2023, the Unaudited Condensed Combined Income Statements reflect rental revenue associated with these related parties of $3.1 million and $3.4 million, respectively. This is primarily comprised of $2.9 million and $3.2 million from the Tin Building by Jean-Georges during the three months ended June 30, 2024, and 2023, respectively.

During the six months ended June 30, 2024 and 2023, the Unaudited Condensed Combined Income Statements reflect rental revenue associated with these related parties of $6.0 million and $6.3 million, respectively. This is primarily comprised of $5.8 million and $6.0 million from the Tin Building by Jean-Georges during the six months ended June 30, 2024, and 2023, respectively.

Related-party Other Receivables  As of June 30, 2024, and December 31, 2023, the Unaudited Condensed Combined Balance Sheets include a $0.1 million and $3.1 million receivable related to development costs incurred by the Company, which will be reimbursed by the Lawn Club venture.