Investment in Our Unconsolidated Joint Venture

9 Months Ended

Sep. 30, 2018

Equity Method Investments and Joint Ventures [Abstract]

Investment in Our Unconsolidated Joint Venture

Note 12 – Investment in Our Unconsolidated Joint Venture

Through a wholly-owned subsidiary, we own a 50% interest in a joint venture formed to acquire and operate 223 North 8th Street, Brooklyn, New York, a newly constructed 95-unit multi-family property, known as The Berkley, encompassing approximately 99,000 gross square feet.  On December 5, 2016, the joint venture closed on the acquisition of The Berkley through a wholly-owned special purpose entity for a purchase price of $68.885 million, of which $42.5 million was financed through a 10-year loan (the “Loan”) secured by The Berkley and the balance was paid in cash (half of which was funded by us).  The non-recourse Loan bears interest at the 30-day LIBOR rate plus 216 basis points, is interest only for five years, is pre-payable after two years with a 1% prepayment premium and has covenants and defaults customary for a Freddie Mac financing.  We and our joint venture partner are joint and several recourse carve-out guarantors under the Loan pursuant to Freddie Mac’s standard form of guaranty. The effective interest rate was 4.42% at September 30, 2018 and 3.72% at December 31, 2017.

This joint venture is a voting interest entity. As we do not control this joint venture, we account for it under the equity method of accounting.

The balance sheets for the unconsolidated joint venture at September 30, 2018 and December 31, 2017 are as follows (in thousands):

	September 30, 2018			December 31, 2017
	(unaudited)			(audited)
ASSETS
Real estate, net	$	52,131		$	53,137
Cash and cash equivalents		180			218
Restricted cash		390			361
Tenant and other receivables, net		35			21
Prepaid expenses and other assets, net		85			71
Intangible assets, net		12,427			12,829
Total assets	$	65,248		$	66,637
LIABILITIES
Mortgage payable, net	$	41,092		$	40,963
Accounts payable and accrued expenses		593			608
Total liabilities		41,685			41,571
MEMBERS' EQUITY
Members' equity		27,276			27,795
Accumulated deficit		(3,713	)		(2,729	)
Total members' equity		23,563			25,066
Total liabilities and members' equity	$	65,248		$	66,637
Our investment in unconsolidated joint venture	$	11,781		$	12,533

The statements of operations for the unconsolidated joint venture for the three and nine months ended September 30, 2018 and September 30, 2017 are as follows (in thousands):

	Three Months Ended September 30, 2018			Three Months Ended September 30, 2017			Nine Months Ended September 30, 2018			Nine Months Ended September 30, 2017
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Revenues
Rental revenues	$	829		$	827		$	2,644		$	2,504
Other income		1			2			4			4
Total revenues		830			829			2,648			2,508
Operating Expenses
Property operating expenses		319			256			773			665
Real estate taxes		11			12			34			35
General and administrative		3			3			5			19
Amortization		134			403			402			1,208
Depreciation		330			328			987			983
Total operating expenses		797			1,002			2,201			2,910
Operating income (loss)		33			(173	)		447			(402	)
Interest expense, net		463			375			1,302			1,076
Interest expense -amortization of deferred finance costs		43			43			129			130
Net loss	$	(473	)	$	(591	)	$	(984	)	$	(1,608	)
Our equity in net loss from unconsolidated joint venture	$	(236	)	$	(296	)	$	(492	)	$	(804	)