Investment in Unconsolidated Joint Venture

6 Months Ended

Jun. 30, 2019

Equity Method Investments and Joint Ventures [Abstract]

Investment in Unconsolidated Joint Venture

Note 12 – Investment in 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 “Berkley Loan”) secured by The Berkley and the balance was paid in cash (half of which was funded by us).  The non-recourse Berkley 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 Berkley Loan pursuant to Freddie Mac’s standard form of guaranty. The effective interest rate was 4.56% at June 30, 2019 and 4.66% at December 31, 2018.

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 June 30, 2019 and December 31, 2018 are as follows (in thousands):

	June 30, 2019			December 31, 2018
	(unaudited)			(audited)
ASSETS
Real estate, net	$	51,153		$	51,802
Cash and cash equivalents		230			201
Restricted cash		390			392
Tenant and other receivables, net		33			39
Prepaid expenses and other assets, net		122			43
Intangible assets, net		12,025			12,293
Total assets	$	63,953		$	64,770
LIABILITIES
Mortgage payable, net	$	41,221		$	41,135
Accounts payable and accrued expenses		562			583
Total liabilities		41,783			41,718
MEMBERS' EQUITY
Members' equity		27,169			27,236
Accumulated deficit		(4,999	)		(4,184	)
Total members' equity		22,170			23,052
Total liabilities and members' equity	$	63,953		$	64,770
Our investment in unconsolidated joint venture	$	11,085		$	11,526

The statements of operations for the unconsolidated joint venture for the three and six months ended June 30, 2019 and June 30, 2018 are as follows (in thousands):

	Three Months Ended June 30, 2019			Three Months Ended June 30, 2018			Six Months Ended June 30, 2019			Six Months Ended June 30, 2018
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Revenues
Rental revenues	$	829		$	909		$	1,665		$	1,818
Total revenues		829			909			1,665			1,818
Operating Expenses
Property operating expenses		182			215			445			454
Real estate taxes		11			12			22			23
General and administrative		3			-			5			2
Amortization		134			134			268			268
Depreciation		331			329			661			657
Total operating expenses		661			690			1,401			1,404
Operating income		168			219			264			414
Interest expense, net		497			453			993			839
Interest expense -amortization of deferred finance costs		43			43			86			86
Net loss	$	(372	)	$	(277	)	$	(815	)	$	(511	)
Our equity in net loss from unconsolidated joint venture	$	(186	)	$	(139	)	$	(407	)	$	(256	)