INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES

12 Months Ended

Dec. 31, 2021

INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES

INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES

NOTE 13 – INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES

We own a 50% interest in a joint venture (the “Berkley JV”) formed to acquire and operate The Berkley, a recently built 95-unit multi-family property.  In December 2016, the Berkley JV closed on the acquisition of The Berkley 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 bore interest at the 30-day LIBOR rate plus 216 basis points, was interest only for five years, was pre-payable after two years with a 1% prepayment premium, had covenants and defaults customary for a Freddie Mac financing. On February 28, 2020, in connection with a refinancing, the Berkley JV repaid the Berkley Loan in full and replaced it with a new 7-year, $33.0 million loan (the “New Berkley Loan”) which bears interest at a fixed rate of 2.717% and is interest only during the initial five years.  It is pre-payable at any time and can be increased by up to $6.0 million under certain circumstances. We and our joint venture partner are joint and several recourse carve-out guarantors under the New Berkley Loan. In October 2021, we entered into a loan agreement with our joint venture partner (see Note 10 – Loans Payable and Secured Line of Credit). See Note 14 – Subsequent Events below for information regarding a contract to sell The Berkley.  

We own a 10% interest in the 250 North 10^th JV formed to acquire and operate 250 North 10^th, a recently built 234-unit apartment building in Williamsburg, Brooklyn, New York. On January 15, 2020, the 250 North 10^th JV closed on the acquisition of the property for a purchase price of $137.75 million, of which $82.75 million was financed through a 15-year mortgage loan (the “250 North 10^th Note”) secured by 250 North 10^th and the balance was paid in cash. Our share of the equity totaling approximately $5.9 million was funded through the Partner Loan from our joint venture partner. The Partner Loan bears interest at 7.0% and is payable to the extent of available cash flow and is prepayable any time within its four year term. Our partner has the option of having the Partner Loan repaid in our common stock if the price of our common stock exceeds $6.50 per share at the time of conversion. The non-recourse 250 North 10^th Note bears interest at 3.39% for

the duration of the loan term and has covenants, defaults and a non-recourse carve out guaranty executed by us. We earned an acquisition fee at closing and are entitled to ongoing asset management fees and a promote upon the achievement of certain performance hurdles.  See Note 10 - Loans Payable and Secured Line of Credit – 250 North 10^th Note. As of December 31, 2021, the net carrying amount of our investment in this entity was approximately $4.8 million and our maximum exposure to loss in this entity is limited to the carrying amount of our investment.

As we do not control these joint ventures, we account for them under the equity method of accounting. During the year ended December 31, 2021, we recognized our share of the fair value liability associated with an interest rate swap entered into on February 28, 2020 of approximately $77,000.  The combined balance sheets for our unconsolidated joint ventures at December 31, 2021 and 2020 are as follows (dollars in thousands):

	December 31,		December 31,
	2021		2020
ASSETS
Real estate, net	$	164,143	$	167,749
Cash and cash equivalents		1,244		1,344
Restricted cash		891		766
Tenant and other receivables, net		225		254
Prepaid expenses and other assets, net		315		204
Intangible assets, net		21,527		24,006
Total assets	$	188,345	$	194,323
LIABILITIES
Mortgages payable, net	$	112,934	$	114,218
Accounts payable and accrued expenses		1,849		1,705
Total liabilities		114,783		115,923
MEMBERS’ EQUITY
Members’ equity		87,654		92,070
Accumulated deficit		(14,092)		(11,943)
Accumulated other comprehensive loss		—		(1,727)
Total members’ equity		73,562		78,400
Total liabilities and members’ equity	$	188,345	$	194,323
Our investments in unconsolidated joint ventures	$	17,938	$	19,379

The combined statements of operations for the unconsolidated joint ventures for the years ended December 31, 2021, 2020, and 2019 are as follows (dollars in thousands):

	For the Year Ended		For the Year Ended		For the Year Ended
	December 31,		December 31,		December 31,
	2021		2020		2019
Revenues
Rental revenues	$	12,679	$	12,747	$	3,314
Total revenues		12,679		12,747		3,314
Operating Expenses
Property operating expenses		4,055		3,595		956
Real estate taxes		100		94		45
General and administrative		10		10		10
Amortization		2,479		5,676		536
Depreciation		3,937		3,833		1,328
Total operating expenses		10,581		13,208		2,875
Operating income (loss)		2,098		(461)		439
Interest expense, net		(3,806)		(3,780)		(1,905)
Interest expense - amortization of deferred finance costs		(289)		(1,881)		(172)
Interest expense - change in fair market value of interest rate swap		(153)		—		—
Net loss	$	(2,150)	$	(6,122)	$	(1,638)
Our equity in net loss from unconsolidated joint ventures	$	(555)	$	(1,571)	$	(819)