INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES

12 Months Ended

Dec. 31, 2022

INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES

INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES

NOTE 14 – INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES

We owned a 50% interest in a joint venture (the “Berkley JV”) formed to acquire and operate The Berkley, a 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. 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 bore interest at a fixed rate of 2.717% and was interest only during the initial five years.  We and our joint venture partner were 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 11 – Loans Payable and Secured Line of Credit – The Berkley Partner Loan),  which was repaid in full when this property was sold in April 2022 for $70.8 million. In connection with the sale of the property, the Berkley JV recognized a gain on sale of approximately $9.0 million as well as a gain of $2.0 million upon settlement of the underlying interest rate swap.  

As of December 31, 2022 we owned a 10% interest in the 250 North 10^th JV formed to acquire and operate 250 North 10^th, a 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. 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.  Our share of the equity totaling approximately $5.9 million was funded through the Partner Loan from our joint venture partner. 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.   As of December 31, 2022, the net carrying amount of our investment in this entity was approximately $4.4 million and our maximum exposure to

loss in this entity is limited to the carrying amount of our investment.  We sold our interest in this joint venture to our joint venture partner in February 2023.

As we do not control the 250 North 10^th JV (and did not control The Berkley JV), we account for these joint ventures under the equity method of accounting. We entered into an interest rate swap on February 28, 2020, whereby we recognized our share of the fair value liability of approximately $77,000 of income and $77,000 of loss for the year ended December 31, 2022 and 2021, respectively.  The combined balance sheets for our unconsolidated joint ventures at December 31, 2022 and 2021 are as follows (dollars in thousands):

	December 31,		December 31,
	2022		2021
ASSETS
Real estate, net	$	113,571	$	164,143
Cash and cash equivalents		1,345		1,244
Restricted cash		731		891
Tenant and other receivables, net		197		225
Prepaid expenses and other assets, net		2,185		315
Intangible assets, net		9,047		21,527
Total assets	$	127,076	$	188,345
LIABILITIES
Mortgages payable, net	$	80,495	$	112,934
Accounts payable and accrued expenses		1,507		1,849
Total liabilities		82,002		114,783
MEMBERS’ EQUITY
Members’ equity		48,677		87,654
Accumulated deficit		(3,603)		(14,092)
Total members’ equity		45,074		73,562
Total liabilities and members’ equity	$	127,076	$	188,345
Our investments in unconsolidated joint ventures	$	4,386	$	17,938

The combined statements of operations for the unconsolidated joint ventures through the date of sale for the years ended December 31, 2022, 2021, and 2020 are as follows (dollars in thousands):

	For the Year Ended		For the Year Ended		For the Year Ended
	December 31,		December 31,		December 31,
	2022		2021		2020
Revenues
Rental revenues	$	11,383	$	12,679	$	12,747
Total revenues		11,383		12,679		12,747
Operating Expenses
Property operating expenses		3,596		4,065		3,605
Real estate taxes		72		100		94
Amortization		1,974		2,479		5,676
Depreciation		3,032		3,937		3,833
Total operating expenses		8,674		10,581		13,208
Gain on sale of real estate		8,981		—		—
Operating income (loss)		11,690		2,098		(461)
Gain on sale of interest rate swap		2,005		—		—
Interest expense		(3,138)		(3,806)		(3,780)
Interest expense - amortization of deferred finance costs		(221)		(289)		(1,881)
Interest income (expense) - change in fair market value of interest rate swap		153		(153)		—
Net income (loss)	$	10,489	$	(2,150)	$	(6,122)
Our equity in net income (loss) from unconsolidated joint ventures	$	5,294	$	(555)	$	(1,571)