Investments in Unconsolidated Joint Ventures

9 Months Ended

Sep. 30, 2023

Investments in Unconsolidated Joint Ventures

Investments in Unconsolidated Joint Ventures

Note 13 – 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 acquisition 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 which was repaid in full when this property was sold in April 2022.  The Berkley JV sold The Berkley in April 2022 for a sale price of $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.

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 bore interest at 3.39% for the duration of the loan term and had 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. See Note 6 - Loans Payable and Secured Line of Credit – Note Payable (250 North 10^th Note) for additional information.  We earned an acquisition fee at closing and were entitled to ongoing asset management fees and a promote upon the achievement of certain performance hurdles.  We sold our interest in this joint venture to our joint venture partner in February 2023 resulting in net proceeds of approximately $1.2 million after repayment of our Partner Loan and release from the mortgage guaranty, and we realized a net gain on the sale of approximately $3.1 million.  

As we did not control the 250 North 10^th JV or The Berkley JV, we accounted for these joint ventures under the equity method of accounting.  The combined balance sheets for the unconsolidated joint ventures at September 30, 2023 and December 31, 2022 are as follows (in thousands):

	September 30,		December 31,
	2023		2022
ASSETS
Real estate, net	$	—	$	113,571
Cash and cash equivalents		—		1,345
Restricted cash		—		731
Tenant and other receivables, net		—		197
Prepaid expenses and other assets, net		—		2,185
Intangible assets, net		—		9,047
Total assets	$	—	$	127,076
LIABILITIES
Mortgages payable, net	$	—	$	80,495
Accounts payable and accrued expenses		—		1,507
Total liabilities		—		82,002
MEMBERS’ EQUITY
Members’ equity		—		48,677
Accumulated deficit		—		(3,603)
Total members’ equity		—		45,074
Total liabilities and members’ equity	$	—	$	127,076
Our investments in unconsolidated joint ventures	$	—	$	4,386

The combined statements of operations for the unconsolidated joint ventures through the date of sale for the three months and nine months ended September 30, 2023 and 2022 are as follows (in thousands):

	For the Three Months Ended		For the Three Months Ended		For the Nine Months Ended		For the Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2023		2022		2023		2022
Revenues
Rental revenues	$	—	$	2,617	$	1,788	$	8,639
Total revenues		—		2,617		1,788		8,639
Operating Expenses
Property operating expenses		—		879		563		2,760
Real estate taxes		—		15		10		57
General and administrative		—		—		—		(10)
Amortization		—		449		299		1,525
Depreciation		—		654		437		2,377
Total operating expenses		—		1,997		1,309		6,709
Gain on sale of real estate		—		—		—		8,981
Operating income		—		620		479		10,911
Gain on sale of interest rate swap		—		—		—		2,005
Interest expense		—		(717)		(483)		(2,429)
Interest expense - amortization of deferred finance costs		—		(46)		(31)		(174)
Interest income - change in fair market value of interest rate swap		—		—		—		153
Net (loss) income	$	—	$	(143)	$	(35)	$	10,466
Our equity in net (loss) income from unconsolidated joint ventures	$	—	$	(14)	$	—	$	5,292