Investment in Unconsolidated Joint Ventures

3 Months Ended

Mar. 31, 2023

Equity Method Investments and Joint Ventures [Abstract]

Investment in Unconsolidated Joint Ventures

Investment in Unconsolidated Joint Ventures

On November 16, 2018, our SPC subsidiary formed the Victory Abode Apartments, LLC ("VAA"), a joint venture with the Macquarie Group (“Macquarie”). VAA was formed as a result of a sale of the 50% ownership interest in a portfolio of multifamily properties owned by us in exchange for a 50% voting interest / 49% profit participation interest ("Class A interest") in VAA and a note payable (“Mezzanine Loan”). Concurrent with the Contribution, VAA issued Class B interests with a 2% profits participation interest and no voting rights to the manager of VAA (“Class B Member”).

In connection with the formation of VAA, ten of the initial properties were subject to an earn-out provision ("Earn Out") that provided for a remeasurement of value after a two-year period following the completion of construction. Upon the formation of VAA, we recorded an initial liability ("Earn Out Obligation") of $10,000 for the advance on the Earn Out that we received from Macquarie. Upon remeasurement, the Earn Out Obligation was determined to be approximately $39,600. In accordance with the joint venture operating agreement, the Earn Out Obligation was paid from our share of distributions from VAA in 2022.

On September 16, 2022, VAA sold 45 of its properties (“VAA Sale Portfolio”) for $1,810,700, resulting in gain on sale of $738,444 to the joint venture. In connection with sale, we received an initial distribution of $182,848 from VAA, which included the payment of the remaining balance of the Earn Out Obligation.

On November 1, 2022, we received an additional distribution from VAA, which included the full operational control of the remaining seven properties of VAA (“VAA Holdback Portfolio”) (See Note 11 - Acquisitions) and a cash payment of $204,036. We are in the process of negotiating the assumption of the mortgage notes payable on the VAA Holdback Portfolio with the lenders.

On March 23, 2023, we received $17,976 from VAA, which represented the remaining distribution of the proceeds from the sale of the VAA Sale Portfolio.

We plan to use our share of the proceeds from the sale of the VAA Sale Portfolio to invest in additional income-producing real estate, pay down our debt and for general corporate purposes.

The following is a summary of our investment in VAA:

	March 31, 2023		December 31, 2022
Assets
Cash, cash equivalents and restricted cash	$	6,883	$	50,058
Other assets	295		2,346
	$	7,178	$	52,404
Liabilities and partners' capital
Liabilities from discontinued operations	$	—	$	8,824
Other liabilities	162		1,988
Our share of partners' capital	3,616		20,904
Outside partner's capital	3,400		20,688
	$	7,178	$	52,404

The following is a summary of income from VAA:

	Three Months Ended March 31,
	2023		2022
Revenue
Rental revenue	$	—	$	3,931
Other revenue	—		142
Total revenue	—		4,073
Expenses
Operating expenses	(331)		2,621
Depreciation and amortization	—		844
Interest	(291)		5,714
Total expenses	(622)		9,179
Income (loss) from continuing operations	622		(5,106)
Income from discontinued operations	754		3,436
Net income (loss)	$	1,376	$	(1,670)
Equity in income from unconsolidated joint venture	$	688	$	4,706