Investments in Partnerships

6 Months Ended

Jun. 30, 2019

Equity Method Investments And Joint Ventures [Abstract]

3. INVESTMENTS IN PARTNERSHIPS

The following table presents summarized financial information of the equity investments in our unconsolidated partnerships as of June 30, 2019 and December 31, 2018:

(in thousands of dollars)	June 30, 2019			December 31, 2018
ASSETS:
Investments in real estate, at cost:
Operating properties	$	587,779		$	575,149
Construction in progress		444,080			420,771
Total investments in real estate		1,031,859			995,920
Accumulated depreciation		(219,159	)		(212,574	)
Net investments in real estate		812,700			783,346
Cash and cash equivalents		29,431			20,446
Deferred costs and other assets, net		33,099			30,549
Total assets		875,230			834,341
LIABILITIES AND PARTNERS’ INVESTMENT:
Mortgage loans payable, net		503,068			507,090
FDP Term Loan, net		248,159			247,901
Other liabilities		34,875			34,463
Total liabilities		786,102			789,454
Net investment	$	89,128		$	44,887
Partners’ share		42,837			21,583
PREIT’s share		46,291			23,304
Excess investment⁽¹⁾		17,375			15,763
Net investments and advances	$	63,666		$	39,067
Reconciliation to comparable GAAP balance sheet item:
Investment in partnerships, at equity	$	153,318		$	131,124
Distributions in excess of partnership investments		(89,652	)		(92,057	)
Net investment	$	63,666		$	39,067

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⁽¹⁾

Excess investment represents the unamortized difference between our investment and our share of the equity in the underlying net investment in the unconsolidated partnerships. The excess investment is amortized over the life of the properties, and the amortization is included in “Equity in income of partnerships.”

We record distributions from our equity investments using the nature of the distribution approach.

The following table summarizes our share of equity in income of partnerships for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands of dollars)	2019			2018			2019			2018
Real estate revenue	$	23,443		$	23,890		$	46,894		$	49,901
Operating expenses:
Property operating and other expenses		(7,543	)		(7,524	)		(15,527	)		(15,705	)
Interest expense⁽¹⁾		(5,843	)		(5,834	)		(11,651	)		(11,568	)
Depreciation and amortization		(4,705	)		(4,880	)		(9,358	)		(9,869	)
Total expenses		(18,091	)		(18,238	)		(36,536	)		(37,142	)
Net income		5,352			5,652			10,358			12,759
Partners’ share		(2,900	)		(3,089	)		(5,587	)		(6,991	)
PREIT’s share		2,452			2,563			4,771			5,768
Amortization of and adjustments to excess investment, net		(136	)		8			(166	)		(59	)
Equity in income of partnerships	$	2,316		$	2,571		$	4,605		$	5,709
⁽¹⁾Net of capitalized interest expense of $1,479 and $1,302 for the three months ended June 30, 2019 and 2018, and $2,951 and $1,921 for the six months ended June 30, 2019 and 2018, respectively.

Dispositions

In March 2019, a partnership in which we hold a 25% interest sold an undeveloped land parcel adjacent to Gloucester Premium Outlets for $3.8 million. The partnership recorded a gain on sale of $2.3 million, of which our share was $0.6 million, which is recorded in gain on sale of real estate by equity method investee in the accompanying consolidated statement of operations.

In February 2018, a partnership in which we hold a 50% ownership share sold its office condominium interest in 907 Market Street in Philadelphia, Pennsylvania for $41.8 million. The partnership recorded a gain on sale of $5.5 million, of which our share was $2.8 million. The partnership distributed to us proceeds of $19.7 million in connection with this transaction in February 2018.

Term Loan

In January 2018, our Fashion District Philadelphia redevelopment project joint venture entity entered into a $250.0 million term loan (the “FDP Term Loan”). We and our partner in the project, The Macerich Company (“Macerich”), each own a 50% partnership interest in Fashion District Philadelphia. The FDP Term Loan matures in January 2023, and bears interest at a variable rate of LIBOR plus 2.00%. PREIT and Macerich secured the FDP Term Loan by pledging their respective equity interests in the entities that own Fashion District Philadelphia. The entire $250.0 million available under the FDP Term Loan was drawn during the first quarter of 2018, and we received an aggregate $123.0 million as a distribution of our share of the draws in 2018. In July 2019, the FDP Term Loan was modified to increase the total potential borrowings from $250.0 million to $350.0 million. $26.0 million was drawn in July 2019, and we received an aggregate $12.5 million as a distribution of our share of the draw in July 2019.

Significant Unconsolidated Subsidiary

We have a 50% ownership interest in Lehigh Valley Associates L.P. (“LVA”). The financial information of LVA is included in the amounts above. Summarized balance sheet information as of June 30, 2019 and December 31, 2018, and summarized statement of operations information for the three and six months ended June 30, 2019 and 2018 for this entity, which is accounted for using the equity method, are as follows:

(in thousands of dollars)	June 30, 2019		December 31, 2018
Summarized balance sheet information
Total assets	$	53,218	$	52,255
Mortgage loan payable, net		193,717		196,328

	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands of dollars)	2019			2018			2019			2018
Summarized statement of operations information
Revenue	$	8,184		$	8,472		$	16,583		$	17,604
Property operating expenses		(1,887	)		(2,124	)		(4,213	)		(4,529	)
Interest expense		(2,019	)		(2,052	)		(4,028	)		(4,097	)
Net income		3,471			3,616			6,709			7,642
PREIT’s share of equity in income of partnership		1,736			1,808			3,355			3,821