Investments in Partnerships

3 Months Ended

Mar. 31, 2020

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 March 31, 2020 and December 31, 2019:

(in thousands of dollars)	March 31, 2020			December 31, 2019
ASSETS:
Investments in real estate, at cost:
Operating properties	$	917,354		$	883,530
Construction in progress		236,807			251,029
Total investments in real estate		1,154,161			1,134,559
Accumulated depreciation		(236,332	)		(229,877	)
Net investments in real estate		917,829			904,682
Cash and cash equivalents		24,153			34,766
Deferred costs and other assets, net		77,257			43,476
Total assets		1,019,239			982,924
LIABILITIES AND PARTNERS’ INVESTMENT:
Mortgage loans payable, net		496,978			499,057
FDP Term Loan, net		299,263			299,091
Other liabilities		99,318			79,166
Total liabilities		895,559			877,314
Net investment	$	123,680		$	105,610
Partners’ share		59,845			50,997
PREIT’s share		63,835			54,613
Excess investment⁽¹⁾		17,562			17,464
Net investments and advances	$	81,397		$	72,077
Reconciliation to comparable GAAP balance sheet item:
Investment in partnerships, at equity	$	167,167		$	159,993
Distributions in excess of partnership investments		(85,770	)		(87,916	)
Net investment	$	81,397		$	72,077

_____________________

⁽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 months ended March 31, 2020 and 2019:

	Three Months Ended March 31,
(in thousands of dollars)	2020			2019
Real estate revenue	$	27,200		$	23,451
Operating expenses:
Property operating and other expenses		(11,229	)		(7,985	)
Interest expense⁽¹⁾		(6,360	)		(5,807	)
Depreciation and amortization		(7,617	)		(4,652	)
Total expenses		(25,206	)		(18,444	)
Net income		1,994			5,007
Partners’ share		(1,178	)		(2,687	)
PREIT’s share		816			2,320
Amortization of and adjustments to excess investment, net		3			(31	)
Equity in income of partnerships	$	819		$	2,289

⁽¹⁾ Net of capitalized interest expense of $1,091 and $1,472 for the three months ended March 31, 2020 and 2019, 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 sales of real estate by equity method investee in the accompanying consolidated statement of operations.

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. A total of $51.0 million was drawn during the third quarter of 2019 and we received aggregate distributions of $25.0 million as our share of the draws.

Significant Unconsolidated Subsidiary

We have a 50% ownership interest in Lehigh Valley Associates L.P. (“LVA”) and Fashion District Philadelphia (“FDP”). The financial information of LVA and FDP are included in the amounts above. Summarized balance sheet information as of March 31, 2020 and December 31, 2019, and summarized statement of operations information for the three months ended March 31, 2020 and 2019 for these entities, which are accounted for using the equity method, are as follows:

LVA

(in thousands of dollars)	March 31, 2020		December 31, 2019
Summarized balance sheet information
Total assets	$	61,362	$	62,504
Mortgage loan payable, net		191,114		191,998

	Three Months Ended March 31,
(in thousands of dollars)	2020			2019
Summarized statement of operations information
Revenue	$	7,879		$	8,399
Property operating expenses		(2,213	)		(2,326	)
Interest expense		(1,934	)		(2,009	)
Net income		2,922			3,238
PREIT’s share of equity in income of partnership		1,461			1,619

FDP

(in thousands of dollars)	March 31, 2020		December 31, 2019
Summarized balance sheet information
Total assets	$	681,280	$	641,377
FDP Term Loan, net		299,263		299,091

	Three Months Ended March 31,
(in thousands of dollars)	2020			2019
Summarized statement of operations information
Revenue	$	5,576		$	625
Property operating expenses		(4,126	)		(698	)
Interest expense		(791	)		-
Net income		(3,452	)		(1,309	)
PREIT’s share of equity in income of partnership		(1,726	)		(655	)