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Note 5 - Investments and Advances in Real Estate Joint Ventures
 6 Months Ended
Jun. 30, 2011
Investmentsand Advancesin Real Estate Joint Ventures Abstract

5. Investments and Advances in Real Estate Joint Ventures


The Company and its subsidiaries have investments in and advances to various real estate joint ventures.  These joint ventures are engaged primarily in the operation of shopping centers which are either owned or held under long-term operating leases. The Company and the joint venture partners have joint approval rights for major decisions, including those regarding property operations.  As such, the Company holds noncontrolling interests in these joint ventures and accounts for them under the equity method of accounting.  The table below presents joint venture investments for which the Company held an ownership interest at June 30, 2011 and December 31, 2010 and the Company’s share of income/(loss) for the six months ended June 30, 2011 and 2010 (in millions, except number of properties):


As of and for the six months ended June 30, 2011

Venture

Average

Ownership

Interest

Number of

Properties

Total

GLA

Gross

Investment

In Real

Estate

The

Company's

Investment

The Company's

Share of

Income/(Loss)

Prudential Investment Program

(“KimPru” and “KimPru II”) (1) (2) *

15.00%

 

63

10.9

$ 2,789.3

$ 152.5

$ (1.7)

Kimco Income Opportunity Portfolio

(“KIR”) (2)

45.00%

 

59

12.6

1,551.8

160.6

10.6 

UBS Programs (2) *

17.90%

 

43

6.3

1,367.7

68.2

1.0 

BIG Shopping Centers (2) (5) *

37.70%

 

23

3.8

555.5

44.3

(1.5)

The Canada Pension Plan Investment

Board (“CPP”) (2) (4)

55.00%

 

6

2.4

429.9

141.6

2.8 

Kimco Income Fund (2)

15.20%

 

12

1.5

281.7

12.2

0.6 

SEB Immobilien (2)

15.00%

 

11

1.5

299.9

1.0

0.1 

Other Institutional Programs (2)

Various

 

68

4.9

842.0

33.7

0.7 

RioCan

50.00%

 

45

9.3

1,422.5

62.6

9.5 

Intown (3)

 

 

138

N/A

824.3

95.5

(2.1)

Latin America

Various

 

129

17.2

1,256.7

360.3

5.7 

Other Joint Venture Programs (6)

Various

 

93

13.3

2,070.0

303.9

4.5 

Total

 

 

690

83.7

$ 13,691.3

$ 1,436.4

$ 30.2 


As of December 31, 2010

 

For the six

months ended

June 30, 2010

Venture

Average

Ownership

Interest

Number

of

Properties

Total

GLA

Gross

Investment

In Real

Estate

The

Company's

Investment

 

The

Company's

Share of

Income/(Loss)

KimPru and KimPru II (1) (2) *

15.00%

 

65

11.3

$  2,915.1

$ 145.3

$

(15.7)

KIR (2)

45.00%

 

59

12.6

1,546.6

156.1

 

7.5

UBS Programs (2) *

17.90%

 

43

6.3

1,366.6

68.3

 

0.4

BIG Shopping Centers (2) *

36.50%

 

22

3.5

507.2

42.4

 

0.2

CPP (2)

55.00%

 

5

2.1

378.1

115.1

 

1.3

Kimco Income Fund (2)

15.20%

 

12

1.5

281.7

12.4

 

0.4

SEB Immobilien (2)

15.00%

 

11

1.5

300.1

3.4

 

0.7

Other Institutional Programs (2)

Various

 

68

4.9

838.1

35.1

 

0.3

RioCan

50.00%

 

45

9.3

1,380.7

61.5

 

9.1

Intown (3)

 

 

138

N/A

820.1

99.4

 

(5.4)

Latin America

Various

 

130

17.3

1,191.1

344.8

 

9.2

Other Joint Venture Programs

Various

 

91

13.1

2,029.3

298.9

 

6.6

Total

 

 

689

83.4

$ 13,554.7

$ 1,382.7

$

14.6


*   Ownership % is a blended rate


(1)   This venture represents four separate joint ventures, with four separate accounts managed by Prudential Real Estate Investors (“PREI”), three of these ventures are collectively referred to as KimPru and the remaining venture is referred to as KimPru II.


(2)   The Company manages these joint venture investments and, where applicable, earns acquisition fees, leasing commissions, property management fees, assets management fees and construction management fees.  


(3)   The Company’s share of this investment is subject to fluctuation and is dependent upon property cash flows.


(4)   CPP acquired an unencumbered operating property in Quakertown, PA for a purchase price of approximately $52.0 million, during the six months ended June 30, 2011.


(5)   BIG Shopping Centers acquired an operating property in Selden, NY for a purchase price of approximately $43.5 million including the assumption of approximately $34.1 million in nonrecourse mortgage debt, during the six months ended June 30, 2011.  


(6)  During the six months ended June 30, 2011, the Company amended two of its preferred equity investment agreements to restructure the investments as pari passu joint ventures in which the Company holds noncontrolling interests.  As a result of these transactions, the Company continues to account for its aggregate net investment in these joint ventures under the equity method of accounting and includes these investments in Investments and advances to real estate joint ventures within the Company’s Condensed Consolidated Balance Sheets.


The table below presents debt balances within the Company’s unconsolidated joint venture investments for which the Company held noncontrolling ownership interests at June 30, 2011 and December 31, 2010 (in millions, except weighted average remaining term):


 

As of June 30, 2011

 

As of December 31, 2010

Venture

Mortgages

and

Notes

Payable

Weighted

Average

Interest Rate

Weighted

Average

Remaining

Term

(months)**

 

Mortgages

and

Notes

Payable

Weighted

Average

Interest Rate

Weighted

Average

Remaining

Term

(months)**

KimPru and KimPru II

$ 1,209.3

5.59%

57.6

 

$ 1,388.0

5.56%

59.8

KIR

970.5

6.29%

66.0

 

954.7

6.54%

53.1

UBS Programs

726.3

5.66%

49.4

 

733.6

5.70%

54.8

BIG Shopping Centers

444.9

5.52%

83.4

 

407.2

5.47%

72.5

CPP

167.5

4.47%

33.2

 

168.7

4.45%

39.3

Kimco Income Fund

166.3

5.45%

38.7

 

167.8

5.45%

44.7

SEB Immobilien

206.8

5.64%

68.8

 

193.5

5.67%

71.4

RioCan

990.9

5.84%

46.1

 

968.5

5.84%

52.0

Intown

624.9

5.18%

45.6

 

628.0

5.19%

46.8

Other Institutional Programs

550.1

4.94%

50.6

 

550.8

5.08%

56.6

Other Joint Venture Programs

1,842.1

5.28%

60.1

 

1,801.8

5.08%

50.5

Total

$ 7,899.6

 

 

 

$ 7,962.6

 

 


** Average Remaining term includes extensions


Prudential Investment Program -


During the six months ended June 30, 2011, KimPru recognized an impairment charge of approximately $40.1 million relating to one property which defaulted on its non-recourse mortgage.  This property was unable to generate sufficient cash flows to cover the debt service and negotiations with the lender had not produced a suitable loan modification.  As such, this property was foreclosed on by the third party lender.  The Company had previously taken other-than-temporary impairment charges on its investment in KimPru and had allocated these impairment charges to the underlying assets of the KimPru joint ventures including a portion to this operating property.  As such, the Company’s share of the $40.1 million impairment loss was approximately $4.5 million which is included in Equity in income/(loss) of joint ventures, net on the Company’s Condensed Consolidated Statements of Income. Additionally, during the six months ended June 30, 2011, a third party mortgage lender foreclosed on an operating property for which KimPru had previously taken an impairment charge on during 2010.  As a result of these foreclosures, KimPru recognized a gain on early extinguishment of debt of approximately $30.1 million.  The Company’s share of this gain was approximately $4.5 million, before income taxes, which is included in Equity in income/(loss) of joint ventures, net on the Company’s Condensed Consolidated Statements of Income.


KimPru’s estimated fair value relating to the impairment assessment above was based upon a discounted cash flow model that included all estimated cash inflows and outflows over a specified holding period.  Capitalization rates and discount rates utilized in this model were based upon rates that the Company believed to be within a reasonable range of current market rates for the respective property.


During the six months ended June 30, 2011, KimPru II recognized an impairment charge of approximately $7.3 million related to a property which defaulted on its non-recourse mortgage.  This property was unable to generate sufficient cash flows to cover the debt service due to tenant vacancies.  Negotiations with the lender had not produced a suitable loan modification and as such, the property was foreclosed on by the third party lender.  The Company had previously taken other-than-temporary impairment charges on its investment in KimPru II and had allocated these impairment charges to the underlying assets of the KimPru II joint ventures including a portion to this operating property.  As such, the Company’s share of the $7.3 million impairment loss was approximately $1.0 million which is included in Equity in income/(loss) of joint ventures, net on the Company’s Condensed Consolidated Statements of Income.  


Other Joint Venture Programs –


During the six months ended June 30, 2011, the Company entered into negotiations with its partners to exit its investment in a redevelopment property in Harlem, NY.  As a result, the Company recognized a full impairment charge of approximately $3.1 million against its investment.