Investment in Unconsolidated Joint Ventures

6 Months Ended

Jun. 30, 2019

Investment in Unconsolidated Joint Ventures

Investment in Unconsolidated Joint Ventures

3. Investment in Unconsolidated Joint Ventures

Our investment in unconsolidated joint ventures consists of a preferred equity investment and a mezzanine loan which is accounted for as unconsolidated joint ventures in accordance with GAAP. The following table summarizes our investment in unconsolidated joint ventures (dollar amounts in thousands):

	Type	Type		Total		Currently			Number
	of	of		Preferred		Paid in			of		Investment			Carrying
State	Properties	Investment		Return		Cash			Beds/ Units		Commitment			Value
Arizona	ALF/MC/ILF	Preferred Equity	(1)	15	%	8	%	(2)	585	$	25,650		$	24,324
Florida	ALF/ILF/MC	Mezzanine	(3)	15	%	15	%		99		2,900	(4)		3,197	(4)
Total									684	$	28,550		$	27,521

(1) We have concluded that the JV is a variable interest entity (“VIE”) in accordance with GAAP. However, because we do not control the entity, nor do we have any role in the day-to-day management, we are not the primary beneficiary of the JV. Therefore, we account for the JV investment using the equity method.

(2) Effective second quarter of 2019, this JV was placed on cash basis due to delinquency of our preferred return.

(3) We evaluated this acquisition, development and construction (“ADC”) arrangement and determined that the characteristics are similar to jointly-owned investments or partnerships, and accordingly, this investment is accounted for as unconsolidated joint venture under the equity method of accounting instead of loan accounting.

(4) Since interest payments were deferred and no interest was recorded for the first twelve months of the loan, we used the effective interest method in accordance with GAAP to recognize interest income and recorded the difference between the effective interest income and cash interest income to the loan principal balance.

The following table summarizes our capital contributions, income recognized, and cash interest received related to our investments in unconsolidated joint ventures (in thousands):

	Type
	of			Capital			Income			Cash Interest
Year	Properties			Contribution			Recognized			Received
2019	ALF/MC/ILF		$	293		$	553		$	727
	ALF/ILF/MC			—			256			243
	ALF/MC	(1)		—	(1)		404	(1)		432	(1)
Total			$	293		$	1,213		$	1,402
2018	ALF/MC/ILF			497			951			1,062
	ALF/ILF/MC			—			255			194
	ALF/MC	(1)		—	(1)		151	(1)		—	(1)
Total			$	497		$	1,357		$	1,256

(1) We had a $3,400 mezzanine loan commitment for the development of a 127-unit seniors housing community in Florida with a total preferred return of 15%. The mezzanine loan was an ADC arrangement which we determined it to have characteristics similar to a jointly-owned arrangement and recorded it as an unconsolidated joint venture. During the first quarter of 2019, the mezzanine loan was paid off.