Investments in and Advances to Unconsolidated Affiliates

9 Months Ended

Sep. 30, 2021

Equity Method Investments and Joint Ventures [Abstract]

Investments in and Advances to Unconsolidated Affiliates

4. Investments in and Advances to Unconsolidated Affiliates

The Company accounts for its investments in and advances to unconsolidated affiliates primarily under the equity method of accounting as it has the ability to exercise significant influence, but does not have financial or operating control over the investment, which is maintained by each of the unaffiliated partners who co-invest with the Company. The Company’s investments in and advances to unconsolidated affiliates consist of the following (dollars in thousands):


		Ownership Interest	September 30,		December 31,
Portfolio	Property	September 30, 2021	2021		2020

Core:	840 N. Michigan (a)	88.43%	$	52,797	$	55,863
	Renaissance Portfolio	20%		28,669		29,270
	Gotham Plaza	49%		28,892		28,683
	Georgetown Portfolio	50%		4,078		4,624
	1238 Wisconsin Avenue	80%		4,385		2,571
				118,821		121,011

Mervyns I & II:	KLA/ABS (b)	36.7%		128,186		72,391

Fund III:	Self Storage Management (c)	95%		207		207

Fund IV:	Fund IV Other Portfolio	98.57%		12,638		11,719
	650 Bald Hill Road	90%		11,692		12,550
				24,330		24,269

Fund V:	Family Center at Riverdale (a)	89.42%		12,612		11,824
	Tri-City Plaza	90%		6,992		7,024
	Frederick County Acquisitions	90%		10,817		10,837
				30,421		29,685

Various:	Due from (to) Related Parties			527		363
	Other (d)			3,176		1,881
	Investments in and advances to unconsolidated affiliates		$	305,668	$	249,807

Core:	Crossroads (e)	49%	$	15,456	$	15,616
	Distributions in excess of income from, and investments in, unconsolidated affiliates		$	15,456	$	15,616

Represents a tenancy-in-common interest.

Includes an interest in Albertsons (at fair value, as described below) (Note 8).

Represents a variable interest entity for which the Company was determined not to be the primary beneficiary.

Includes cost-method investments in Storage Post, Fifth Wall and other investments.

Distributions have exceeded the Company’s investment; however, the Company recognizes a liability balance as it may be required to return distributions to fund future obligations of the entity.

During the nine months ended September 30, 2021, the Company:



monetized $1.2 million at Mervyns II related to distributions from its Investment in Albertsons and recorded a net unrealized holding gain of $55.8 million reflecting the change in fair value of its Investment in Albertsons



on January 4, 2021, Fund V sold two land parcels at its unconsolidated Family Center at Riverdale property for a total of $10.5 million, repaid $7.9 million of the related mortgage and the venture recognized a gain of $3.2 million, of which the Company's share was $0.6 million; and



increased its investment in Fifth Wall by $1.3 million pursuant to its subscription agreement.

During the year ended December 31, 2020, the Company:



exchanged the remaining $38.7 million of Brandywine Notes Receivable (Note 3), plus accrued interest of $2.0 million for the remaining 24.78% interest in Town Center on April 1, 2020, thereby obtaining a 100% controlling interest in the property. The property was then consolidated (Note 2) and the Company recorded the remaining interest in the property investment at the carrying value of the notes;



increased its investment in Fifth Wall by $0.4 million pursuant to its subscription agreement;



impaired $0.4 million of its investment in Fifth Wall (Note 8) during the fourth quarter of 2020, reflecting management’s estimate of fair value at that date;



recorded realized gains at Mervyns II of approximately $22.8 million and $0.4 million, during the second and fourth quarters of 2020, respectively, from its Investment in Albertsons. The realized gains during the second quarter of 2020 resulted from the issuance and distribution of proceeds from a preferred equity investment and a sale of a portion of its investment in an initial public offering of Albertsons, both of which occurred in June 2020;



recorded an unrealized gain of approximately $64.9 million during the second quarter of 2020 at Mervyns II reflecting the initial market value of its ownership of approximately 4.1 million shares (approximately 1% interest) through its Investment in Albertsons, which it has accounted for at fair value following the initial public offering;



recorded an additional net unrealized holding gain of $7.5 million at Mervyns II reflecting the change in fair value of its Investment in Albertsons from the initial public offering through December 31, 2020; and



acquired all of the third-party equity of BSP II at Fund IV, which underlies two properties within Broughton Street Portfolio, for $1.3 million on May 26, 2020, pursuant to the buy-sell provisions of the operating agreement of the Broughton Street Portfolio. These two BSP II properties were consolidated during the second quarter of 2020.

Fees from Unconsolidated Affiliates

The Company earned property management, construction, development, legal and leasing fees from its investments in unconsolidated partnerships totaling $0.1 million for each of the three months ended September 30, 2021 and 2020, and $0.3 million for each of the nine months ended September 30, 2021 and 2020, which are included in other revenues in the consolidated statements of operations.

In addition, the Company's joint ventures paid to certain unaffiliated partners of its joint ventures, $0.3 million and $0.4 million for the three months ended September 30, 2021 and 2020, respectively, and $1.0 million and $1.7 million for the nine months ended September 30, 2021 and 2020, respectively, for leasing commissions, development, management, construction and overhead fees.

Summarized Financial Information of Unconsolidated Affiliates

The following combined and condensed Balance Sheets and Statements of operations, in each period, summarize the financial information of the Company’s investments in unconsolidated affiliates that were held as of September 30, 2021, and accordingly exclude the results of any investments disposed of or consolidated prior to that date (in thousands):


	September 30, 2021		December 31, 2020
Combined and Condensed Balance Sheets
Assets:
Rental property, net	$	557,892	$	563,997
Real estate under development		10,768		14,517
Other assets		63,461		61,969
Total assets	$	632,121	$	640,483
Liabilities and partners’ equity:
Mortgage notes payable	$	507,396	$	512,490
Other liabilities		71,937		74,872
Partners’ equity		52,788		53,121
Total liabilities and partners’ equity	$	632,121	$	640,483

Company's share of accumulated equity	$	100,015	$	100,767
Basis differential		54,065		55,017
Deferred fees, net of portion related to the Company's interest		4,036		3,565
Amounts receivable/payable by the Company		527		363
Investments in and advances to unconsolidated affiliates, net of Company's share of distributions in excess of income from and investments in unconsolidated affiliates		158,643		159,712
Investments carried at fair value or cost		131,569		74,479
Company's share of distributions in excess of income from and investments in unconsolidated affiliates		15,456		15,616
Investments in and advances to unconsolidated affiliates	$	305,668	$	249,807


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Combined and Condensed Statements of Operations
Total revenues	$	17,912		$	17,302		$	54,734		$	53,170
Operating and other expenses		(6,845	)		(6,234	)		(19,878	)		(18,996	)
Interest expense		(4,733	)		(4,865	)		(14,136	)		(15,135	)
Depreciation and amortization		(6,320	)		(7,947	)		(20,797	)		(20,831	)
Gain on disposition of properties (a)		—			—			3,206			—
Net income (loss) attributable to unconsolidated affiliates	$	14		$	(1,744	)	$	3,129		$	(1,792	)

Company’s share of equity in net income (loss) of unconsolidated affiliates	$	899		$	21		$	4,965		$	(153	)
Income attributable to unconsolidated affiliates recently sold or consolidated		—			(11	)		—			1,280
Basis differential amortization		(255	)		(634	)		(952	)		(1,282	)
Company’s equity in earnings (losses) of unconsolidated affiliates	$	644		$	(624	)	$	4,013		$	(155	)

Represents the gain on the sale of two land parcels by the Family Center at Riverdale on January 4, 2021.