Investments in and Advances to Unconsolidated Affiliates

12 Months Ended

Dec. 31, 2021

Equity Method Investments And Joint Ventures [Abstract]

Investments in and Advances to Unconsolidated Affiliates

. 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	December 31,
Portfolio	Property	December 31, 2021	2021		2020
					(As Restated)
Core:	840 N. Michigan (a)	88.43%	$	51,513	$	55,863
	Renaissance Portfolio	20%		28,466		29,270
	Gotham Plaza	49%		29,187		28,683
	Georgetown Portfolio	50%		4,089		4,624
	1238 Wisconsin Avenue	80%		5,895		2,571
				119,150		121,011

Mervyns I & II:	KLA/ABS (b)	36.7%		124,316		72,391

Fund III:	Self Storage Management (c)	95%		207		207
	640 Broadway (d)	63.13%		17,825		17,457
				18,032		17,664

Fund IV:	Fund IV Other Portfolio	98.57%		12,675		11,719
	650 Bald Hill Road	90%		11,677		12,550
	Paramus Plaza	50%		1,975		5,565
				26,327		29,834

Fund V:	Family Center at Riverdale (a)	89.42%		12,449		11,824
	Tri-City Plaza	90%		6,827		7,024
	Frederick County Acquisitions	90%		10,748		10,837
				30,024		29,685

Various:	Due from (to) Related Parties			666		363
	Other (e)			3,811		1,881
	Investments in and advances to unconsolidated affiliates		$	322,326	$	272,829

Core:	Crossroads (f)	49%	$	9,939	$	15,616
	Distributions in excess of income from, and investments in, unconsolidated affiliates		$	9,939	$	15,616

Represents a tenancy-in-common interest.

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

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

In January 2022, the Company obtained the partner's interest and now owns 100% and consolidates the entity (Note 18).

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 year ended December 31, 2021, the Company:

•

received dividends of $1.7 million at Mervyns II related to distributions from its Investment in Albertsons and recorded a net unrealized holding gain of $51.9 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;

•

called capital for its Crossroads investment of $7.5 million, of which the venture partner's share was $5.4 million; and

•

increased its investment in Fifth Wall by $1.9 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 4), 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 3) 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 9) 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.

Core Portfolio

Fifth Wall

On August 8, 2019, the Company invested $1.8 million in Fifth Wall Ventures Retail Fund, L.P. (“Fifth Wall”). During the fourth quarter of 2019, the Company invested another $0.2 million. During 2021 and 2020, the Company increased its investment in Fifth Wall by $1.9 million and $0.4 million, respectively. The Company’s total commitment is $5.0 million. The Company accounts for its interest at cost less impairment given its ownership is less than five percent, and the Company has virtually no influence over the partnership’s operating and financial policies. During the fourth quarter of 2020, the Company impaired $0.4 million for this investment (Note 9) reflecting management’s estimate of fair value at that date. At December 31, 2021, the Company’s investment was $3.7 million.

Brandywine Portfolio, Market Square and Town Center

The Company now owns a 100% interest in an approximately one million square-foot retail portfolio (the “Brandywine Portfolio” joint venture) located in Wilmington, Delaware, which includes two properties referred to as “Market Square” and “Town Center.” Through a series of exchange transactions from 2017 through 2020, the Company converted a $140.0 million non-recourse note receivable and interest thereon (Note 4), which was collateralized by the Brandywine Portfolio, into ownership of the tenancy-in-common interests held by co-investors in the property ventures.

The Brandywine Portfolio and Market Square ventures do not include the property held by Acadia Brandywine Holdings, LLC (“Brandywine Holdings”), an entity in which the Company had a 22.22% controlling interest (until it acquired the noncontrolling interest during 2020 as discussed in Note 8) and which is consolidated by the Company.

1238 Wisconsin Avenue

On December 28, 2021, the Company provided a $12.8 million construction loan commitment to an unconsolidated entity, collateralized by the membership interest in the joint venture that owns the property. The loan, which had not been funded at December 31, 2021, matures in December 2023 with one twelve-month extension option. The Company earned an origination fee of $0.1 million at closing.

Fund Investments

Broughton Street Portfolio

During 2014, Fund IV acquired 50% interests in two joint ventures referred to as “BSP I” and “BSP II” with the same venture partner to acquire and operate a total of 23 properties in Savannah, Georgia referred to as the “Broughton Street Portfolio.” Since that time, as described below, the ventures have sold eight of the properties and terminated the master leases on two of the properties. In October 2018, the venture partner relinquished its interest in BSP I, resulting in Fund IV becoming the 100% owner of the BSP I venture, which holds 11 consolidated properties (Note 3). On May 26, 2020, pursuant to the buy-sell provisions of the operating agreement of the Broughton Street Portfolio, Fund IV acquired all of the third-party equity of BSP II, which underlies two properties within Broughton Street Portfolio, for $1.3 million in a non-monetary exchange. These two BSP II properties were consolidated during the second quarter of 2020.

Storage Post

On June 29, 2019, Fund III’s Storage Post venture, which is a cost method investment with no carrying value distributed $1.6 million, of which the Operating Partnership’s share was $0.4 million.

Albertsons

During 2006, as part of a series of investments with a consortium of other investors known as the “RCP Venture”, Mervyns II acquired an indirect interest in Albertsons Companies, Inc., a private chain of grocery stores (“Albertsons”) through two 36.67% owned entities (KLA A Investments, LLC and ABS Opportunities, LLC, “KLA/ABS”). The investment (the “Investment in Albertsons”) has been accounted for under the cost method as Mervyns II has no influence over operating and financial policies of KLA/ABS. Subsequent to the initial investment in 2006, Mervyns II received distributions from its Investment in Albertsons in excess of its initial contribution, which have been recognized in earnings. During the second and fourth quarters of 2020, Mervyns II realized gains of approximately $22.8 million and $0.4 million, 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. Following these transactions, Mervyns II has retained an effective indirect 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 given the readily determinable fair value. During 2021, Mervyns II realized gains of approximately $1.7 million related to distributions from its Investment in Albertsons. The Company has an effective ownership interest of 28.33% in Mervyns II.

Fees from Unconsolidated Affiliates

The Company earned property management, construction, development, legal and leasing fees from its investments in unconsolidated partnerships totaling $0.6 million, $1.1 million and $0.7 million for the years ended December 31, 2021, 2020 and 2019, respectively, which is included in other revenues in the consolidated statements of operations.

In addition, the Company paid certain unaffiliated partners of its joint ventures, $1.4 million and $2.1 million and $1.4 million for the years ended December 31, 2021, 2020 and 2019, 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 December 31, 2021, and accordingly exclude the results of any investments disposed of or consolidated prior to that date (in thousands):


	December 31,
	2021		2020
Combined and Condensed Balance Sheets
Assets:
Rental property, net	$	631,661	$	633,375
Real estate under development		8,112		14,664
Other assets		78,300		70,710
Total assets	$	718,073	$	718,749
Liabilities and partners’ equity:
Mortgage notes payable	$	571,461	$	569,040
Other liabilities		69,166		76,341
Partners’ equity		77,446		73,368
Total liabilities and partners’ equity	$	718,073	$	718,749

Company's share of accumulated equity	$	113,285	$	112,088
Basis differential		66,031		66,724
Deferred fees, net of portion related to the Company's interest		4,071		3,559
Amounts receivable/payable by the Company		666		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		184,053		182,734
Investments carried at fair value or cost		128,334		74,479
Company's share of distributions in excess of income from and investments in unconsolidated affiliates		9,939		15,616
Investments in and advances to unconsolidated affiliates	$	322,326	$	272,829


	Year Ended December 31,
	2021			2020			2019
Combined and Condensed Statements of Operations
Total revenues	$	80,823		$	78,054		$	77,507
Operating and other expenses		(28,572	)		(28,718	)		(24,894	)
Interest expense		(21,228	)		(22,651	)		(25,660	)
Depreciation and amortization		(30,518	)		(30,917	)		(25,012	)
Loss on extinguishment of debt		(35	)		—			—
Gain on disposition of properties (a)		3,206			—			—
Net income (loss) attributable to unconsolidated affiliates	$	3,676		$	(4,232	)	$	1,941

Company’s share of equity in net income (loss) of unconsolidated affiliates	$	6,023		$	(2,503	)	$	1,118
Income attributable to unconsolidated affiliates recently sold or consolidated		—			1,280		$	6,155
Basis differential amortization		(693	)		(1,834	)		(1,374	)
Company’s equity in earnings (losses) of unconsolidated affiliates	$	5,330		$	(3,057	)	$	5,899

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