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Investments in and Advances to Unconsolidated Affiliates
 9 Months Ended
Sep. 30, 2022
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, 2022

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

Core:

 

840 N. Michigan Avenue (a)

 

88.43%

 

$

341

 

 

$

51,513

 

 

 

Renaissance Portfolio

 

20%

 

 

28,904

 

 

 

28,466

 

 

 

Gotham Plaza

 

49%

 

 

29,666

 

 

 

29,187

 

 

 

Georgetown Portfolio (b)

 

50%

 

 

4,109

 

 

 

4,089

 

 

 

1238 Wisconsin Avenue (b)

 

80%

 

 

10,993

 

 

 

5,895

 

 

 

 

 

 

 

 

74,013

 

 

 

119,150

 

 

 

 

 

 

 

 

 

 

 

 

Mervyns II:

 

KLA/ABS (c)

 

36.7%

 

 

102,368

 

 

 

124,316

 

 

 

 

 

 

 

 

 

 

 

 

Fund III:

 

Self Storage Management (b)

 

0%

 

 

—

 

 

 

207

 

 

 

640 Broadway (d)

 

100%

 

 

—

 

 

 

17,825

 

 

 

 

 

 

 

 

—

 

 

 

18,032

 

 

 

 

 

 

 

 

 

 

 

 

Fund IV:

 

Fund IV Other Portfolio

 

98.57%

 

 

11,877

 

 

 

12,675

 

 

 

650 Bald Hill Road

 

90%

 

 

10,220

 

 

 

11,677

 

 

 

Paramus Plaza

 

50%

 

 

1,022

 

 

 

1,975

 

 

 

 

 

 

 

 

23,119

 

 

 

26,327

 

 

 

 

 

 

 

 

 

 

 

 

Fund V:

 

Family Center at Riverdale (a)

 

89.42%

 

 

11,852

 

 

 

12,449

 

 

 

Tri-City Plaza

 

90%

 

 

8,983

 

 

 

6,827

 

 

 

Frederick County Acquisitions

 

90%

 

 

13,096

 

 

 

10,748

 

 

 

Wood Ridge Plaza

 

90%

 

 

13,289

 

 

 

—

 

 

 

La Frontera Village

 

90%

 

 

21,097

 

 

 

—

 

 

 

Shoppes at South Hills

 

90%

 

 

45,436

 

 

 

—

 

 

 

 

 

 

 

 

113,753

 

 

 

30,024

 

 

 

 

 

 

 

 

 

 

 

 

Various:

 

Due from (to) Related Parties

 

 

 

 

175

 

 

 

666

 

 

 

Other (e)

 

 

 

 

3,994

 

 

 

3,811

 

 

 

Investments in and advances to
unconsolidated affiliates

 

 

 

$

317,422

 

 

$

322,326

 

 

 

 

 

 

 

 

 

 

 

 

Core:

 

Crossroads (f)

 

49%

 

$

8,880

 

 

$

9,939

 

 

 

Distributions in excess of income from,
and investments in, unconsolidated affiliates

 

 

 

$

8,880

 

 

$

9,939

 

 

 

a)
Represents a tenancy-in-common interest.
b)
Represents a VIE for which the Company is not the primary beneficiary. The Company's involvement with such entities is in the form of equity interests and fee arrangements. The maximum exposure to loss is limited to the amount of the Company's equity investment in these VIEs. Total unconsolidated VIE assets of $38.4 million and $32.2 million at September 30, 2022 and December 31, 2021, respectively. Total unconsolidated VIE liabilities of $46.1 million and $41.9 million at September 30, 2022 and December 31, 2021, respectively.
c)
Includes an interest in Albertsons at fair value, as described below ("Investment in Albertsons") (Note 8).
d)
In January 2022, the Company foreclosed on partner's interest and now owns 100% and consolidates the entity (Note 2).
e)
Includes cost-method investments in Storage Post, Fifth Wall and other investments.
f)
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, 2022, the Company:

 

•
through Fund V, acquired a 90% interest in a venture for $15.9 million, which acquired Shoppes at South Hills, a shopping center located in Poughkeepsie, New York for $47.6 million. In addition, Fund V made a bridge loan to the entity for $31.7 million during the third quarter;
•
impaired $50.8 million of its 840 N. Michigan Avenue investment during the third quarter, which is included in Equity in (losses) earnings of unconsolidated affiliates in the consolidated statements of operations, reflecting management’s estimate of fair value at that date;
•
through Fund V, acquired a 90% interest in a venture for $26.5 million, which acquired La Frontera Village, a shopping center located in Round Rock, Texas for $81.4 million. In addition, Fund V made a bridge loan to the entity for $52.0 million during the first quarter, which was repaid during the second quarter. On June 10, 2022, the venture entered into a $57.0 million mortgage loan, of which $55.5 million was funded at closing;
•
through Fund V, acquired a 90% interest in a venture for $15.3 million, which acquired Wood Ridge Plaza, a shopping center located in Houston, Texas for $49.3 million during the first quarter. In addition, on March 21, 2022 the Wood Ridge Plaza venture entered into a $36.6 million mortgage loan, of which $32.3 million was funded at closing;
•
through Fund III, foreclosed on the remaining 37% interest in 640 Broadway during the first quarter. Accordingly, the Company now consolidates this property (Note 2);
•
through Fund III, sold its investment in Self Storage Management for $6.0 million and recognized its proportionate gain of approximately $1.5 million during the first quarter, which is included in Realized and unrealized holding (losses) gains on investments and other in the consolidated statements of operations;
•
funded $0.2 million of its capital commitment to its Fifth Wall investment during the second and third quarter; and
•
received cash dividends totaling $1.4 million at Mervyns II related to distributions from its Investment in Albertsons and recorded a net unrealized holding loss of $22.0 million reflecting the change in fair value of its Investment in Albertsons. In addition, the entity that holds the shares of Albertsons extended the expiration of the lockup term through May 2023.

 

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
•
made a capital contribution to its Fifth Wall investment in the amount of $1.9 million.
 

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, $0.3 million, $0.1 million and $0.4 million for each of the three and nine months ended September 30, 2022 and 2021, respectively, 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, $0.5 million, $1.1 million, $0.3 million and $1.0 million for the three and nine months ended September 30, 2022 and 2021, 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, 2022, and accordingly exclude the results of any investments disposed of or consolidated prior to that date (in thousands):

 

 

 

September 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Combined and Condensed Balance Sheets

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

Rental property, net

 

$

681,799

 

 

$

631,661

 

Real estate under development

 

 

14,387

 

 

 

8,112

 

Other assets

 

 

133,731

 

 

 

78,300

 

Total assets

 

$

829,917

 

 

$

718,073

 

Liabilities and partners’ equity:

 

 

 

 

 

 

Mortgage notes payable

 

$

624,043

 

 

$

571,461

 

Other liabilities

 

 

99,566

 

 

 

69,166

 

Partners’ equity

 

 

106,308

 

 

 

77,446

 

Total liabilities and partners’ equity

 

$

829,917

 

 

$

718,073

 

 

 

 

 

 

 

 

Company's share of accumulated equity

 

$

145,270

 

 

$

113,285

 

Basis differential

 

 

53,061

 

 

 

66,031

 

Deferred fees, net of portion related to the Company's interest

 

 

3,674

 

 

 

4,071

 

Amounts receivable/payable by the Company

 

 

175

 

 

 

666

 

Investments in and advances to unconsolidated affiliates, net of Company's
   share of distributions in excess of income from and investments in
   unconsolidated affiliates

 

 

202,180

 

 

 

184,053

 

Investments carried at fair value or cost

 

 

106,362

 

 

 

128,334

 

Company's share of distributions in excess of income from and
   investments in unconsolidated affiliates

 

 

8,880

 

 

 

9,939

 

Investments in and advances to unconsolidated affiliates

 

$

317,422

 

 

$

322,326

 

 

 

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Combined and Condensed Statements of Operations

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

25,096

 

 

$

18,974

 

 

$

72,167

 

 

$

59,090

 

Operating and other expenses

 

 

(8,443

)

 

 

(7,174

)

 

 

(23,768

)

 

 

(21,584

)

Interest expense

 

 

(7,130

)

 

 

(4,978

)

 

 

(18,458

)

 

 

(15,799

)

Depreciation and amortization

 

 

(9,708

)

 

 

(6,785

)

 

 

(24,867

)

 

 

(23,154

)

Impairment of Investments

 

 

(57,423

)

 

 

—

 

 

 

(57,423

)

 

 

—

 

Gain on disposition of properties (a)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

3,206

 

Net (loss) income attributable to unconsolidated affiliates

 

$

(57,608

)

 

$

37

 

 

$

(52,349

)

 

$

1,759

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company’s share of equity in net (loss) income of unconsolidated affiliates

 

$

(50,331

)

 

$

910

 

 

$

(45,416

)

 

$

4,951

 

Income attributable to unconsolidated affiliates recently sold or consolidated

 

 

—

 

 

 

(283

)

 

 

—

 

 

 

(845

)

Basis differential amortization

 

 

(248

)

 

 

(255

)

 

 

(753

)

 

 

(953

)

Company’s equity in (losses) earnings of unconsolidated affiliates

 

$

(50,579

)

 

$

372

 

 

$

(46,169

)

 

$

3,153

 

 

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