Investments in and Advances to Unconsolidated Affiliates

12 Months Ended

Dec. 31, 2023

Equity Method Investments and Joint Ventures [Abstract]

Investments in and Advances to Unconsolidated Affiliates

4. Investments in and Advances to Unconsolidated Affiliates

The Company’s investments in and advances to unconsolidated affiliates consist of the following (dollars in thousands):


		Ownership Interest	December 31,		December 31,
Portfolio	Property	December 31, 2023	2023		2022

Core:	Renaissance Portfolio	20%	$	30,745	$	28,755
	Gotham Plaza	49%		30,772		30,112
	Georgetown Portfolio (a)	50%		4,230		4,048
	1238 Wisconsin Avenue (a, b)	80%		19,719		14,502
	840 N. Michigan Avenue (d)	91.85%		15,761		—
				101,227		77,417

Mervyns II:	KLA/ABS (c)	36.7%		—		85,403

Fund IV:	Fund IV Other Portfolio	90%		5,221		7,914
	650 Bald Hill Road	90%		9,486		10,203
	Paramus Plaza	50%		70		936
				14,777		19,053

Fund V:	Family Center at Riverdale (d)	89.42%		2,552		4,995
	Tri-City Plaza	90%		6,452		8,422
	Frederick County Acquisitions	90%		11,345		12,240
	Wood Ridge Plaza	90%		10,313		12,751
	La Frontera Village	90%		17,483		20,803
	Shoppes at South Hills (e)	90%		11,707		44,677
	Mohawk Commons	90%		16,434		775
				76,286		104,663

Various:	Due from (to) Related Parties			396		305
	Other (f)			4,554		4,315
	Investments in and advances to unconsolidated affiliates		$	197,240	$	291,156

Core:	Crossroads (g)	49%	$	7,982	$	8,832
	840 N. Michigan Avenue (d, g)	91.85%		—		1,673
	Distributions in excess of income from, and investments in, unconsolidated affiliates		$	7,982	$	10,505

Represents a VIE for which the Company is not the primary beneficiary (Note 16).

Includes the amounts advanced against a $12.8 million construction commitment from the Company to the venture that holds an investment in 1238 Wisconsin. As of December 31, 2023 and 2022 the note receivable from a related party had a balance of $12.8 million and $7.5 million, respectively, net of an allowance for CECL of $0.1 million, and $0.1 million, respectively. The loan is collateralized by the venture members' equity interest in the entity that holds the 1238 Wisconsin development property, bears interest at Prime + 1.0% subject to a 4.5% floor, and matures on December 28, 2024. The Company recognized Interest income of $0.2 million for the year ended December 31, 2023, related to this note receivable. The note originated in 2022 and the Company recognized less than $0.1 million of Interest income for the year ended December 31, 2022.

At December 31, 2022, Mervyns II had an effective indirect ownership of approximately 4.1 million shares (approximately 1% interest) through its Investment in Albertsons Companies Inc. ("Albertsons"), which is accounted for at fair value (Note 8). Mervyns II distributed its shares to its investors upon expiration of the lock-up agreement in January 2023, as further described below.

Represents a tenancy-in-common interest.

Includes a $31.7 million bridge loan at December 31, 2022, from the Company to the venture that holds the property in its investment in Shoppes at South Hills. During the first quarter of 2023 the bridge loan was repaid, as further described below.

Includes cost-method investment in Fifth Wall and other investments.

Distributions have exceeded the Company’s investment; however, the Company recognizes a liability balance as it may elect to contribute capital to the entity.

During the year ended December 31, 2023, the Company:

•

funded $5.3 million of a $12.8 million construction loan commitment to the 1238 Wisconsin venture. The total outstanding balance of the loan was $12.8 million;

•

modified a property mortgage with an outstanding balance of $160.0 million with a new loan of $152.0 million and extended the maturity date at Georgetown Renaissance. The Company contributed an additional $1.4 million in equity to cover the venture partner’s share of the required paydown;

•

through Fund IV, modified a property mortgage with an outstanding balance of $21.9 million with a new loan of $24.1 million at Eden Square;

•

through Fund V, modified a property mortgage with an outstanding balance of $33.5 million to extend the maturity date at Wood Ridge Plaza;

•

through Fund V, acquired a 90% interest in a venture for $20.2 million, which purchased Mohawk Commons, a shopping center located in Schenectady, New York for $62.1 million, inclusive of transaction costs. In addition, the Mohawk Commons venture entered into a $39.7 million mortgage loan;

•

through Fund V, received payment on a bridge loan from the Shoppes at South Hills venture for $31.7 million which matured in February 2023. Upon maturity of the bridge loan, the venture entered into a $36.0 million mortgage loan, of which $31.8 million was funded at closing; and

•

through Mervyns II, received cash dividends from its investment in Albertsons totaling $28.5 million on January 20, 2023, of which the Company's share was $11.4 million. Additionally, the lock-up period, which restricted the transfer or sale of shares, expired on January 24, 2023, and 4.1 million shares of Albertsons were distributed to the individual investors as a non-cash distribution, of which the Company received 1.6 million shares. The shares are classified as Marketable securities on the Company's Consolidated Balance Sheets (Note 8).

In December 2023, an unconsolidated venture that holds an interest in a property on North Michigan Avenue modified its $73.5 million nonrecourse mortgage loan. As part of the modification, the principal balance was reduced by $18.5 million and required a principal paydown of $17.5 million, the interest rate increased from 4.4% to 6.5%, and the maturity date was extended from February 2025 to December 2026. In addition, the venture, upon a sale or secured refinancing prior to maturity (or early prepayment) at an amount that exceeds $55.0 million (as adjusted pursuant to the modification agreement), may be subject to additional contingent payments of up to $17.5 million (“Contingent Payment”), which amortizes on a straight-line basis over the remaining term of the loan. The modification was accounted for as a troubled debt restructuring pursuant to ASC 470, resulting in an initial gain of approximately $0.4 million, which was recognized within Equity in (losses) earnings of unconsolidated affiliates on the Company’s Consolidated Statements of Operations, and represented the excess of the original principal balance of the mortgage (prior to modification), over the maximum total future cash payments under the new terms. Thus, all future cash payments under the terms of the payable, including the Contingent Payment, shall be accounted for as a reduction of the carrying amount of the mortgage, and no interest expense shall be recognized for any period between the modification and the revised maturity of the mortgage. As the Contingent Payment amortizes (and no transaction arises that requires a payment as described above) the additional gain will be recognized within equity in earnings in the Company’s consolidated financial statements. No amortization of the Contingent Payment occurred in 2023. As part of the modification, the Operating Partnership provided a recourse guarantee equivalent to 50% of the unpaid outstanding principal balance of the mortgage.

In December 2023, the Company acquired an additional 3.42% interest in the North Michigan Avenue venture, increasing its ownership from 88.43% to 91.85% and provided a loan of $1.4 million to the remaining venture partners for their share of the required paydown (Note 3).

During the year ended December 31, 2022, the Company:

•

funded $7.5 million of a $12.8 million construction loan commitment to the 1238 Wisconsin venture. The total outstanding balance of the loan was $7.5 million;

•

recorded our proportionate share of an impairment charge of $50.8 million in the 840 N. Michigan Avenue venture during the third quarter, which is included in Equity in (losses) earnings of unconsolidated affiliates in the Consolidated Statements of Operations;

•

through Fund III, sold its investment in Self Storage Management for $6.0 million and recognized its proportionate gain of $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;

•

through Fund IV, recognized its proportionate gain from the venture’s sale of Promenade at Manassas for $46.0 million and repayment of $27.3 million of mortgage debt. Fund IV recognized a gain of $12.8 million, of which the Company's share was $3.0 million;

•

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 venture for $31.7 million during the third quarter;

•

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 venture for $52.0 million during the first quarter, which was repaid during the second quarter. During the second quarter, 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;

•

funded $0.2 million of its capital commitment to its Fifth Wall investment during the second and third quarter; and

•

received cash dividends totaling $1.9 million at Mervyns II related to distributions from its Investment in Albertsons and recorded a net unrealized holding loss of $38.9 million reflecting the change in fair value of its Investment in Albertsons (Note 8).

Fees from Unconsolidated Affiliates

The Company earned property management, construction, development, legal and leasing fees from its investments in unconsolidated partnerships totaling $0.4 million and $0.4 million and $0.6 million for the years ended December 31, 2023, 2022 and 2021, respectively, which is included in other revenues in the Consolidated Statements of Operations.

In addition, the Company’s joint ventures paid certain unaffiliated partners of its joint ventures, $4.5 million and $2.7 million and $2.2 million for the years ended December 31, 2023, 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, summarized the financial information of the Company’s investments in unconsolidated affiliates that were held as of December 31, 2023, and accordingly exclude the results of any investments disposed of or consolidated prior to that date (in thousands):


	December 31,		December 31,
	2023		2022
Combined and Condensed Balance Sheets
Assets:
Rental property, net	$	723,411	$	650,997
Real estate under development		—		17,359
Other assets		125,699		127,070
Total assets	$	849,110	$	795,426
Liabilities and partners’ equity:
Mortgage notes payable	$	662,552	$	609,923
Other liabilities		100,270		96,532
Partners’ equity		86,288		88,971
Total liabilities and partners’ equity	$	849,110	$	795,426

Company's share of accumulated equity	$	128,690	$	131,878
Basis differential		51,824		52,813
Deferred fees, net of portion related to the Company's interest		3,794		5,937
Amounts receivable to/payable by the Company		396		305
Investments in and advances to unconsolidated affiliates, net of Company's share of distributions in excess of income from and investments in unconsolidated affiliates		184,704		190,933
Investments carried at fair value or cost		4,554		89,718
Company's share of distributions in excess of income from and investments in unconsolidated affiliates		7,982		10,505
Investments in and advances to unconsolidated affiliates	$	197,240	$	291,156


	Year Ended December 31,
	2023			2022			2021
Combined and Condensed Statements of Operations
Total revenues	$	108,425		$	96,080		$	80,823
Operating and other expenses		(35,488	)		(29,858	)		(28,572	)
Interest expense		(40,864	)		(26,807	)		(21,228	)
Depreciation and amortization		(42,212	)		(34,596	)		(30,518	)
Gain (loss) on extinguishment of debt (a)		368			(7	)		(35	)
Impairment of Investment (b)		—			(57,423	)		—
Gain on disposition of properties (c)		—			12,983			3,206
Net (losses) earnings attributable to unconsolidated affiliates	$	(9,771	)	$	(39,628	)	$	3,676

Company’s share of equity in net losses of unconsolidated affiliates	$	(6,688	)	$	(31,907	)	$	6,023
Basis differential amortization		(989	)		(1,000	)		(693	)
Company’s equity in (losses) earnings of unconsolidated affiliates	$	(7,677	)	$	(32,907	)	$	5,330

Includes the gain on debt extinguishment related to the restructuring at 840 N. Michigan Avenue for the year ended December 31, 2023.

Includes the impairment charge related to 840 N. Michigan Avenue for the year ended December 31, 2022.

Includes the gain on the sale of Promenade at Manassas on October 13, 2022, and two land parcels by the Family Center at Riverdale on January 4, 2021.