Investments in Unconsolidated Joint Ventures

6 Months Ended

Jun. 30, 2023

Equity Method Investments and Joint Ventures [Abstract]

Investments in Unconsolidated Joint Ventures

Investments in Unconsolidated Joint Ventures:

The Company has made the following recent financings or other events within its unconsolidated joint ventures:

On February 2, 2022, the Company’s joint venture in FlatIron Crossing replaced the existing $197,011 loan on the property with a new $175,000 loan that bears interest at the Secured Overnight Financing Rate ("SOFR") plus 3.70% and matures on February 9, 2025, including extension options. The loan is covered by an interest rate cap agreement that effectively prevents SOFR from exceeding 4.0% through February 15, 2024.

On August 2, 2022, the Company acquired the remaining 50% ownership interest in two former Sears parcels (Deptford Mall and Vintage Faire Mall) in MS Portfolio LLC, the Company's joint venture with Seritage Growth Properties ("Seritage"), for a total purchase price of approximately $24,544. As a result of this transaction and the shortening of holding periods on certain other assets in the joint venture, an impairment loss was recorded for the twelve months ending December 31, 2022. The Company's share of the impairment loss was $27,054. Effective as of August 2, 2022, the Company now owns and has consolidated its 100% interest in these two former Sears parcels in its consolidated financial statements (See Note 15—Acquisitions).

On November 14, 2022, the Company's joint venture in Washington Square closed on a four-year maturity date extension for the existing loan to November 1, 2026, including extension options. The Company's joint venture repaid $15,000 ($9,000 at the Company's pro rata share) of the outstanding loan balance. The loan bears interest at SOFR plus 4.0% and is covered by an interest rate cap agreement that effectively prevents SOFR from exceeding 4.0%.

On March 3, 2023, the Company’s joint venture in Scottsdale Fashion Square replaced the existing $403,931 mortgage loan on the property with a $700,000 loan that bears interest at a fixed rate of 6.21%, is interest only during the entire loan term and matures on March 6, 2028.

On April 25, 2023, the Company's joint venture in Deptford Mall closed on a three-year maturity date extension for the existing loan to April 3, 2026, including extension options. The Company's joint venture repaid $10,000 ($5,100 at the Company's pro rata share) of the outstanding loan balance at closing. The interest rate on the loan remains unchanged at 3.73%.

Effective May 9, 2023, the Company’s joint venture in Country Club Plaza defaulted on the $295,210 ($147,605 at the Company’s pro rata share) non-recourse loan on the property. The Company’s joint venture is in negotiations with the lender on the terms of the loan.

On May 18, 2023, the Company acquired Seritage’s remaining 50% ownership interest in the MS Portfolio LLC joint venture that owns five former Sears parcels, for a total purchase price of $46,687. These parcels are located at Chandler Fashion Center, Danbury Fair Mall, Freehold Raceway Mall, Los Cerritos Center and Washington Square. The Company previously recorded an impairment loss of $50,197, at the Company’s share, during the three months ending March 31, 2023 as a result of shortening the holding periods on these parcels. Upon the closing of this transaction, the Company recorded an additional loss of $1,166, at the Company’s share, during the three months ending June 30, 2023. Effective as of May 18, 2023, the Company now owns and has consolidated its 100% interest in these five former Sears parcels in its consolidated financial statements (See Note 15—Acquisitions).

4. Investments in Unconsolidated Joint Ventures: (Continued)

Combined and condensed balance sheets and statements of operations are presented below for all unconsolidated joint ventures.

Combined and Condensed Balance Sheets of Unconsolidated Joint Ventures:

	June 30, 2023		December 31, 2022
Assets(1):
Property, net	$	7,925,379	$	8,156,632
Other assets	674,038		664,036
Total assets	$	8,599,417	$	8,820,668
Liabilities and partners' capital(1):
Mortgage and other notes payable	$	5,755,394	$	5,491,250
Other liabilities	460,908		451,511
Company's capital	1,263,903		1,528,348
Outside partners' capital	1,119,212		1,349,559
Total liabilities and partners' capital	$	8,599,417	$	8,820,668
Investments in unconsolidated joint ventures:
Company's capital	$	1,263,903	$	1,528,348
Basis adjustment(2)	(424,820)		(425,153)
	$	839,083	$	1,103,195
Assets—Investments in unconsolidated joint ventures	$	1,034,181	$	1,224,288
Liabilities—Distributions in excess of investments in unconsolidated joint ventures	(195,098)		(121,093)
	$	839,083	$	1,103,195

(1)     These amounts include assets of $2,655,745 and $2,690,651 of Pacific Premier Retail LLC (the "PPR Portfolio") as of June 30, 2023 and December 31, 2022, respectively, and liabilities of $1,601,209 and $1,611,661 of the PPR Portfolio as of June 30, 2023 and December 31, 2022, respectively.

(2)     The Company amortizes the difference between the cost of its investments in unconsolidated joint ventures and the book value of the underlying equity into (loss) income on a straight-line basis consistent with the lives of the underlying assets. The amortization of this difference was $1,106 and $2,295 for the three months ended June 30, 2023 and 2022, respectively, and $(11,448) and $4,870 for the six months ended June 30, 2023 and 2022, respectively.

Combined and Condensed Statements of Operations of Unconsolidated Joint Ventures:

	PPR Portfolio		Other Joint Ventures		Total
Three Months Ended June 30, 2023
Revenues:
Leasing revenue	$	42,095	$	168,389	$	210,484
Other	496		7,621		8,117
Total revenues	42,591		176,010		218,601
Expenses:
Shopping center and operating expenses	10,275		59,540		69,815
Leasing expenses	425		1,453		1,878
Interest expense	21,849		50,789		72,638
Depreciation and amortization	22,330		63,231		85,561
Total expenses	54,879		175,013		229,892
Loss on sale or write down of assets, net	—		(1,088)		(1,088)
Net loss	$	(12,288)	$	(91)	$	(12,379)
Company's equity in net loss	$	(4,457)	$	(2,503)	$	(6,960)
Three Months Ended June 30, 2022
Revenues:
Leasing revenue	$	48,339	$	168,827	$	217,166
Other	55		2,766		2,821
Total revenues	48,394		171,593		219,987
Expenses:
Shopping center and operating expenses	10,139		55,365		65,504
Leasing expenses	365		1,200		1,565
Interest expense	15,378		36,582		51,960
Depreciation and amortization	24,218		66,226		90,444
Total expenses	50,100		159,373		209,473
Gain on sale or write down of assets, net	—		2,032		2,032
Net (loss) income	$	(1,706)	$	14,252	$	12,546
Company's equity in net income	$	1,289	$	5,064	$	6,353

Significant accounting policies used by the unconsolidated joint ventures are similar to those used by the Company.

Combined and Condensed Statements of Operations of Unconsolidated Joint Ventures:

	PPR Portfolio		Other Joint Ventures		Total
Six Months Ended June 30, 2023
Revenues:
Leasing revenue	$	85,166	$	331,757	$	416,923
Other	1,176		8,287		9,463
Total revenues	86,342		340,044		426,386
Expenses:
Shopping center and operating expenses	21,673		119,659		141,332
Leasing expenses	994		2,926		3,920
Interest expense	43,658		93,085		136,743
Depreciation and amortization	45,207		125,736		170,943
Total expenses	111,532		341,406		452,938
Loss on sale or write down of assets, net	—		(71,651)		(71,651)
Net loss	$	(25,190)	$	(73,013)	$	(98,203)
Company's equity in net loss	$	(10,715)	$	(58,055)	$	(68,770)
Six Months Ended June 30, 2022
Revenues:
Leasing revenue	$	92,189	$	323,993	$	416,182
Other	119		10,105		10,224
Total revenues	92,308		334,098		426,406
Expenses:
Shopping center and operating expenses	20,857		113,232		134,089
Leasing expenses	834		2,521		3,355
Interest expense	30,751		72,327		103,078
Depreciation and amortization	48,491		131,406		179,897
Total expenses	100,933		319,486		420,419
Loss on sale or write down of assets, net	—		(56,659)		(56,659)
Net loss	$	(8,625)	$	(42,047)	$	(50,672)
Company's equity in net loss	$	(503)	$	(22,241)	$	(22,744)