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Variable Interest Entities
3 Months Ended
Mar. 31, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Variable Interest Entities

Note 8 — Variable Interest Entities

We evaluate our investments in limited partnerships and similar entities in accordance with the consolidation guidance to determine whether each such entity is a VIE. The accounting standards related to the consolidation of VIEs require qualitative assessments to determine whether we are the primary beneficiary. The primary beneficiary analysis is based on power and economics. We conclude that we are the primary beneficiary and consolidate the VIE if we have both: (i) the power to direct the activities of the VIE that most significantly influence the VIE's economic performance, and (ii) the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE. Significant judgments and assumptions related to the determinations include, but are not limited to, estimates about the current and future fair values and performance of real estate held by these VIEs and general market conditions.

Aimco consolidates Aimco Operating Partnership, a VIE of which Aimco is the primary beneficiary. Aimco, through Aimco Operating Partnership, consolidates all VIEs for which it is the primary beneficiary. Substantially all of the assets and liabilities of Aimco are that of Aimco Operating Partnership.

The VIEs that Aimco Operating Partnership consolidates own interests in real estate. We are the primary beneficiary of the VIEs because we have the power to direct the activities that most significantly impact the entities’ economic performance and have a substantial economic interest. We have seven unconsolidated VIEs for which we are not the primary beneficiary because we are not the decision maker. The seven unconsolidated VIEs include four unconsolidated real estate partnerships that hold four apartment communities in San Diego, California, the Mezzanine Investment, our passive equity investment in IQHQ, and our investment in the Edgewater joint venture, formed in the first quarter of 2022 to develop a 2.8-acre site in Miami's Edgewater neighborhood.

The details of our consolidated and unconsolidated VIEs, excluding those of Aimco Operating Partnership, are summarized in the table below (in thousands, except for VIE count):

 

 

 

March 31, 2022

 

 

December 31, 2021

 

 

 

Consolidated

 

 

Unconsolidated

 

 

Consolidated

 

 

Unconsolidated

 

Count of VIEs

 

8

 

 

7

 

 

9

 

 

6

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Real estate, net

 

$

211,702

 

 

$

 

 

$

564,909

 

 

$

 

Mezzanine investment

 

 

 

 

 

346,034

 

 

 

 

 

 

337,797

 

Right-of-use lease assets

 

 

425,788

 

 

 

 

 

 

429,768

 

 

 

 

Unconsolidated real estate partnerships

 

 

 

 

 

15,145

 

 

 

 

 

 

13,005

 

Other assets, net

 

 

23,271

 

 

 

50,000

 

 

 

43,715

 

 

 

35,773

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Deferred tax liabilities

 

 

 

 

 

 

 

 

124,747

 

 

 

 

Accrued liabilities and other

 

 

56,077

 

 

 

 

 

 

30,519

 

 

 

 

Construction loans, net

 

 

129,625

 

 

 

 

 

 

163,570

 

 

 

 

Lease liabilities

 

 

433,171

 

 

 

 

 

 

435,093

 

 

 

 

During the three months ended March 31, 2022, Aimco acquired all of the outstanding redeemable non-controlling interests in an entity classified as a consolidated VIE as of December 31, 2021. The changes in consolidated VIE assets and liabilities from December 31, 2021 to March 31, 2022 in the table above are primarily due to the impact of declassification of the entity as a VIE.

As of March 31, 2022, one of our consolidated VIEs had an outstanding construction loan. In conjunction with this loan, we made customary guarantees. In certain situations, the lenders may have recourse to our general credit. As of March 31, 2022, we estimate the maximum exposure equals the $129.6 million outstanding loan balance. Other consolidated VIEs' creditors do not have recourse to our general credit.

Unconsolidated Real Estate Partnerships

We own an interest in four apartment communities in San Diego, California of which we are not the primary beneficiary. We also own a joint venture interest in a 2.8-acre development site in Miami’s Edgewater neighborhood. Our investment balance of $15.1 million and $13.0 million as of March 31, 2022 and December 31, 2021, respectively, represents our maximum exposure to loss in these VIEs.

Mezzanine Investment

AIR owns an interest in a partnership that owns Parkmerced Apartments, of which it is not the primary beneficiary, and under the terms of the Separation Agreement, AIR is obligated to transfer ownership of the subsidiaries that hold this interest to us upon receipt of required third-party consents. Our investment balance of $346.0 million and $337.8 million as of March 31, 2022 and December 31, 2021, respectively, represents our indirect interest in notes receivable through our agreement with AIR and our maximum exposure to loss in this VIE.