| Investments In Unconsolidated Joint Ventures |
4. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES
As of June 30, 2016, the Company had an aggregate investment of approximately $315.2 million in its equity method joint ventures. The Company formed these ventures with unaffiliated third parties, or acquired interests in them, to develop or manage primarily office and multi-family rental properties, or to acquire land in anticipation of possible development of office and multi-family rental properties. As of June 30, 2016, the unconsolidated joint ventures owned: 36 office and two retail properties aggregating approximately 5.7 million square feet, 10 multi-family properties totaling 3,587 apartments, a 350-room hotel, development projects for up to approximately 763 apartments; and interests and/or rights to developable land parcels able to accommodate up to 4,210 apartments. The Company’s unconsolidated interests range from 7.5 percent to 85 percent subject to specified priority allocations in certain of the joint ventures.
The amounts reflected in the following tables (except for the Company’s share of equity in earnings) are based on the historical financial information of the individual joint ventures. The Company does not record losses of the joint ventures in excess of its investment balances unless the Company is liable for the obligations of the joint venture or is otherwise committed to provide financial support to the joint venture. The outside basis portion of the Company’s investments in joint ventures is amortized over the anticipated useful lives of the underlying ventures’ tangible and intangible assets acquired and liabilities assumed. Unless otherwise noted below, the debt of the Company’s unconsolidated joint ventures generally is non-recourse to the Company, except for customary exceptions pertaining to such matters as intentional misuse of funds, environmental conditions, and material misrepresentations.
The Company has agreed to guarantee repayment of a portion of the debt of its unconsolidated joint ventures. As of June 30, 2016, such debt had a total facility amount of $282.2 million of which the Company agreed to guarantee up to $32 million. As of June 30, 2016, the outstanding balance of such debt totaled $199.5 million of which $23.1 million was guaranteed by the Company. The Company also posted a $3.6 million letter of credit in support of the South Pier at Harborside joint venture, half of which is indemnified by Hyatt Corporation, the Company’s joint venture partner. The Company performed management, leasing, development and other services for the properties owned by the unconsolidated joint ventures and recognized $1.0 million and $1.4 million for such services in the three months ended June 30, 2016 and 2015, respectively. The Company had $0.6 million and $0.8 million in accounts receivable due from its unconsolidated joint ventures as of June 30, 2016 and December 31, 2015, respectively.
Included in the Company’s investments in unconsolidated joint ventures as of June 30, 2016 are four unconsolidated development joint ventures, which are VIEs for which the Company is not the primary beneficiary. These joint ventures are primarily established to develop real estate property for long-term investment and were deemed VIEs primarily based on the fact that the equity investment at risk was not sufficient to permit the entities to finance their activities without additional financial support. The initial equity contributed to these entities was not sufficient to fully finance the real estate construction as development costs are funded by the partners throughout the construction period. The Company determined that it was not the primary beneficiary of these VIEs based on the fact that the Company has shared control of these entities along with the entity’s partners and therefore does not have controlling financial interests in these VIEs. The Company’s aggregate investment in these VIEs was approximately $178.4 million as of June 30, 2016. The Company’s maximum exposure to loss as a result of its involvement with these VIEs is estimated to be approximately $201.5 million, which includes the Company’s current investment and estimated future funding commitments/guarantees of approximately $23.1 million. The Company has not provided financial support to these VIEs that it was not previously contractually required to provide. In general, future costs of development not financed through third party will be funded with capital contributions from the Company and its outside partners in accordance with their respective ownership percentages.
The following is a summary of the Company's unconsolidated joint ventures as of June 30, 2016 and December 31, 2015: (dollars in thousands, including footnotes)
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Property Debt
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Number of
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Company's
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Carrying Value
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As of June 30, 2016
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Apartment Units
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Effective
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June 30,
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December 31,
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Maturity
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Interest
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Entity / Property Name
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or Square Feet (sf)
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Ownership % (a)
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2016
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2015
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Balance
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Date
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Rate
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Multi-family
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Marbella RoseGarden, L.L.C./ Marbella (b)
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412
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units
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24.27
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%
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$
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15,362
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$
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15,569
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$
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95,000
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05/01/18
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4.99
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%
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RoseGarden Monaco Holdings, L.L.C./ Monaco (b)
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523
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units
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15.00
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%
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346
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937
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165,000
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02/01/21
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4.19
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%
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Rosewood Morristown, L.L.C. / Metropolitan at 40 Park (c) (d)
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130
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units
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12.50
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%
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5,784
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5,723
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45,533
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(e)
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(e)
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Riverwalk G Urban Renewal, L.L.C./ RiverTrace at Port Imperial (b) (f)
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316
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units
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50.00
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%
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10,683
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-
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79,393
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07/15/21
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6.00
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%
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(g)
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Elmajo Urban Renewal Associates, LLC / Lincoln Harbor (Bldg A&C) (b)
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355
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units
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7.50
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%
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-
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-
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128,100
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03/01/30
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4.00
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%
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Crystal House Apartments Investors LLC / Crystal House (h)
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794
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units
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25.00
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%
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29,687
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28,114
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165,000
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04/01/20
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3.17
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%
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Roseland/Port Imperial Partners, L.P./ Riverwalk C (b) (i)
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363
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units
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20.00
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%
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1,678
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1,678
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-
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-
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-
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RoseGarden Marbella South, L.L.C./ Marbella II
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311
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units
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24.27
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%
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17,514
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16,728
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72,615
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03/30/17
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L+2.25
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%
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(j)
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Estuary Urban Renewal Unit B, LLC / Lincoln Harbor (Bldg B) (b)
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227
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units
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7.50
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%
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-
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-
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81,900
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03/01/30
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4.00
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%
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Riverpark at Harrison I, L.L.C./ Riverpark at Harrison
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141
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units
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45.00
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%
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2,257
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2,544
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30,000
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08/01/25
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3.70
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%
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Capitol Place Mezz LLC / Station Townhouses
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378
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units
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50.00
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%
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44,923
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46,267
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100,700
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07/01/33
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4.82
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%
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(k)
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Harborside Unit A Urban Renewal, L.L.C. / URL Harborside
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763
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units
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85.00
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%
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98,518
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96,799
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119,433
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08/01/29
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5.197
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%
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(l)
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RoseGarden Monaco, L.L.C./ San Remo Land
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250
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potential units
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41.67
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%
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1,370
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1,339
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-
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-
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-
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Grand Jersey Waterfront URA, L.L.C./ Liberty Landing
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850
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potential units
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50.00
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%
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337
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337
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-
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-
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-
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Hillsborough 206 Holdings, L.L.C./ Hillsborough 206
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160,000
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sf
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50.00
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%
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1,962
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1,962
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-
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-
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-
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Plaza VIII & IX Associates, L.L.C./ Vacant land (parking operations)
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1,225,000
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sf
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50.00
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%
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4,230
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4,055
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-
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-
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-
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PruRose Port Imperial South 15, LLC/RiversEdge at Port Imperial (x)
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236
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units
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50.00
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%
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-
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-
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-
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-
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-
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PruRose Port Imperial South 13, LLC/RiverParc at Port Imperial (x)
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280
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units
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20.00
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%
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-
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-
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-
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-
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-
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Office
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Red Bank Corporate Plaza, L.L.C./ Red Bank
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92,878
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sf
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50.00
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%
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4,085
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4,140
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14,776
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05/17/16
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L+3.00
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%
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(m)
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12 Vreeland Associates, L.L.C./ 12 Vreeland Road
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139,750
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sf
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50.00
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%
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6,082
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5,890
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12,171
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07/01/23
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2.87
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%
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BNES Associates III / Offices at Crystal Lake
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106,345
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sf
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31.25
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%
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2,587
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2,295
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5,810
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11/01/23
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4.76
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%
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KPG-P 100 IMW JV, LLC / 100 Independence Mall West
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339,615
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sf
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33.33
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%
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-
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-
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72,000
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09/09/16
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L+7.00
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%
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(n)
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Keystone-Penn
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1,842,820
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sf
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(o)
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-
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-
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229,882
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(p)
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(p)
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Keystone-TriState
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1,266,384
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sf
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(q)
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3,288
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3,958
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213,916
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(r)
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(r)
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KPG-MCG Curtis JV, L.L.C./ Curtis Center (s)
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885,000
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sf
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50.00
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%
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62,144
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59,858
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(t)
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(t)
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(t)
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Other
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Roseland/North Retail, L.L.C./ Riverwalk at Port Imperial (b)
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30,745
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sf
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20.00
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%
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1,733
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1,758
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-
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-
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-
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South Pier at Harborside / Hyatt Regency Jersey City on the Hudson
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350
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rooms
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50.00
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%
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(u)
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(u)
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63,023
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(v)
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(v)
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Other (w)
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630
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3,506
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-
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-
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-
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Totals:
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$
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315,200
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$
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303,457
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$
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1,694,252
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(a)
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Company's effective ownership % represents the Company's entitlement to residual distributions after payments of priority returns, where applicable.
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(b)
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The Company's ownership interests in this venture are subordinate to its partner's preferred capital balance and the Company is not expected to meaningfully participate in the venture's cash flows in the near term.
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(c)
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Through the joint venture, the Company also owns a 12.5 percent interest in a 50,973 square feet retail building ("Shops at 40 Park") and a 25 percent interest in a to-be-built 59-unit, five story multi-family rental development property ("Lofts at 40 Park").
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(d)
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The Company's ownership interests in this venture are subordinate to its partner's preferred capital balance and the payment of the outstanding balance remaining on a note ($975 as of June 30, 2016), and is not expected to meaningfully participate in the venture's cash flows in the near term.
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(e)
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Property debt balance consists of: (i) a loan, collateralized by the Metropolitan at 40 Park, with a balance of $38,028, bears interest at 3.25 percent, matures in September 2020; (ii) an amortizable loan, collateralized by the Shops at 40 Park, with a balance of $6,388, bears interest at 3.63 percent, matures in August 2018; and (iii) a loan, collateralized by the Lofts at 40 Park, with a balance of $1,117, bears interest at LIBOR plus 250 basis points and matures in September 2016. The Shops at 40 Park mortgage loan also provides for additional borrowing proceeds of $1 million based on certain preferred thresholds being achieved.
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(f)
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During the three months ended June 30, 2016, the Company acquired the equity interests of its joint venture partner in Portside Apartment Holdings, L.L.C and PruRose Riverwalk G, L.L.C. for $39.6 million and $11.3 million, respectively, which increased its ownership to 100 percent in Portside Apartment Holdings, LLC and 50 percent in Riverwalk G Urban Renewal, L.L.C. (See Note 3: Recent Transactions – Acquisitions).
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(g)
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The permanent loan has a maximum borrowing amount of $80,249.
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(h)
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The Company also owns a 50 percent interest in a vacant land to accommodate the development of approximately 295 additional units of which 252 are currently approved.
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(i)
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The Company also owns a 20 percent residual interest in undeveloped land parcels: parcels 6, I, and J that can accommodate the development of 836 apartment units.
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(j)
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The construction loan has a maximum borrowing amount of $77,400 and provides, subject to certain conditions, two one-year extension options with a fee of 25 basis points for each year.
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(k)
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The construction/permanent loan has a maximum borrowing amount of $100,700 with amortization starting in August 2017.
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(l)
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The construction/permanent loan has a maximum borrowing amount of $192,000.
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(m)
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The joint venture has a swap agreement that fixes the all-in rate to 3.99375 percent per annum on an initial notional amount of $13,650 and then adjusting in accordance with an amortization schedule, which is effective from October 17, 2011 through loan maturity.
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(n)
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The mortgage loan has two one-year extension options, subject to certain conditions.
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(o)
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The Company’s equity interests in the joint ventures will be subordinated to Keystone Entities receiving a 15 percent internal rate of return (“IRR”) after which the Company will receive a 10 percent IRR on its subordinate equity and then all profit will be split equally.
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(p)
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Principal balance of $127,600 bears interest at 5.114 percent and matures on August 27, 2023; principal balance of $45,500 bears interest at 5.01 percent and matures on September 6, 2025; principal balance of $35,107 bears interest at rates ranging from LIBOR+5.0 percent to LIBOR+5.75 percent and matures on August 27, 2016; principal balance of $11,250 bears interest at LIBOR+5.5 percent and matures on January 9, 2019; principal balance of $10,425 bears interest at LIBOR+6.0 percent matures on August 31, 2016.
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(q)
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Includes the Company’s pari-passu interests of $3.3 million in five properties and Company’s subordinated equity interests to Keystone Entities receiving a 15 percent internal rate of return (“IRR”) after which the Company will receive a 10 percent IRR on its subordinate equity and then all profit will be split equally.
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(r)
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Principal balance of $44,378 bears interest at 5.38 percent and matures on July 1, 2017; principal balance of $76,837 bears interest at rates ranging from 5.65 percent to 6.75 percent and matures on September 9, 2017; principal balance of $14,250 bears interest at 4.88 percent and matures on July 6, 2024; principal balance of $63,400 bears interest at 4.93 percent and matures on July 6, 2044; principal balance of $15,050 bears interest at 4.71 percent and matures on August 6, 2044.
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(s)
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Includes undivided interests in the same manner as investments in noncontrolling partnership, pursuant to ASC 970-323-25-12.
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(t)
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See Note 10: Mortgages, Loans Payable and Other Obligations for debt secured by interests in these assets.
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(u)
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The negative carrying value for this venture of $3,847 and $3,317 as of June 30, 2016 and December 31, 2015, respectively, were included in accounts payable, accrued expenses and other liabilities.
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(v)
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Balance includes: (i) mortgage loan, collateralized by the hotel property, with a balance of $59,429, bears interest at 6.15 percent and matures in November 2016, and (ii) loan with a balance of $3,594, bears interest at fixed rates ranging from 6.09 percent to 6.62 percent and matures in August 1, 2020. The Company posted a $3.6 million letter of credit in support of this loan, half of which is indemnified by the partner.
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(w)
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The Company owns other interests in various unconsolidated joint ventures, including interests in assets previously owned and interest in ventures whose businesses are related to its core operations. These ventures are not expected to significantly impact the Company's operations in the near term.
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(x)
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See discussion in Note 3: Recent Transactions - Unconsolidated Joint Venture Activity.
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The following is a summary of the Company’s equity in earnings (loss) of unconsolidated joint ventures for the three and six months ended June 30, 2016 and 2015: (dollars in thousands)
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Three Months Ended
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Six Months Ended
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June 30,
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June 30,
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Entity / Property Name
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2016
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2015
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2016
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2015
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Multi-family
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Marbella RoseGarden, L.L.C./ Marbella
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$
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47
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$
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61
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$
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132
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$
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122
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RoseGarden Monaco Holdings, L.L.C./ Monaco
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(300)
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(313)
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(592)
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(629)
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Rosewood Morristown, L.L.C. / Metropolitan at 40 Park
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(82)
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(91)
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(163)
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(185)
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Riverwalk G Urban Renewal, L.L.C./ RiverTrace at Port Imperial
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(595)
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(276)
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(595)
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(530)
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Elmajo Urban Renewal Associates, LLC / Lincoln Harbor (Bldg A&C)
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-
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-
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-
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-
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Crystal House Apartments Investors LLC / Crystal House
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(110)
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13
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(222)
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3
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Roseland/Port Imperial Partners, L.P./ Riverwalk C
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|
-
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|
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(125)
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|
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-
|
|
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(309)
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RoseGarden Marbella South, L.L.C./ Marbella II
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|
(307)
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|
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-
|
|
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(307)
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|
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-
|
|
Estuary Urban Renewal Unit B, LLC / Lincoln Harbor (Bldg B)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Riverpark at Harrison I, L.L.C./ Riverpark at Harrison
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|
(102)
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|
|
(150)
|
|
|
(130)
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|
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(324)
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Capitol Place Mezz LLC / Station Townhouses
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(727)
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|
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(1,263)
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|
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(1,495)
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|
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(1,188)
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Harborside Unit A Urban Renewal, L.L.C. / URL Harborside
|
|
-
|
|
|
-
|
|
|
(17)
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|
|
-
|
|
RoseGarden Monaco, L.L.C./ San Remo Land
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Grand Jersey Waterfront URA, L.L.C./ Liberty Landing
|
|
-
|
|
|
-
|
|
|
(60)
|
|
|
(19)
|
|
Hillsborough 206 Holdings, L.L.C./ Hillsborough 206
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|
(13)
|
|
|
(5)
|
|
|
(32)
|
|
|
(5)
|
|
Plaza VIII & IX Associates, L.L.C./ Vacant land (parking operations)
|
|
98
|
|
|
70
|
|
|
175
|
|
|
156
|
|
Office
|
|
|
|
|
|
|
|
|
|
|
|
|
Red Bank Corporate Plaza, L.L.C./ Red Bank
|
|
108
|
|
|
112
|
|
|
210
|
|
|
222
|
|
12 Vreeland Associates, L.L.C./ 12 Vreeland Road
|
|
108
|
|
|
86
|
|
|
192
|
|
|
72
|
|
BNES Associates III / Offices at Crystal Lake
|
|
17
|
|
|
52
|
|
|
(177)
|
|
|
121
|
|
KPG-P 100 IMW JV, LLC / 100 Independence Mall West
|
|
-
|
|
|
(379)
|
|
|
-
|
|
|
(763)
|
|
Keystone-Penn
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Keystone-TriState
|
|
(191)
|
|
|
(242)
|
|
|
(668)
|
|
|
(1,590)
|
|
KPG-MCG Curtis JV, L.L.C./ Curtis Center
|
|
226
|
|
|
232
|
|
|
405
|
|
|
428
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Roseland/North Retail, L.L.C./ Riverwalk at Port Imperial
|
|
(9)
|
|
|
(18)
|
|
|
(25)
|
|
|
(36)
|
|
South Pier at Harborside / Hyatt Regency Jersey City on the Hudson
|
|
987
|
|
|
868
|
|
|
820
|
|
|
784
|
|
Other
|
|
231
|
|
|
(961)
|
|
|
381
|
|
|
(2,188)
|
|
Company's equity in earnings (loss) of unconsolidated joint ventures
|
$
|
(614)
|
|
$
|
(2,329)
|
|
$
|
(2,168)
|
|
$
|
(5,858)
|
The following is a summary of the financial position of the unconsolidated joint ventures in which the Company had investment interests as of June 30, 2016 and December 31, 2015: (dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
|
2016
|
|
|
2015
|
|
Assets:
|
|
|
|
|
|
|
|
Rental property, net
|
|
$
|
1,598,623
|
|
$
|
1,781,621
|
|
Other assets
|
|
|
269,073
|
|
|
307,000
|
|
Total assets
|
|
$
|
1,867,696
|
|
$
|
2,088,621
|
|
Liabilities and partners'/
|
|
|
|
|
|
|
|
members' capital:
|
|
|
|
|
|
|
|
Mortgages and loans payable
|
|
$
|
1,187,866
|
|
$
|
1,298,293
|
|
Other liabilities
|
|
|
229,941
|
|
|
215,951
|
|
Partners'/members' capital
|
|
|
449,889
|
|
|
574,377
|
|
Total liabilities and
|
|
|
|
|
|
|
|
partners'/members' capital
|
|
$
|
1,867,696
|
|
$
|
2,088,621
|
The following is a summary of the results from operations of the unconsolidated joint ventures for the period in which the Company had investment interests during the three and six months ended June 30, 2016 and 2015: (dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Total revenues
|
$
|
94,193
|
|
$
|
81,075
|
|
$
|
164,315
|
|
$
|
155,552
|
|
Operating and other expenses
|
|
(65,456)
|
|
|
(55,953)
|
|
|
(111,017)
|
|
|
(113,309)
|
|
Depreciation and amortization
|
|
(16,924)
|
|
|
(17,816)
|
|
|
(35,766)
|
|
|
(34,809)
|
|
Interest expense
|
|
(13,415)
|
|
|
(13,324)
|
|
|
(27,464)
|
|
|
(24,658)
|
|
Net loss
|
$
|
(1,602)
|
|
$
|
(6,018)
|
|
$
|
(9,932)
|
|
$
|
(17,224)
|
|