3.    RECENT TRANSACTIONS



Management Changes

On April 5, 2017, the Company announced that Michael J. DeMarco would be assuming the title of chief executive officer of the Company and Mitchell Rudin, formerly the chief executive officer, was being named the vice chairman of the Company effective April 4, 2017.  Mr. DeMarco had joined the Company in 2015 as the president and chief operating officer.



On January 29, 2018, the Company announced the appointment of David J. Smetana as chief financial officer and Nicholas Hilton as executive vice president of leasing of the General Partner. Mr. Smetana will begin to perform his duties as chief financial officer and Anthony Krug shall cease to serve as chief financial officer immediately following the filing of this Annual Report on Form 10-K for the year ended December 31, 2017.  Mr. Krug will remain an employee of the General Partner and will provide transition services through March 31, 2018.  Mr. Hilton’s employment commenced on February 12, 2018 following the departure of Christopher DeLorenzo.



Acquisitions



2017

The Company acquired the following office properties (which were determined to be asset acquisitions in accordance with ASU 2017-01) during the year ended December 31, 2017 (dollars in thousands):





The purchase prices were allocated to the net assets acquired, as follows (in thousands):







(a)Above market, in-place and below market leases are being amortized over a weighted-average term of 5.4 years.



The Company acquired three developable land parcels located in Jersey City, Morris Township and Red Bank, New Jersey, for approximately $80 million during the year ended December 31, 2017.  The acquisitions were funded using available cash and borrowings under the Company’s unsecured revolving credit facility.



2016

The Company acquired the following office properties during the year ended December 31, 2016 (dollars in thousands):







The purchase prices were allocated to the net assets acquired, as follows (in thousands):





(a)Above market, in-place and below market leases are being amortized over a weighted-average term of 8.1 years.    



Properties Commencing Initial Operations

The following properties commenced initial operations during the year ended December 31, 2016 (dollars in thousands):





(a)Development costs as of December 31, 2016 included approximately $5.6 million in land costs.   

(b)Development costs as of December 31, 2016 included approximately $10.8 million in land costs.  As of December 31, 2016, the Company anticipates additional costs of approximately $9.7 million, which will be funded from a construction loan.



Consolidations



2017

On February 3, 2017, the Operating Partnership issued 42,800 shares of a new class of 3.5 percent Series A Preferred Limited Partnership Units of the Operating Partnership (the “Series A Units”) valued at $42.8 million.  The Series A Units were issued to the Company’s partners in the Plaza VIII & IX Associates L.L.C. joint venture that owns a development site adjacent to the Company’s Harborside property in Jersey City, New Jersey as non-cash consideration for their approximate 37.5 percent interest in the joint venture.  Concurrent with the issuance of the Series A Units, the Company purchased from other partners in the Plaza VIII & IX Associates L.L.C. joint venture their approximate 12.5 percent interest for approximately $14.3 million in cash.  The results of these transactions increased the Company’s interests in the joint venture from 50 percent to 100 percent.  Upon these acquisitions, the Company consolidated Plaza VIII & IX Associates L.L.C., a voting interest entity, substantially all of which is comprised of land for development.  As an acquisition of the additional 50 percent of the land, the Company accounted for the transaction as an asset acquisition under a cost accumulation model, resulting in total consolidated assets of $60.6 million, substantially all of which is classified as land on the Balance Sheet.



On February 28, 2017, the Operating Partnership authorized the issuance of 9,213 shares of a new class of 3.5 percent Series A-1 Preferred Limited Partnership Units of the Operating Partnership (the “Series A-1 Units”).  9,122 Series A-1 Units were issued on February 28, 2017, valued at $9.1 million, to the Company’s partner in a joint venture with the Operating Partnership, which owns Monaco Towers in Jersey City, New Jersey that includes 523 apartment homes in two fifty-story towers with 558 parking spaces and 12,300 square feet of ground floor retail space.  The Series A-1 Units were issued as non-cash consideration for the partner’s approximate 13.8 percent ownership interest in the joint venture to increase the Company’s unconsolidated investment to 29 percent.  In April 2017, an additional 91 Series A-1 Units were issued by the Operating Partnership to purchase from other partners in the same joint venture their approximate 71.2 percent ownership interest for approximately $130.9 million in cash and $171.2 million in assumed debt in transactions which closed in April 2017. The results of these transactions increased the Company’s interests in the joint venture to 100 percent.  Upon these acquisitions, the Company consolidated RoseGarden Monaco Holdings, L.L.C., a voting interest entity. 



As an acquisition of the remaining interests in the venture which owns the Monaco Towers, the Company accounted for the transaction as an asset acquisition under a cost accumulation model, resulting in total consolidated net assets of $139.9 million which is allocated, as follows (in thousands):







(a)Above market, in-place and below market leases are being amortized over a weighted-average term of 8 months.



2016

On January 5, 2016, the Company, which held a 50 percent subordinated interest in the unconsolidated joint venture, Overlook Ridge Apartment Investors LLC, a 371-unit multi-family operating property located in Malden, Massachusetts, acquired the remaining interest for $39.8 million in cash plus the assumption of a first mortgage loan secured by the property with a principal balance of $52.7 million.  The cash portion of the acquisition was funded primarily through borrowings under the Company’s unsecured revolving credit facility.  Upon acquisition, the Company consolidated the asset and accordingly, remeasured its equity interests, as required by the FASB’s consolidation guidance, at fair value (based upon the income approach using current rates and market cap rates and discount rates).  As a result, the Company recorded a gain on change of control of interests of $10.2 million in the year ended December 31, 2016.  On January 19, 2016, the Company repaid the assumed loan and obtained a new loan secured by the property in the amount of $72.5 million, which bears interest at 3.625 percent and matures in February 2023.  See Note 9: Mortgages, Loans Payable and Other Obligations.



During the second quarter 2016, the Company, which held a 38.25 percent subordinate interest in the unconsolidated Portside Apartment Developers, L.L.C., a joint venture which owns a 175-unit operating multi-family property located in East Boston, Massachusetts, acquired the remaining interests of its joint venture partners for $39.6 million in cash plus the assumption of a mortgage loan secured by the property with a principal balance of $42.5 million.  The cash portion of the acquisition was funded primarily through borrowings under the Company’s unsecured revolving credit facility.  Upon acquisition, the Company consolidated the asset and accordingly, remeasured its equity interests, as required by the FASB’s consolidation guidance, at fair value (based upon the income approach using current rates and market cap rates and discount rates).  As a result, the Company recorded a gain on change of control of interests of $5.2 million in the year ended December 31, 2016.  On July 8, 2016, the Company repaid the assumed loan and obtained a new loan secured by the property in the amount of $59 million, which bears interest at 3.44 percent and matures in August 2023.  See Note 9: Mortgages, Loans Payable and Other Obligations.



The purchase prices were preliminarily allocated to the net assets acquired upon consolidation, as follows (in thousands):





(a)In-place lease values and below-market lease values are being amortized over a weighted average term of 7.4 months.   



Other Investments in 2016

On April 26, 2016, the Company acquired the remaining non-controlling interest in a development project located in Weehawken, New Jersey for $36.4 million.  The project includes developable land for approximately 1,100 multi-family units, 290,000 square feet of office space, a 52.5 percent ownership interest in Port Imperial 4/5 Garage and Retail operating properties.  The initial phase, Port Imperial South 11, a 295-unit multi-family project, began construction in the first quarter 2016.



Dispositions/Rental Property Held for Sale



2017

The Company disposed of the following office properties during the year ended December 31, 2017 (dollars in thousands):







The Company identified as held for sale 21 office properties totaling approximately 2 million square feet as of December 31, 2017.  The properties are located in Parsippany, Paramus, Rochelle Park, Hamilton and Wall, New Jersey and White Plains, New York.  The total estimated sales proceeds from the sales are expected to be approximately $223 million.  The Company determined that the carrying value of seven of the office properties was not expected to be recovered from estimated net sales proceeds and accordingly recognized an unrealized loss allowance of $12.3 million during the year ended December 31, 2017.  In February 2018, the Company completed the disposition of one of these properties for sales proceeds of $25.9 million.



The following table summarizes the rental property held for sale, net, as of December 31, 2017: (dollars in thousands)    







Other assets and liabilities related to the rental properties held for sale, as of December 31, 2017, include $9.8 million in deferred charges, and other assets, $4.7 million in Unbilled rents receivable and $4.6 million in Accounts payable, accrued expenses and other liabilities.  Approximately $13.4 million of these assets and $0.3 million of these liabilities are expected to be written off with the completion of the sales.



2016

The Company disposed of the following office and multi-family properties during the year ended December 31, 2016 (dollars in thousands):





As of December 31, 2016, the Company identified as held for sale eight office properties totaling approximately 750,000 square feet.  The properties were located in Princeton, Cranford and Bridgewater, New Jersey.  The Company determined that the carrying value of one of the office properties was not expected to be recovered from estimated net sales proceeds and accordingly recognized an unrealized loss allowance of $7.7 million at December 31, 2016.  In January and February 2017, the Company completed the disposition of these properties for sales proceeds of approximately $45.8 million.



The following table summarizes the rental property held for sale, net, as of December 31, 2016: (dollars in thousands)    





Other assets and liabilities related to the rental properties held for sale, as of December 31, 2016, include $1.7 million in deferred charges, and other assets, $1.2 million in Unbilled rents receivable, $1.1 million in Accounts payable, accrued expenses and other liabilities, and $1.9 million in Rents received in advance and security deposits.  Approximately $2.9 million of these assets and $0.5 million of these liabilities are expected to be written off with the completion of the sales.



Rockpoint Transaction

On February 27, 2017, the Company, Roseland Residential Trust (“RRT”), the Company’s wholly-owned subsidiary through which the Company conducts its multi-family residential real estate operations, Roseland Residential, L.P. (“RRLP”), the operating partnership through which RRT conducts all of its operations, and certain other affiliates of the Company entered into an equity investment agreement (the “Investment Agreement”) with Rockpoint Group, L.L.C. and certain of its affiliates (collectively, “Rockpoint”).  The Investment Agreement provides for multiple equity investments by Rockpoint in RRLP from time to time for up to an aggregate of $300 million of equity units of limited partnership interests of RRLP (the “Rockpoint Units”).  The initial closing under the Investment Agreement occurred on March 10, 2017 for $150 million of Rockpoint Units.  Additional closings of Rockpoint Units to be issued and sold to Rockpoint pursuant to the Investment Agreement may occur from time to time in increments of not less than $10 million per closing, with the balance of the full $300 million by March 1, 2019.  See Note 14: Redeemable Noncontrolling Interests.



RRLP has been identified as a variable interest entity in which the Company is deemed to be the primary beneficiary.  As of December 31, 2017 and December 31, 2016, the Company’s consolidated RRLP entity had total assets of $1.9 billion and $1.3 billion, respectively, total mortgages and loan payable of $769.7 million and $480.7 million, respectively, and other liabilities of $95.9 million and $40.1 million, respectively.



Unconsolidated Joint Venture Activity

On April 1, 2016, the Company bought out its partner PruRose Riverwalk G, L.L.C. for $11.3 million and increased its subordinated interest in Riverwalk G Urban Renewal, L.L.C. from 25 percent to 50 percent using borrowings on the Company’s unsecured credit facility.  Riverwalk G Urban Renewal, L.L.C., owns a 316-unit operating multi-family property located in West New York, New Jersey.  Concurrent with the refinancing in October 2016, the Company executed an agreement with the remaining partner which converted the 50 percent subordinated interest to 22.5 percent pari passu interest.



On May 26, 2016, the Company sold its 50 percent interest in Port Imperial South 15, L.L.C. (“RiversEdge”) and its 20 percent interest in Port Imperial South 13 Urban Renewal, L.L.C. (“RiverParc”), joint ventures that own the 236-unit and the 280-unit multi-family operating properties, respectively, located in Weehawken, New Jersey for $6.4 million.  The Company realized a gain on the sale of $5.7 million. 



On January 31, 2017, the Company sold its interest in the KPG-P 100 IMW JV, LLC, Keystone-Penn and Keystone-Tristate joint ventures that own operating properties, located in Philadelphia, Pennsylvania for an aggregate sales price of $9.7 million and realized a gain on the sale of the unconsolidated joint venture of $7.4 million.



On February 15, 2017, the Company sold its 7.5 percent interest in the Elmajo Urban Renewal Associates, LLC and Estuary Urban Renewal Unit B, LLC joint ventures that own operating multi-family properties located in Weehawken, New Jersey for a sales price of $5.1 million and realized a gain on the sale of the unconsolidated joint venture of $5.1 million. 



On September 21, 2017, the RoseGarden Monaco, L.L.C. joint venture agreement was terminated.  Accordingly, the Company wrote off the carrying value of its investment in the joint venture and recorded a loss of $1.4 million on the disposition of its joint venture interest.



On September 29, 2017, the Company sold its interests in the KPG-MCG Curtis joint venture that owns an operating property located in Philadelphia, Pennsylvania for a sales price of $102.5 million, which included the retirement of the Company’s share in a mortgage payable of $75 million, and realized a gain on the sale of the unconsolidated joint venture of $12 million.  $5.6 million of the net sales proceeds from this sale were held by a qualified intermediary, which is considered non cash and recorded in deferred charges, goodwill and other assets.  See Note 5: Deferred Charges, Goodwill and Other Assets, Net.