INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES
|12 Months Ended|
Dec. 31, 2022
|Equity Method Investments and Joint Ventures [Abstract]|
|INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES||INVESTMENTS IN UNCONSOLIDATED JOINT VENTURESAs of December 31, 2022, the Company had an aggregate investment of approximately $126.2 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 properties, or to acquire land in anticipation of possible development of rental properties. As of December 31,
2022, the unconsolidated joint ventures owned: seven multifamily properties totaling 2,146 apartment units, a retail property aggregating approximately 51,000 square feet and interests and/or rights to developable land parcels able to accommodate up to 829 apartment units. The Company’s unconsolidated interests range from 20 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.
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 December 31, 2022, the outstanding balance of such debt, subject to guarantees, totaled $188.5 million of which $22 million was guaranteed by the Company.
The Company performed management, leasing, development and other services for the properties owned by the unconsolidated joint ventures, related parties to the Company, and recognized $3.6 million, $3.4 million and $4.9 million for such services in the years ended December 31, 2022, 2021 and 2020, respectively. The Company had $0.2 million and $0.2 million in accounts receivable due from its unconsolidated joint ventures as of December 31, 2022 and 2021.
As of December 31, 2022, the Company does not have any investments in unconsolidated joint ventures that are considered VIEs. The Company previously had three investments in unconsolidated joint ventures which were 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 Company determined that these unconsolidated joint ventures are no longer VIEs since these ventures have completed their development projects and are now in operation.
The following is a summary of the Company's unconsolidated joint ventures as of December 31, 2022 and 2021 (dollars in thousands):
(a)Company's effective ownership % represents the Company's entitlement to residual distributions after payments of priority returns, where applicable.
(b)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.
(c)Through the joint venture, the Company also owns a 25 percent interest in a 50,973 square feet retail building ("Shops at 40 Park") and a 50 percent interest in a 59-unit, five story multifamily rental property ("Lofts at 40 Park").
(d)Property debt balance consists of: (i) an interest only loan, collateralized by the Metropolitan at 40 Park, with a balance of $36,500, bears interest at LIBOR +2.85 percent, matures in October 2023; (ii) an amortizable loan, collateralized by the Shops at 40 Park, with a balance of $6,067, bears interest at LIBOR +1.50 percent and matures in October 2022. The loan was extended on October 11, 2022, for three months and matured in January 2023 with a fixed rate of 5.125%. On January 10, 2023, the loan was modified bearing interest at SOFR +2% and matures in January 2025; (iii) an interest only loan, collateralized by the Lofts at 40 Park, with a balance of $18,200, which bears interest at LIBOR +1.50 percent and matures in January 2023. On January 10, 2023, the loan was extended for three months and matures on April 1, 2023.
(e)On December 22, 2021, the venture paid off the $108.3 million construction loan and simultaneously obtained a new $135 million mortgage loan, collateralized by the property and received its share of net loan proceeds of $9.2 million. The property commenced operations in second quarter 2021.
(f)The Company owns an 85 percent interest with shared control over major decisions such as, approval of budgets, property financings and leasing guidelines. The Company has guaranteed $22 million of the principal outstanding debt. On February 1, 2023, the lender has released the guarantor of all obligations under the Guaranty Agreement.
(g)The Company owns a 20 percent residual interest in undeveloped land parcels: parcels 6 and I that can accommodate the development of 829 apartment units.
(h)Pursuant to a notice letter to its joint venture partner dated January 6, 2022, the Company intends to not proceed with the acquisition and development of Liberty Landing.
(i)On April 29, 2021, the Company sold its interest in the joint venture for a gross sales price of approximately $2 million. See Note 3: Recent Transactions - Unconsolidated Joint Venture
(j)On September 1, 2021, the Company sold its interest in the joint venture for a gross sales price of approximately $1.9 million. See Note 3: Recent Transactions - Unconsolidated Joint Venture
(k)On November 30, 2022, the Company sold its interest in the joint venture for a venture gross sales price of approximately $117.0 million. See Note 3: Recent Transactions - Unconsolidated Joint Venture.
(l)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.
The following is a summary of the Company’s equity in earnings (loss) of unconsolidated joint ventures for the years ended December 31, 2022, 2021 and 2020 (dollars in thousands):
(a) On December 31, 2020, the Crystal House Apartment Investors LLC, an unconsolidated joint venture property sold its sole apartment property. The Company realized its share of the gain on the property sale from the unconsolidated joint venture of $35.1 million.
(b) The property commenced operations in second quarter 2021.
(c) In September 2021, the joint venture agreed to settle certain obligations regarding a previously owned development project, of which the Company’s share of the expense for such settlement was $0.9 million, which was recorded in equity in earnings for this venture in the year ended December 31, 2021.
(d) Pursuant to a notice letter to its joint venture partner dated January 6, 2022, the Company intends to not proceed with the acquisition and development of Liberty Landing.
(e) On April 29, 2021, the Company sold its interest in the joint venture and realized no gain or loss on the sale.
(f) On September 1, 2021, the Company sold its interest in this unconsolidated joint venture to its venture partner for $1.9 million, and realized a loss on the sale of approximately $1.9 million.
(g) On March 12, 2020, the Company acquired the remaining 80 percent interest from its equity partner and consolidated the asset.
(h) On November 30, 2022, the Company sold its interest in the joint venture and realized a gain on the sale of approximately $7.7 million.
(i) Amounts are net of amortization of basis differences of $154, $138 and $143 for the year ended December 31, 2022, 2021 and 2020, respectively.
The following is a summary of the combined financial position of the unconsolidated joint ventures in which the Company had investment interests as of December 31, 2022 and 2021 (dollars in thousands):
The following is a summary of the combined results from operations of the unconsolidated joint ventures for the period in which the Company had investment interests during the years ended December 31, 2022, 2021 and 2020 (dollars in thousands):
The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef