Quarterly report pursuant to Section 13 or 15(d)

Investments in Unconsolidated Real Estate Joint Ventures

v3.10.0.1
Investments in Unconsolidated Real Estate Joint Ventures
9 Months Ended
Sep. 30, 2018
Investments In Unconsolidated Real Estate Joint Ventures [Abstract]  
Investments in Unconsolidated Real Estate Joint Ventures
Investments in Unconsolidated Real Estate Joint Ventures
The equity method of accounting is used to account for each of the individual joint ventures. We have an ownership interest in the following unconsolidated real estate joint ventures:

As of September 30, 2018
Joint Venture
 
Outlet Center Location
 
Ownership %
 
Square Feet
(in 000's)
 
Carrying Value of Investment (in millions)
 
Total Joint Venture Debt, Net
(in millions)(1)
Investments included in investments in unconsolidated joint ventures:
 
 
 
 
National Harbor
 
National Harbor, MD
 
50.0
%
 
341

 
$
0.6

 
$
86.7

RioCan Canada
 
Various
 
50.0
%
 
923

 
110.7

 
10.2

 
 
 
 
 
 
$
111.3

 


Investments included in other liabilities:
 
 
 
 
Columbus(2)
 
Columbus, OH
 
50.0
%
 
355

 
$
(1.1
)
 
$
84.7

Charlotte(2)
 
Charlotte, NC
 
50.0
%
 
398

 
(10.3
)
 
99.5

Galveston/Houston (2)
 
Texas City, TX
 
50.0
%
 
353

 
(15.3
)
 
79.5

 
 
 
 
 
 
$
(26.7
)
 




As of December 31, 2017
Joint Venture
 
Outlet Center Location
 
Ownership %
 
Square Feet
(in 000's)
 
Carrying Value of Investment (in millions)
 
Total Joint Venture Debt, Net
(in millions)
(1)
Investments included in investments in unconsolidated joint ventures:
 
 
 
 
Columbus
 
Columbus, OH
 
50.0
%
 
355

 
$
1.1

 
$
84.4

National Harbor
 
National Harbor, MD
 
50.0
%
 
341

 
2.5

 
86.4

RioCan Canada
 
Various
 
50.0
%
 
923

 
115.8

 
11.1

 
 
 
 
 
 
$
119.4

 


 
 
 
 
 
 
 
 
 
 
 
Investments included in other liabilities:
 
 
 
 
Charlotte(2)
 
Charlotte, NC
 
50.0
%
 
398

 
$
(4.1
)
 
$
89.8

Galveston/Houston (2)
 
Texas City, TX
 
50.0
%
 
353

 
(13.0
)
 
79.4

 
 
 
 
 
 
$
(17.1
)
 


(1)
Net of debt origination costs and including premiums of $1.4 million as of September 30, 2018 and December 31, 2017.
(2)
The negative carrying value is due to distributions exceeding contributions and increases or decreases from our equity in earnings of the joint venture.

Fees we received for various services provided to our unconsolidated joint ventures were recognized in management, leasing and other services as follows (in thousands):
 
 
Three months ended

Nine months ended
 
 
September 30,

September 30,
 
 
2018
 
2017

2018

2017
Fee:
 
 
 
 
 
 

 
 

Management and marketing
 
$
571

 
$
564

 
$
1,704

 
$
1,676

Leasing and other fees
 
12

 
24

 
122

 
100

Total Fees
 
$
583

 
$
588

 
$
1,826

 
$
1,776



Our investments in real estate joint ventures are reduced by the percentage of the profits earned for leasing and development services associated with our ownership interest in each joint venture. Our carrying value of investments in unconsolidated joint ventures differs from our share of the assets reported in the "Summary Balance Sheets - Unconsolidated Joint Ventures" shown below due to adjustments to the book basis, including intercompany profits on sales of services that are capitalized by the unconsolidated joint ventures. The differences in basis (totaling $4.1 million and $4.2 million as of September 30, 2018 and December 31, 2017, respectively) are amortized over the various useful lives of the related assets.

Charlotte

In June 2018, the Charlotte joint venture closed on a $100.0 million mortgage loan with a fixed interest rate of 4.3% and a maturity date of July 2028. The proceeds from the loan were used to pay off the $90.0 million mortgage loan with an interest rate of LIBOR + 1.45%, which had an original maturity date of November 2018. The joint venture distributed the incremental net loan proceeds of $9.3 million equally to the partners.

RioCan Canada

During the third quarter of 2017, the joint venture determined for its Bromont and Saint Sauveur, Quebec outlet centers that the estimated future undiscounted cash flows of those properties did not exceed the properties' carrying values based on the joint venture's expectations of the future performance of the centers. Therefore, the joint venture recorded an $18.0 million non-cash impairment charge in its statement of operations, which equaled the excess of the properties' carrying values over their fair values. The fair values were determined using a market approach considering the prevailing market income capitalization rates for similar assets. Our share of this impairment charge, $9.0 million, was recorded in equity in earnings of unconsolidated joint ventures in our consolidated statement of operations.

Condensed combined summary financial information of unconsolidated joint ventures accounted for using the equity method is as follows (in thousands):
Condensed Combined Balance Sheets - Unconsolidated Joint Ventures
 
September 30, 2018
 
December 31, 2017
Assets
 
 

 
 

Land
 
$
94,118

 
$
95,686

Buildings, improvements and fixtures
 
503,430

 
505,618

Construction in progress
 
3,169

 
3,005

 
 
600,717

 
604,309

Accumulated depreciation
 
(110,213
)
 
(93,837
)
Total rental property, net
 
490,504

 
510,472

Cash and cash equivalents
 
13,366

 
25,061

Deferred lease costs and other intangibles, net
 
9,387

 
10,985

Prepaids and other assets
 
18,142

 
15,073

Total assets
 
$
531,399

 
$
561,591

Liabilities and Owners' Equity
 
 

 
 

Mortgages payable, net
 
$
360,600

 
$
351,259

Accounts payable and other liabilities
 
11,114

 
14,680

Total liabilities
 
371,714

 
365,939

Owners' equity
 
159,685

 
195,652

Total liabilities and owners' equity
 
$
531,399

 
$
561,591




 
 
Three months ended
 
Nine months ended
Condensed Combined Statements of Operations
 
September 30,
 
September 30,
 - Unconsolidated Joint Ventures
 
2018
 
2017
 
2018
 
2017
Revenues
 
$
23,538

 
$
25,241

 
$
70,940

 
$
72,588

Expenses:
 
 
 
 
 
 

 
 
Property operating
 
9,147

 
8,987

 
28,032

 
27,242

General and administrative
 
49

 
72

 
301

 
289

Asset impairment
 

 
18,042

 

 
18,042

Depreciation and amortization
 
6,860

 
6,998

 
19,768

 
21,453

Total expenses
 
16,056

 
34,099

 
48,101

 
67,026

Operating income (loss)
 
7,482

 
(8,858
)
 
22,839

 
5,562

Interest expense
 
(3,810
)
 
(2,776
)
 
(10,275
)
 
(7,497
)
Other non-operating income
 
68

 
20

 
175

 
23

Net income (loss)
 
$
3,740

 
$
(11,614
)
 
$
12,739

 
$
(1,912
)
 
 
 
 
 
 
 
 
 
The Company and Operating Partnership's share of:
 
 

 
 

Net income (loss)
 
$
1,833

 
$
(5,893
)
 
$
6,233

 
$
(1,201
)
Depreciation and amortization and asset impairments (real estate related)
 
$
3,466

 
$
12,604

 
$
10,020

 
$
19,992