Quarterly report pursuant to Section 13 or 15(d)

Investments in Unconsolidated Real Estate Joint Ventures

v3.20.2
Investments in Unconsolidated Real Estate Joint Ventures
6 Months Ended
Jun. 30, 2020
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 June 30, 2020
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:
 
 
 
 
RioCan Canada
 
Various
 
50.0
%
 
765

 
$
92.1

 
$

 
 
 
 
 
 
$
92.1

 


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

 
$
(3.9
)
 
$
85.0

Charlotte(2)
 
Charlotte, NC
 
50.0
%
 
399

 
(13.1
)
 
99.6

National Harbor(2)
 
National Harbor, MD
 
50.0
%
 
341

 
(7.8
)
 
94.5

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

 
(20.0
)
 
79.9

 
 
 
 
 
 
$
(44.8
)
 




As of December 31, 2019
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:
 
 
 
 
RioCan Canada
 
Various
 
50.0
%
 
764

 
$
94.7

 
$
9.2

 
 
 
 
 
 
$
94.7

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

 
$
(3.5
)
 
$
85.0

Charlotte(2)
 
Charlotte, NC
 
50.0
%
 
399

 
(13.0
)
 
99.5

National Harbor(2)
 
National Harbor, MD
 
50.0
%
 
341

 
(5.9
)
 
94.4

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

 
(19.7
)
 
79.9

 
 
 
 
 
 
$
(42.1
)
 



(1)
Net of debt origination costs of $1.1 million as of June 30, 2020 and net of debt origination cost and including premiums of $1.1 million as of December 31, 2019.
(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

Six months ended
 
 
June 30,

June 30,
 
 
2020
 
2019

2020

2019
Fee:
 
 
 
 
 
 

 
 

Management and marketing
 
$
143

 
$
561

 
$
685

 
$
1,128

Leasing and other fees
 
15

 
9

 
35

 
40

Expense reimbursements from unconsolidated joint ventures
 
566

 
675

 
1,448

 
1,419

Total Fees
 
$
724

 
$
1,245

 
$
2,168

 
$
2,587



Galveston/Houston

In June 2020, in response to the COVID 19 impact on the property, the Galveston/Houston joint venture amended its mortgage loan. The loan modification amended the first one-year extension option to provide for two six-month options (the “First Extension” and “Second Extension”, respectively). Under the loan modification, the joint venture is prohibited from making partner distributions during the term of the First Extension.  If the joint venture exercises all available options, the loan would mature in July 2022.  The joint venture exercised its First Extension option to extend the mortgage loan for six months to January 2021.

RioCan Canada

In May 2020, the joint venture’s mortgage loan for the outlet center in Saint-Sauveur matured and the joint venture repaid the approximately $8.3 million owed in full.

During June 2020, the Rio-Can joint venture recognized an impairment charge related to its Saint-Sauveur property in Quebec. The impairment charge was primarily driven by deterioration of net operating income caused by market competition and the COVID-19 pandemic.

The table below summarizes the impairment charge taken during the second quarter of 2020 (in thousands):
 
 
 
 
Impairment Charge(1)
 
 
Outlet Center
 
Total
 
Our Share
2020
 
Saint-Sauveur
 
$
6,181

 
$
3,091

(1)
The fair value was determined using an income approach considering the prevailing market income capitalization rates for similar assets.

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 $3.7 million and $3.8 million as of June 30, 2020 and December 31, 2019, respectively) are amortized over the various useful lives of the related assets.

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
 
June 30, 2020
 
December 31, 2019
Assets
 
 

 
 

Land
 
$
87,402

 
$
90,859

Buildings, improvements and fixtures
 
457,969

 
477,061

Construction in progress
 
4,495

 
4,779

 
 
549,866

 
572,699

Accumulated depreciation
 
(133,199
)
 
(132,860
)
Total rental property, net
 
416,667

 
439,839

Cash and cash equivalents
 
9,274

 
19,750

Deferred lease costs and other intangibles, net
 
5,554

 
6,772

Prepaids and other assets
 
26,888

 
17,789

Total assets
 
$
458,383

 
$
484,150

Liabilities and Owners’ Equity
 
 

 
 

Mortgages payable, net
 
$
358,923

 
$
368,032

Accounts payable and other liabilities
 
15,627

 
17,173

Total liabilities
 
374,550

 
385,205

Owners’ equity
 
83,833

 
98,945

Total liabilities and owners’ equity
 
$
458,383

 
$
484,150




 
 
Three months ended
 
Six months ended
Condensed Combined Statements of Operations
 
June 30,
 
June 30,
 - Unconsolidated Joint Ventures
 
2020
 
2019
 
2020
 
2019
Revenues
 
$
16,475

 
$
23,575

 
$
38,512

 
$
47,038

Expenses:
 
 
 
 
 
 

 
 
Property operating
 
6,860

 
9,611

 
15,989

 
19,400

General and administrative
 
123

 
62

 
262

 
152

Asset impairment
 
6,181

 

 
6,181

 

Depreciation and amortization
 
5,903

 
6,317

 
11,809

 
12,427

Total expenses
 
19,067

 
15,990

 
34,241

 
31,979

Other income (expense):
 


 


 


 


Interest expense
 
(3,232
)
 
(4,138
)
 
(6,967
)
 
(8,272
)
Other income
 
6

 
60

 
61

 
126

Total other income (expense)
 
(3,226
)
 
(4,078
)
 
$
(6,906
)
 
$
(8,146
)
Net income (loss)
 
$
(5,818
)
 
$
3,507

 
$
(2,635
)
 
$
6,913

The Company and Operating Partnership’s share of:
 
 

 
 

Net income (loss)
 
$
(2,975
)
 
$
1,646

 
$
(1,448
)
 
$
3,275

Depreciation and amortization (real estate related)
 
$
3,017

 
$
3,265

 
$
6,035

 
$
6,395