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Investments in Partially Owned Entities | 9 Months Ended
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Sep. 30, 2014
Investments in Partially Owned Entities [Abstract] |
Investments in Partially Owned Entities |
6. | Investments in Partially Owned Entities
The Company has co-invested in various properties with unrelated third parties which are either consolidated or accounted for under the equity method of accounting (unconsolidated). The following tables and information summarize the Company’s investments in partially owned entities as of September 30, 2014 (amounts in thousands except for project and apartment unit amounts):
| Consolidated |  | Unconsolidated
| Development Projects |  |  |  |  |  | Development Projects |  |  |  |
| Held for and/or Under Development |  | Operating |  | Total |  | Held for and/or Under Development |  | Completed, Not Stabilized (3) |  | Operating |  | Total
Total projects (1) | — |  |  | 19 |  |  | 19 |  |  | — |  |  | 1 |  |  | 3 |  |  | 4 |
Total apartment units (1) | — |  |  | 3,771 |  |  | 3,771 |  |  | — |  |  | 444 |  |  | 1,225 |  |  | 1,669 |
Balance sheet information at 9/30/14 (at 100%): |  |  |  |  |  |  |  |  |  |  |  |  |
ASSETS |  |  |  |  |  |  |  |  |  |  |  |  |
Investment in real estate | $ | 324,997 |  |  | $ | 679,956 |  |  | $ | 1,004,953 |  |  | $ | 61,037 |  |  | $ | 155,413 |  |  | $ | 186,779 |  |  | $ | 403,229 |
Accumulated depreciation | — |  |  | (189,005 | ) |  | (189,005 | ) |  | — |  |  | (5,313 | ) |  | (12,185 | ) |  | (17,498 | )
Investment in real estate, net | 324,997 |  |  | 490,951 |  |  | 815,948 |  |  | 61,037 |  |  | 150,100 |  |  | 174,594 |  |  | 385,731 |
Cash and cash equivalents | 2,953 |  |  | 15,820 |  |  | 18,773 |  |  | 66 |  |  | 1,975 |  |  | 4,486 |  |  | 6,527 |
Investments in unconsolidated entities | — |  |  | 52,641 |  |  | 52,641 |  |  | — |  |  | — |  |  | — |  |  | — |
Deposits – restricted | 31,236 |  |  | 300 |  |  | 31,536 |  |  | — |  |  | — |  |  | 189 |  |  | 189 |
Deferred financing costs, net | — |  |  | 2,229 |  |  | 2,229 |  |  | 41 |  |  | — |  |  | 158 |  |  | 199 |
Other assets | 6,679 |  |  | 26,927 |  |  | 33,606 |  |  | — |  |  | 50 |  |  | 1,039 |  |  | 1,089 |
Total assets | $ | 365,865 |  |  | $ | 588,868 |  |  | $ | 954,733 |  |  | $ | 61,144 |  |  | $ | 152,125 |  |  | $ | 180,466 |  |  | $ | 393,735 |
LIABILITIES AND EQUITY/CAPITAL |  |  |  |  |  |  |  |  |  |  |  |  |
Mortgage notes payable (2) | $ | — |  |  | $ | 360,392 |  |  | $ | 360,392 |  |  | $ | 25,631 |  |  | $ | 96,793 |  |  | $ | 111,800 |  |  | $ | 234,224 |
Accounts payable & accrued expenses | 16,707 |  |  | 3,217 |  |  | 19,924 |  |  | 5,730 |  |  | 456 |  |  | 1,467 |  |  | 7,653 |
Accrued interest payable | — |  |  | 1,266 |  |  | 1,266 |  |  | 51 |  |  | 464 |  |  | 269 |  |  | 784 |
Other liabilities | — |  |  | 1,230 |  |  | 1,230 |  |  | 3 |  |  | 88 |  |  | 986 |  |  | 1,077 |
Security deposits | — |  |  | 1,975 |  |  | 1,975 |  |  | — |  |  | 161 |  |  | 296 |  |  | 457 |
Total liabilities | 16,707 |  |  | 368,080 |  |  | 384,787 |  |  | 31,415 |  |  | 97,962 |  |  | 114,818 |  |  | 244,195 |
Noncontrolling Interests – Partially Owned Properties/Partners' equity | 117,351 |  |  | 7,846 |  |  | 125,197 |  |  | 27,858 |  |  | 47,223 |  |  | 46,639 |  |  | 121,720 |
Company equity/General and Limited Partners' Capital | 231,807 |  |  | 212,942 |  |  | 444,749 |  |  | 1,871 |  |  | 6,940 |  |  | 19,009 |  |  | 27,820 |
Total equity/capital | 349,158 |  |  | 220,788 |  |  | 569,946 |  |  | 29,729 |  |  | 54,163 |  |  | 65,648 |  |  | 149,540 |
Total liabilities and equity/capital | $ | 365,865 |  |  | $ | 588,868 |  |  | $ | 954,733 |  |  | $ | 61,144 |  |  | $ | 152,125 |  |  | $ | 180,466 |  |  | $ | 393,735 |
| Consolidated |  | Unconsolidated
| Development Projects |  |  |  |  |  | Development Projects |  |  |  |
| Held for and/or Under Development |  |  |  |  |  | Held for and/or Under Development |  |  |  | Operating |  |
|  |  |  |  |  |  | Completed, Not Stabilized (3) |  |  |
|  | Operating |  | Total |  |  |  |  | Total
Operating information for the nine months ended 9/30/14 (at 100%): |  |  |  |  |  |  |  |  |  |  |  |  |
Operating revenue | $ | — |  |  | $ | 65,565 |  |  | $ | 65,565 |  |  | $ | — |  |  | $ | 6,874 |  |  | $ | 14,499 |  |  | $ | 21,373 |
Operating expenses | — |  |  | 19,390 |  |  | 19,390 |  |  | 159 |  |  | 2,486 |  |  | 5,442 |  |  | 8,087 |
Net operating income (loss) | — |  |  | 46,175 |  |  | 46,175 |  |  | (159 | ) |  | 4,388 |  |  | 9,057 |  |  | 13,286 |
Depreciation | — |  |  | 16,202 |  |  | 16,202 |  |  | — |  |  | 4,903 |  |  | 6,102 |  |  | 11,005 |
General and administrative/other | 1 |  |  | 34 |  |  | 35 |  |  | — |  |  | 1 |  |  | 205 |  |  | 206 |
Operating (loss) income | (1 | ) |  | 29,939 |  |  | 29,938 |  |  | (159 | ) |  | (516 | ) |  | 2,750 |  |  | 2,075 |
Interest and other income | — |  |  | 10 |  |  | 10 |  |  | — |  |  | — |  |  | — |  |  | — |
Other expenses | — |  |  | (54 | ) |  | (54 | ) |  | — |  |  | — |  |  | — |  |  | — |
Interest: |  |  |  |  |  |  |  |  |  |  |  |  |
Expense incurred, net | — |  |  | (11,708 | ) |  | (11,708 | ) |  | — |  |  | (3,905 | ) |  | (3,422 | ) |  | (7,327 | )
Amortization of deferred financing costs | — |  |  | (266 | ) |  | (266 | ) |  | — |  |  | — |  |  | (81 | ) |  | (81 | )
(Loss) income before income and other taxes and (loss) from investments in unconsolidated entities | (1 | ) |  | 17,921 |  |  | 17,920 |  |  | (159 | ) |  | (4,421 | ) |  | (753 | ) |  | (5,333 | )
Income and other tax (expense) benefit | — |  |  | (45 | ) |  | (45 | ) |  | — |  |  | (7 | ) |  | — |  |  | (7 | )
(Loss) from investments in unconsolidated entities | — |  |  | (1,273 | ) |  | (1,273 | ) |  | — |  |  | — |  |  | — |  |  | — |
Net (loss) income | $ | (1 | ) |  | $ | 16,603 |  |  | $ | 16,602 |  |  | $ | (159 | ) |  | $ | (4,428 | ) |  | $ | (753 | ) |  | $ | (5,340 | )
(1) | Project and apartment unit counts exclude all uncompleted development projects until those projects are substantially completed.
(2) | All debt is non-recourse to the Company with the exception of 50% of the current $25.6 million outstanding debt balance on one unconsolidated development project.
(3) | Projects included here are substantially complete. However, they may still require additional exterior and interior work for all units to be available for leasing.
Note: | The above tables exclude the Company's interests in unconsolidated joint ventures entered into with AVB in connection with the Archstone Transaction. These ventures own certain non-core Archstone assets that are held for sale and succeeded to certain residual Archstone liabilities, such as liability for various employment-related matters as well as responsibility for tax protection arrangements and third-party preferred interests in former Archstone subsidiaries. The preferred interests have an aggregate liquidation value of $73.5 million at September 30, 2014. The ventures are owned 60% by the Company and 40% by AVB.
During the nine months ended September 30, 2014, the Company and its joint venture partner sold one consolidated partially owned land parcel and recognized a net gain on the sale of approximately $1.1 million. The Company is the controlling partner in various consolidated partnership properties and development properties having a noncontrolling interest book value of $125.2 million at September 30, 2014. The Company does not have any VIEs. Archstone Acquisition On February 27, 2013, in conjunction with the Archstone Acquisition, the Company acquired interests in several joint ventures. Details of these interests follow by project: Wisconsin Place – This project contains a mixed-use site located in Chevy Chase, Maryland consisting of residential, retail, office and accessory uses, including underground parking facilities. The Company has a 75% equity interest with an initial basis of $198.5 million in the 432 unit residential component. The Company is the managing member, was responsible for constructing the residential project and its partner does not have substantive kick-out or participating rights. As a result, the entity that owns the residential component of this mixed-use site is required to be consolidated on the Company's balance sheet. Such entity also retains an unconsolidated interest in an entity that owns the land underlying the entire project and owns and operates the parking facility. The initial fair value of this investment is $56.5 million. The Company does not have any ownership interest in the retail and office components. San Norterra – This venture developed certain land parcels into a 388 unit apartment building located in Phoenix, Arizona. The Company has an 85% equity interest with an initial basis of $16.9 million. Total project costs were approximately $52.8 million and construction was partially funded with a construction loan that was guaranteed by the partner and non-recourse to the Company. The loan has a maximum debt commitment of $34.8 million and a current unconsolidated outstanding balance of $33.0 million; the loan bears interest at LIBOR plus 2.00% and matures January 6, 2015. The partner is the managing member and developed the project. The Company does not have substantive kick-out or participating rights. As a result, the entity is unconsolidated and recorded using the equity method of accounting. Waterton Tenside – This venture was formed to develop and operate a 336 unit apartment property located in Atlanta, Georgia. The Company has a 20% equity interest with an initial basis of $5.1 million. The partner is the managing member and developed the project. The project is encumbered by a non-recourse mortgage loan that has a current outstanding balance of $30.1 million, bears interest at 3.66% and matures December 1, 2018. The Company does not have substantive kick-out or participating rights. As a result, the entity is unconsolidated and recorded using the equity method of accounting. Parc on Powell (formerly known as 1333 Powell) – This venture is currently developing certain land parcels into a 176 unit apartment building located in Emeryville, California. The Company has a 5% equity interest with an initial obligation of approximately $2.1 million. Total project costs are expected to be approximately $75.0 million and construction is being partially funded with a construction loan. The loan has a maximum debt commitment of $39.5 million and a current unconsolidated outstanding balance of $25.6 million; the loan bears interest at LIBOR plus 2.25% and matures August 14, 2015. The Company has given a repayment guaranty on the construction loan of 50% of the outstanding balance, up to a maximum of $19.7 million, and has given certain construction cost overrun guarantees. The partner is the managing member. The Company does not have substantive kick-out or participating rights. As a result, the entity is unconsolidated and recorded using the equity method of accounting. On February 27, 2013, in connection with the Archstone Acquisition, subsidiaries of the Company and AVB entered into three limited liability company agreements (collectively, the “Residual JV”). The Residual JV owns certain non-core Archstone assets, such as interests in a six property portfolio of apartment buildings and succeeded to certain residual Archstone liabilities, such as liability for various employment-related matters. The Residual JV is owned 60% by the Company and 40% by AVB and the Company's initial investment was $147.6 million. The Residual JV is managed by a Management Committee consisting of two members from each of the Company and AVB. Both partners have equal participation in the Management Committee and all significant participating rights are shared by both partners. As a result, the Residual JV is unconsolidated and recorded using the equity method of accounting. During the nine months ended September 30, 2014, the Company closed on the sale of its unconsolidated interest in the German portfolio fund, the German management company and the remaining wholly-owned German real estate assets. With these sales, all German real estate assets that were acquired by the Residual JV as part of the Archstone Acquisition have now been sold. The Company's pro rata share of the proceeds/distributions that have been repatriated to the Residual JV and received by the Company as a result of the German dispositions was approximately $77.0 million during the nine months ended September 30, 2014 and $95.9 million cumulatively since the closing of the Archstone Acquisition. On February 27, 2013, in connection with the Archstone Acquisition, a subsidiary of the Company and AVB entered into a limited liability company agreement (the “Legacy JV”), through which they assumed obligations of Archstone in the form of preferred interests, some of which are governed by tax protection arrangements. During the year ended December 31, 2013, the Company purchased with AVB $65.0 million (of which the Company's 60% share was $39.0 million) of the preferred interests assumed by the Legacy JV. At September 30, 2014, the remaining preferred interests have an aggregate liquidation value of $73.5 million, our share of which is included in other liabilities in the accompanying consolidated balance sheets. Obligations of the Legacy JV are borne 60% by the Company and 40% by AVB. The Legacy JV is managed by a Management Committee consisting of two members from each of the Company and AVB. Both partners have equal participation in the Management Committee and all significant participating rights are shared by both partners. As a result, the Legacy JV is unconsolidated and recorded using the equity method of accounting. Other In December 2011, the Company and Toll Brothers (NYSE: TOL) jointly acquired a vacant land parcel at 400 Park Avenue South in New York City. The Company's and Toll Brothers' allocated portions of the purchase price were approximately $76.1 million and $57.9 million, respectively. The Company is the managing member and Toll Brothers does not have substantive kick-out or participating rights. Until the core and shell of the building is complete, the building and land will be owned jointly and are required to be consolidated on the Company's balance sheet. Thereafter, the Company will solely own and control the rental portion of the building (floors 2-22) and Toll Brothers will solely own and control the for sale portion of the building (floors 23-40). Once the core and shell are complete, the Toll Brothers' portion of the property will be deconsolidated from the Company's balance sheet. The acquisition was financed through contributions by the Company and Toll Brothers of approximately $102.5 million and $75.7 million, respectively, which included the land purchase noted above, restricted deposits and taxes and fees. As of September 30, 2014, the Company's and Toll Brothers' consolidated contributions to the joint venture were approximately $331.8 million, of which Toll Brothers' noncontrolling interest balance totaled $117.4 million. The Company admitted an 80% institutional partner to two separate entities/transactions (Nexus Sawgrass in December 2010 and Domain in August 2011), each owning a developable land parcel, in exchange for $40.1 million in cash and retained a 20% equity interest in both of these entities. These projects are now unconsolidated. Details of these projects follow:
• | Nexus Sawgrass – This development project was completed and stabilized during the quarter ended September 30, 2014. Total project costs were approximately $78.6 million and construction was predominantly funded with a long-term, non-recourse secured loan from the partner. The mortgage loan has a maximum debt commitment of $48.7 million and a current unconsolidated outstanding balance of $48.6 million; the loan bears interest at 5.60% and matures January 1, 2021.
• | Domain – This development project is substantially complete. Total project costs are expected to be approximately $155.8 million and construction was predominantly funded with a long-term, non-recourse secured loan from the partner. The mortgage loan has a maximum debt commitment of $98.6 million and a current unconsolidated outstanding balance of $96.8 million; the loan bears interest at 5.75% and matures January 1, 2022.
While the Company is the managing member of both of the joint ventures, was responsible for constructing both of the projects and has given certain construction cost overrun guarantees, the joint venture partner has significant participating rights and has active involvement in and oversight of the ongoing projects. The Company currently has no further funding obligations related to these projects.

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