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Note 8 - Other Real Estate Investments and Other Assets | 12 Months Ended
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Dec. 31, 2018
Notes to Financial Statements |
Other Real Estate Investments and Other Assets [Text Block] |
8. | Other Real Estate Investments and Other Assets :
Preferred Equity Capital – The Company previously provided capital to owners and developers of real estate properties through its Preferred Equity program. The Company’s maximum exposure to losses associated with its preferred equity investments is primarily limited to its net investment. As of December 31, 2018, the Company’s net investment under the Preferred Equity program was $176.3 million relating to 285 properties, including 273 net leased properties which are accounted for as direct financing leases. For the year ended December 31, 2018, the Company earned $28.8 million from its preferred equity investments, including $10.6 million in profit participation earned from six capital transactions. As of December 31, 2017, the Company’s net investment under the Preferred Equity program was $201.9 million relating to 357 properties, including 344 net leased properties which are accounted for as direct financing leases. For the year ended December 31, 2017, the Company earned $32.2 million from its preferred equity investments, including $14.8 million of cumulative foreign currency translation gain recognized as a result of the substantial liquidation of the Company’s investments in Canada during 2017. As of December 31, 2018, these preferred equity investment properties had non-recourse mortgage loans aggregating $298.9 million (excluding fair market value of debt adjustments aggregating $15.1 million). These loans have scheduled maturities ranging from six months to six years and bear interest at rates ranging from 4.19% to 10.47%. Due to the Company’s preferred position in these investments, the Company’s share of each investment is subject to fluctuation and is dependent upon property cash flows. The Company’s maximum exposure to losses associated with its preferred equity investments is primarily limited to its invested capital. Summarized financial information relating to the Company’s preferred equity investments is as follows (in millions):
|  | December 31, |
|  | 201 8 |  |  | 201 7 |
Assets: |  |  |  |  |  |  |  |
Real estate, net |  | $ | 110.4 |  |  | $ | 142.3 |
Other assets |  |  | 578.8 |  |  |  | 581.2 |
|  | $ | 689.2 |  |  | $ | 723.5 |
Liabilities and Partners’/Members’ Capital: |  |  |  |  |  |  |  |
Mortgages payable, net |  | $ | 314.0 |  |  | $ | 381.9 |
Other liabilities |  |  | 3.0 |  |  |  | 6.0 |
Partners’/Members’ capital |  |  | 372.2 |  |  |  | 335.6 |
|  | $ | 689.2 |  |  | $ | 723.5 |
|  | Year Ended December 31, |
|  | 201 8 |  |  | 201 7 |  |  | 201 6 |
Revenues |  | $ | 77.0 |  |  | $ | 75.4 |  |  | $ | 102.6 |
Operating expenses |  |  | (15.5 | ) |  |  | (14.7 | ) |  |  | (27.4 | )
Depreciation and amortization |  |  | (4.3 | ) |  |  | (4.6 | ) |  |  | (6.7 | )
Gain on sale of operating properties |  |  | 1.9 |  |  |  | 4.3 |  |  |  | 5.3 |
Interest expense |  |  | (16.9 | ) |  |  | (20.4 | ) |  |  | (26.7 | )
Other expense, net |  |  | (8.2 | ) |  |  | (5.9 | ) |  |  | (11.5 | )
Net income |  | $ | 34.0 |  |  | $ | 34.1 |  |  | $ | 35.6 |
Kimsouth (Albertsons) – Kimsouth Realty Inc. (“Kimsouth”) is a wholly-owned subsidiary of the Company. KRS AB Acquisition, LLC (the “ABS Venture”) was a subsidiary of Kimsouth that had a combined 14.35% noncontrolling interest (of which the Company held 9.8% and the two other noncontrolling members in the partnership, including Colony NorthStar, Inc. (“Colony NorthStar”) held a 4.3% ownership interest), in AB Acquisition, LLC (“AB Acquisition”). AB Acquisition was a joint venture which owned grocery operators Albertsons LLC (“Albertsons”), NAI Group Holdings Inc. (“NAI”) and Safeway Inc. (“Safeway”). The Company held a controlling interest in the ABS Venture and consolidated this entity. During June 2017, the Company and ABS Venture received an aggregate cash distribution of $34.6 million from Albertsons, of which the Company’s combined share was $23.7 million with the remaining $10.9 million distributed to the two noncontrolling interest members in the ABS Venture. This distribution exceeded the Company’s carrying basis in its Albertson’s investment and as such was recognized as income and is included in Equity in income from other real estate investments, net on the Company’s Consolidated Statements of Income. During December 2017, Albertsons, NAI and Safeway were merged into a single corporate entity Albertsons Companies, Inc. (“ACI”). In addition, the Company liquidated the ABS Venture, its consolidated partnership with Colony NorthStar and its other noncontrolling member, which held investments in Albertsons, NAI and Safeway. As a result of these transactions, the Company owns 9.74% of the common stock of ACI through two newly formed wholly-owned partnerships and accounts for this investment on the cost method. The liquidation of the ABS Venture resulted in the elimination of the previous noncontrolling member’s, including Colony NorthStar’s noncontrolling interest of $64.9 million, and a corresponding reduction in other assets to reflect the Company’s net investment in ACI of $140.2 million. The Company’s net investment in ACI is included in Other assets on the Company’s Consolidated Balance Sheets. The previous two noncontrolling members own their respective interests in ACI directly and are no longer in a joint venture partnership with the Company. As of December 31, 2018, there were no identified events or changes in circumstances that may have a significant adverse effect on the fair value of this cost method investment.

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