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JOINT VENTURES AND PARTNERSHIPS | 9 Months Ended
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Sep. 30, 2022
JOINT VENTURES AND PARTNERSHIPS |
JOINT VENTURES AND PARTNERSHIPS | 5. JOINT VENTURES AND PARTNERSHIPS UDR has entered into joint ventures and partnerships with unrelated third parties to own, operate, acquire, renovate, develop, redevelop, dispose of, and manage real estate assets that are either consolidated and included in Real estate owned on the Consolidated Balance Sheets or are accounted for under the equity method of accounting, and are included in Investment in and advances to unconsolidated joint ventures, net, on the Consolidated Balance Sheets. The Company consolidates the entities that we control as well as any variable interest entity where we are the primary beneficiary. Under the VIE model, the Company consolidates an entity when it has control to direct the activities of the VIE and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. Under the voting model, the Company consolidates an entity when it controls the entity through ownership of a majority voting interest. UDR’s joint ventures and partnerships are funded with a combination of debt and equity. Our losses are typically limited to our investment and except as noted below, the Company does not guarantee any debt, capital payout or other obligations associated with our joint ventures and partnerships. Consolidated joint venture ​ The Company has a preferred equity investment in a joint venture that owns 1532 Harrison, a 136 home community located in San Francisco, California. In September 2022, the joint venture defaulted on its senior construction loan, and the Company subsequently purchased the loan for its unpaid balance of $47.2 million pursuant to an agreement entered into with the lender at the time the preferred equity investment was made. As a result, the joint venture was deemed to be a VIE. The Company concluded that it is the primary beneficiary of the VIE, and therefore began consolidating the joint venture. The consolidated assets and liabilities related to the VIE were initially recorded at fair value during September 2022 and were approximately $86.9 million and $0.3 million, respectively, as of September 30, 2022. The senior construction loan payable and related interest expense due from the joint venture eliminate upon consolidation of the Company’s consolidated financial statements. ​ Unconsolidated joint ventures and partnerships ​ The Company recognizes earnings or losses from our investments in unconsolidated joint ventures and partnerships consisting of our proportionate share of the net earnings or losses of the joint ventures and partnerships. In addition, we may earn fees for providing management services for the communities held by the unconsolidated joint ventures and partnerships. The following table summarizes the Company’s investment in and advances to unconsolidated joint ventures and partnerships, net, which are accounted for under the equity method of accounting as of September 30, 2022 and December 31, 2021 (dollars in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | Number of | ​ | Number of | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | Operating | ​ | Apartment | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |  | ​ | Income/(loss) from investments
​ | ​ | ​ | ​ | Communities | ​ | Homes | ​ | Investment at | ​ | UDR’s Ownership Interest | ​ | ​ | Three Months Ended | ​ | Nine Months Ended
​ |  | Location of |  | September 30, |  | September 30, |  | September 30, |  | December 31, | ​ | September 30, |  | ​ | December 31, |  | ​ | September 30, | ​ | September 30,
Joint Ventures |  | Properties |  | 2022 |  | 2022 |  | 2022 |  | 2021 | ​ | 2022 |  | ​ | 2021 |  | ​ | 2022 |  | 2021 | ​ | 2022 |  | 2021
Operating: | ​ |  | ​ |  | ​ |  | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  |  | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
UDR/MetLife I | ​ | Los Angeles, CA | ​ | 1 | ​ | 150 | ​ | $ | 21,532 | ​ | $ | 23,880 | ​ | 50.0 | % | ​ | 50.0 | % | ​ | $ | (423) | ​ | $ | (608) | ​ | $ | (1,556) | ​ | $ | (1,922)
UDR/MetLife II |  | Various |  | 7 |  | 1,250 |  | ​ | 176,191 |  | ​ | 181,023 | ​ | 50.0 | % | ​ | 50.0 | % | ​ | ​ | 295 | ​ | ​ | (289) | ​ | ​ | 811 | ​ | ​ | (3,126)
Other UDR/MetLife Joint Ventures (a) |  | Various |  | 5 |  | 1,437 |  | ​ | 55,619 |  | ​ | 66,012 | ​ | 50.6 | % | ​ | 50.6 | % | ​ | ​ | (1,699) | ​ | ​ | (2,859) | ​ | ​ | (5,521) | ​ | ​ | (9,611)
Investment in and advances to unconsolidated joint ventures, net, before preferred equity investments and real estate technology investments |  |  | ​ | $ | 253,342 | ​ | $ | 270,915 | ​ |  |  | ​ |  | ​ | ​ | $ | (1,827) | ​ | $ | (3,756) | ​ | $ | (6,266) | ​ | $ | (14,659)
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Income/(loss) from investments
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Investment at | ​ | Three Months Ended | ​ | Nine Months Ended
Developer Capital Program |  | ​ |  | ​ |  | Years To | ​ | UDR |  | September 30, |  | December 31, |  | September 30, | ​ | September 30,
and Real Estate Technology Investments (b) |  | Location |  | Rate |  | Maturity | ​ | Commitment (c) |  | 2022 |  | 2021 |  | 2022 |  | 2021 |  | 2022 |  | 2021
Preferred equity investments: |  |  |  |  |  |  | ​ | ​ | ​ | ​ |  |  | ​ |  |  | ​ | ​ |  | ​ | ​ | ​ | ​ | ​ | ​ |  | ​ |
Junction | ​ | Santa Monica, CA | ​ | 12.0 | % | 0.2 | ​ | $ | 8,800 | ​ | $ | 14,415 | ​ | $ | 13,183 | ​ | $ | 428 | ​ | $ | 379 | ​ | $ | 1,232 | ​ | $ | 1,093
1532 Harrison (d) | ​ | San Francisco, CA | ​ | N/A | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 35,248 | ​ | ​ | 5,158 | ​ | ​ | 1,003 | ​ | ​ | 5,152 | ​ | ​ | 2,896
1200 Broadway (e) (f) | ​ | Nashville, TN | ​ | N/A | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 61,326 | ​ | ​ | — | ​ | ​ | 1,837 | ​ | ​ | 11,893 | ​ | ​ | 4,936
1300 Fairmount (f) | ​ | Philadelphia, PA | ​ | 8.5 | % | 1.0 | ​ | ​ | 51,393 | ​ | ​ | 69,013 | ​ | ​ | 64,780 | ​ | ​ | 1,457 | ​ | ​ | 1,338 | ​ | ​ | 4,233 | ​ | ​ | 3,869
Modera Lake Merritt (f) | ​ | Oakland, CA | ​ | 9.0 | % | 1.6 | ​ | ​ | 27,250 | ​ | ​ | 34,073 | ​ | ​ | 33,828 | ​ | ​ | (1,283) | ​ | ​ | 739 | ​ | ​ | 246 | ​ | ​ | 2,144
Thousand Oaks (f) | ​ | Thousand Oaks, CA | ​ | 9.0 | % | 2.4 | ​ | ​ | 20,059 | ​ | ​ | 24,342 | ​ | ​ | 22,764 | ​ | ​ | 544 | ​ | ​ | 497 | ​ | ​ | 1,578 | ​ | ​ | 1,415
Vernon Boulevard (f) | ​ | Queens, NY | ​ | 13.0 | % | 2.8 | ​ | ​ | 40,000 | ​ | ​ | 53,104 | ​ | ​ | 48,210 | ​ | ​ | 1,693 | ​ | ​ | 1,496 | ​ | ​ | 4,885 | ​ | ​ | 4,300
Makers Rise (f) | ​ | Herndon, VA | ​ | 9.0 | % | 3.3 | ​ | ​ | 30,208 | ​ | ​ | 33,299 | ​ | ​ | 22,828 | ​ | ​ | 743 | ​ | ​ | 251 | ​ | ​ | 2,105 | ​ | ​ | 519
121 at Watters (f) | ​ | Allen, TX | ​ | 9.0 | % | 3.5 | ​ | ​ | 19,843 | ​ | ​ | 22,009 | ​ | ​ | 14,134 | ​ | ​ | 490 | ​ | ​ | 234 | ​ | ​ | 1,359 | ​ | ​ | 462
Infield Phase I | ​ | Kissimmee, FL | ​ | 14.0 | % | 1.6 | ​ | ​ | 16,044 | ​ | ​ | 17,201 | ​ | ​ | — | ​ | ​ | 593 | ​ | ​ | — | ​ | ​ | 1,129 | ​ | ​ | —
Upton Place | ​ | Washington, D.C. | ​ | 9.7 | % | 5.2 | ​ | ​ | 52,163 | ​ | ​ | 55,465 | ​ | ​ | 29,566 | ​ | ​ | 1,316 | ​ | ​ | — | ​ | ​ | 3,061 | ​ | ​ | —
Meetinghouse (g) | ​ | Portland, OR | ​ | 8.25 | % | 4.4 | ​ | ​ | 11,600 | ​ | ​ | 12,007 | ​ | ​ | — | ​ | ​ | 239 | ​ | ​ | — | ​ | ​ | 466 | ​ | ​ | —
Heirloom (h) | ​ | Portland, OR | ​ | 8.25 | % | 4.7 | ​ | ​ | 16,185 | ​ | ​ | 16,539 | ​ | ​ | — | ​ | ​ | 332 | ​ | ​ | — | ​ | ​ | 347 | ​ | ​ | —
Portfolio Recapitalization (i) | ​ | Various | ​ | 8.0 | % | 6.7 | ​ | ​ | 102,000 | ​ | ​ | 102,674 | ​ | ​ | — | ​ | ​ | 1,565 | ​ | ​ | — | ​ | ​ | 1,565 | ​ | ​ | —
Real estate technology investments: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
RETV I (j) | ​ | N/A | ​ | N/A | ​ | N/A | ​ | ​ | 18,000 | ​ | ​ | 25,639 | ​ | ​ | 71,464 | ​ | ​ | (1,458) | ​ | ​ | 9,869 | ​ | ​ | (28,009) | ​ | ​ | 17,975
RETV II | ​ | N/A | ​ | N/A | ​ | N/A | ​ | ​ | 18,000 | ​ | ​ | 9,607 | ​ | ​ | 8,130 | ​ | ​ | 122 | ​ | ​ | 147 | ​ | ​ | (603) | ​ | ​ | 209
RET Strategic Fund (k) | ​ | N/A | ​ | N/A | ​ | N/A | ​ | ​ | 25,000 | ​ | ​ | 7,435 | ​ | ​ | — | ​ | ​ | (37) | ​ | ​ | — | ​ | ​ | (115) | ​ | ​ | —
RET ESG (l) | ​ | N/A | ​ | N/A | ​ | N/A | ​ | ​ | 10,000 | ​ | ​ | 3,959 | ​ | ​ | — | ​ | ​ | (72) | ​ | ​ | — | ​ | ​ | (72) | ​ | ​ | —
Total Preferred Equity Investments and Real Estate Technology Investments | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 500,781 | ​ | ​ | 425,461 | ​ | ​ | 11,830 | ​ | ​ | 17,790 | ​ | ​ | 10,452 | ​ | ​ | 39,818
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Sold joint ventures and other investments | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 416 | ​ | ​ | — | ​ | ​ | 3,964
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total Joint Ventures and Developer Capital Program and Real Estate Technology Investments, net (a) | ​ | ​ | ​ | ​ | $ | 754,123 | ​ | $ | 696,376 | ​ | $ | 10,003 |  | $ | 14,450 | ​ | $ | 4,186 |  | $ | 29,123
(a) | As of September 30, 2022 and December 31, 2021, the Company’s negative investment in 13th and Market Properties LLC of $7.0 million and $6.1 million, respectively, is included in Other UDR/MetLife Joint Ventures in the table above and recorded in Accounts payable, accrued expenses, and other liabilities on the Consolidated Balance Sheet.
(b) | The Developer Capital Program is the program through which the Company makes investments, including preferred equity investments, mezzanine loans or other structured investments that may receive a fixed yield on the investment and may include provisions pursuant to which the Company participates in the increase in value of the property upon monetization of the applicable property.
(c) | Represents UDR’s maximum funding commitment only and therefore excludes other activity such as income from investments.
(d) | As disclosed above, the Company began consolidating the 1532 Harrison joint venture in September 2022. The Company recorded $5.2 million in Income/(loss) from unconsolidated entities in connection with recording the joint venture’s assets and liabilities at fair value on the date of consolidation.
(e) | In J anuary 2022, the joint venture sold its community, a 313 apartment home operating community located in Nashville, Tennessee, for a sales price of approximately $294.0 million. As a result, the Company recorded variable upside participation on the sale of approximately $10.6 million, net of associated costs.
(f) | The Company’s preferred equity investment receives a variable percentage of the value created from the project
| upon a capital or liquidating event.
(g) | In March 2022, the Company entered into a joint venture agreement with an unaffiliated joint venture partner to operate a 232 apartment home community in Portland, Oregon. The Company’s preferred equity investment of $11.6 million earns a preferred return of 8.25% per annum. The unaffiliated joint venture partner is the managing member of the joint venture. The Company has concluded that it does not control the joint venture and accounts for it under the equity method of accounting.
(h) | In June 2022, the Company entered into a joint venture agreement with an unaffiliated joint venture partner to operate a 286 apartment home community in Portland, Oregon. The Company’s preferred equity investment of $16.2 million earns a preferred return of 8.25% per annum. The unaffiliated joint venture partner is the managing member of the joint venture. The Company has concluded that it does not control the joint venture and accounts for it under the equity method of accounting.
(i) | In July 2022, the Company entered into a joint venture agreement with an unaffiliated joint venture partner to operate 14 communities located in various markets across the United States. The Company’s preferred equity investment of $102.0 million will earn a preferred return of 8.0% per annum. The unaffiliated joint venture partner is the managing member of the joint venture. The Company has concluded that it does not control the joint venture and accounts for it under the equity method of accounting.
(j) | The Company recognized $(1.5) million and $9.9 million of investment income/(loss) from RETV I for the three months ended September 30, 2022 and 2021, respectively, and $(28.0) million and $18.0 million of investment income/(loss) from RETV I for the nine months ended September 30, 2022 and 2021, respectively, which primarily related to unrealized gains/(losses) from one portfolio investment held by RETV I, SmartRent, Inc. (“SmartRent”). In 2021, SmartRent, a provider of smart home automation solutions, went public through a merger with a publicly traded special purpose acquisition company. As a result, SmartRent began trading on the New York Stock Exchange under the ticker symbol “SMRT.” Due to the merger, all shares of SmartRent that RETV I held were converted to publicly traded SmartRent shares based on a pre-determined conversion factor. Following the merger and stock conversion, RETV I began recording its investment in SmartRent based on the share price at the end of the applicable reporting period.
(k) | In January 2022, the Company entered into a real estate technology investment as a limited partner, for a total commitment of $25.0 million. The Company funded $7.5 million to the limited partnership at closing. The Company has concluded that it does not control the limited partnership and accounts for it under the equity method of accounting.
(l) | In April 2022, the Company entered into a real estate technology ESG investment as a limited partner, for a total commitment of $10.0 million. The Company funded $4.0 million to the limited partnership at closing. The Company has concluded that it does not control the limited partnership and accounts for it under the equity method of accounting.
​ As of September 30, 2022 and December 31, 2021, the Company had deferred fees of $8.2 million and $8.7 million, respectively, which will be recognized through earnings over the weighted average life of the related properties, upon the disposition of the properties to a third party, or upon completion of certain development obligations. The Company recognized management fees of $1.3 million and $1.1 million for the three months ended September 30, 2022 and 2021, respectively, and $3.8 million and $4.9 million for the nine months ended September 30, 2022 and 2021, respectively, for management of the communities held by the joint ventures and partnerships. The management fees are included in Joint venture management and other fees on the Consolidated Statements of Operations. The Company may, in the future, make additional capital contributions to certain of our joint ventures and partnerships should additional capital contributions be necessary to fund acquisitions or operations. We consider various factors to determine if a decrease in the value of our Investment in and advances to unconsolidated joint ventures, net is other-than-temporary. These factors include, but are not limited to, age of the venture, our intent and ability to retain our investment in the entity, the financial condition and long-term prospects of the entity, and the relationships with the other joint venture partners and its lenders. Based on the significance of the unobservable inputs, we classify these fair value measurements within Level 3 of the valuation hierarchy. The Company did not incur any other-than-temporary impairments in the value of its investments in unconsolidated joint ventures during the three and nine months ended September 30, 2022 and 2021. Combined summary balance sheets relating to the unconsolidated joint ventures’ and partnerships’ (not just our proportionate share) are presented below as of September 30, 2022 and December 31, 2021 (dollars in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | September 30, | ​ | December 31,
​ |  | 2022 |  | 2021
Total real estate, net |  | $ | 2,315,766 |  | $ | 2,043,158
Real estate assets held for sale | ​ |  | — | ​ |  | 168,668
Investments, at fair value | ​ | ​ | 258,129 | ​ | ​ | 460,241
Cash and cash equivalents | ​ |  | 38,298 | ​ |  | 22,891
Other assets | ​ | ​ | 122,365 | ​ |  | 28,948
Total assets |  | $ | 2,734,558 |  | $ | 2,723,906
​ | ​ | ​ | ​ | ​ | ​ | ​
Third party debt, net | ​ | $ | 1,359,194 | ​ | $ | 1,215,918
Liabilities held for sale | ​ |  | — | ​ |  | 106,990
Accounts payable and accrued liabilities | ​ | ​ | 156,175 | ​ | ​ | 51,689
Total liabilities |  | ​ | 1,515,369 |  | ​ | 1,374,597
Total equity |  | $ | 1,219,189 |  | $ | 1,349,309
​ Combined summary financial information relating to the unconsolidated joint ventures’ and partnerships’ operations (not just our proportionate share) is presented below for the three and nine months ended September 30, 2022 and 2021 (dollars in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended | ​ | Nine Months Ended
​ | ​ | September 30, | ​ | September 30,
​ |  | 2022 |  | 2021 |  | 2022 |  | 2021
Total revenues |  | $ | 38,093 |  | $ | 33,635 |  | $ | 110,451 |  | $ | 97,777
Property operating expenses | ​ |  | 18,326 | ​ |  | 18,128 | ​ |  | 52,805 | ​ |  | 51,983
Real estate depreciation and amortization | ​ |  | 16,233 | ​ |  | 17,486 | ​ |  | 50,689 | ​ |  | 50,082
Gain/(loss) on sale of property | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 127,542 | ​ | ​ | 34,757
Operating income/(loss) | ​ |  | 3,534 | ​ | ​ | (1,979) | ​ |  | 134,499 | ​ | ​ | 30,469
Interest expense | ​ |  | (9,829) | ​ |  | (13,181) | ​ |  | (26,598) | ​ |  | (32,776)
Net realized gain/(loss) on held investments | ​ | ​ | 19,331 | ​ | ​ | 1,875 | ​ | ​ | 95,953 | ​ | ​ | 4,452
Net unrealized gain/(loss) on held investments | ​ | ​ | (24,561) | ​ | ​ | 60,138 | ​ | ​ | (263,202) | ​ | ​ | 104,399
Other income/(loss) | ​ | ​ | (478) | ​ | ​ | (156) | ​ | ​ | (877) | ​ | ​ | (1,826)
Net income/(loss) |  | $ | (12,003) |  | $ | 46,697 |  | $ | (60,225) |  | $ | 104,718
​

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- Definition 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. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -URI https://asc.fasb.org/topic&trid=2196965 + Details
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