Escrow Deposits, Prepaid Expenses and Other Assets

9 Months Ended

Sep. 30, 2019

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Escrow Deposits, Prepaid Expenses and Other Assets

The following table summarizes escrow deposits, prepaid expenses and other assets for the Company as of September 30, 2019 and December 31, 2018 (in thousands):



	September 30, 2019		December 31, 2018
Escrow deposits, prepaid expenses and other	$	40,320	$	38,642
Investments in joint ventures	63,169		56,789
Notes receivable	36,706		6,012
Commercial real estate, vehicles and FF&E, net	42,699		44,591
Total	$	182,894	$	146,034

Depreciation expense related to commercial real estate, vehicles and furniture, fixtures and equipment (“FF&E”), net was $2.0 million and $1.8 million for the three months ended September 30, 2019 and 2018, respectively, and $5.7 million and $5.2 million for the nine months ended September 30, 2019 and 2018, respectively.

Investments in Joint Ventures

In August 2018, the Operating Partnership entered into a joint venture with a leading institutional investor for the purpose of developing, leasing and operating newly constructed single-family rental homes located in select submarkets, which was subsequently amended and upsized to $312.5 million in July 2019. The initial term of the joint venture is five years, during which the Company is entitled to a proportionate share of the joint venture’s cash flows based on our 20% ownership interest, along with an opportunity for a promoted interest, and also receives fees for services the Company provides to the joint venture. In evaluating the Company’s 20% ownership interest in the joint venture, we concluded that the joint venture is not a variable interest entity after applying the variable interest model and, therefore, we account for our interest in the joint venture as an investment in an unconsolidated subsidiary after applying the voting interest model using the equity method of accounting. As of September 30, 2019 and December 31, 2018, the balance of the Company’s investment in the joint venture was $26.0 million and $18.0 million, respectively, which is included in escrow deposits, prepaid expenses and other assets on the condensed consolidated balance sheets.

The Company provides property management and development services to certain unconsolidated joint ventures, which are considered to be related parties. Management fee income from these joint ventures was $1.0 million and $0.3 million for the three

months ended September 30, 2019 and 2018, respectively, and $2.4 million and $0.7 million for the nine months ended September 30, 2019 and 2018, respectively, and was included in other revenues within the condensed consolidated statements of operations.

Notes Receivable

In June 2019, as part of a bulk portfolio disposition of 215 homes, the Company issued a $30.7 million secured promissory note, which is secured by a first priority mortgage on the disposed homes, guaranteed by a parent of the borrower, matures on June 20, 2025, bears interest at 2.70% through October 31, 2019 and 4.50% thereafter to maturity, and contains certain required covenants. The secured promissory note requires quarterly interest payments with the full principal due at maturity. As of September 30, 2019, the secured note receivable, net of a $1.0 million discount, had a balance of $29.7 million included in escrow deposits, prepaid expenses and other assets on the condensed consolidated balance sheet.

The Company analyzes its notes receivables quarterly based on certain factors including, but not limited to, the borrower’s financial results and satisfying scheduled payments. A note receivable will be categorized as non-performing if a borrower experiences financial difficulty and has failed to make scheduled payments. As part of the monitoring process we may meet with a borrower’s management to better understand such borrower’s financial performance and its future plans on an as-needed basis.