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Investments in Unconsolidated Joint Ventures | 9 Months Ended
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Sep. 30, 2022
Equity Method Investments and Joint Ventures [Abstract] |
Investments in Unconsolidated Joint Ventures | Investments in Unconsolidated Joint Ventures As of September 30, 2022, the Company held 20% ownership interests in three unconsolidated joint ventures. In evaluating the Company’s 20% ownership interests in these joint ventures, we concluded that the joint ventures are not VIEs after applying the variable interest model and, therefore, we account for our interests in the joint ventures as investments in unconsolidated subsidiaries after applying the voting interest model using the equity method of accounting. Equity in net income (losses) of unconsolidated joint ventures is included in other income and expense, net within the condensed consolidated statements of operations. The Company entered into a joint venture with (i) the Alaska Permanent Fund Corporation (the “Alaska JV”) during the second quarter of 2014 to invest in homes acquired through traditional acquisition channels, (ii) another leading institutional investor (the “Institutional Investor JV”) during the third quarter of 2018 to invest in newly constructed single-family rental homes, and (iii) institutional investors advised by J.P. Morgan Asset Management (the “J.P. Morgan JV”) during the first quarter of 2020 focused on constructing and operating newly built rental homes. The following table summarizes our investments in unconsolidated joint ventures (amounts in thousands, except percentages and property data):
|  | Joint Venture Description |  | % Ownership at September 30, 2022 |  | Completed Homes at September 30, 2022 |  | Balances at September 30, 2022 |  | Balances at December 31, 2021 |  |  |  |  |  |  |
|  | Alaska JV |  | 20 | % |  | 276 |  |  | $ | 19,394 |  |  | $ | 22,658 |  |  |  |  |  |  |  |
|  | Institutional Investor JV |  | 20 | % |  | 933 |  |  | 15,271 |  |  | 28,695 |  |  |  |  |  |  |  |
|  | J.P. Morgan JV |  | 20 | % |  | 1,062 |  |  | 75,744 |  |  | 70,597 |  |  |  |  |  |  |  |
|  |  |  |  |  | 2,271 |  |  | $ | 110,409 |  |  | $ | 121,950 |  |  |  |  |  |  |  |
The Company provides various services to these joint ventures, which are considered to be related parties, including property management and development services and has opportunities to earn promoted interests. Management fee and development fee income from unconsolidated joint ventures was $3.8 million and $2.8 million for the three months ended September 30, 2022 and 2021, respectively, and $10.2 million and $7.4 million for the nine months ended September 30, 2022 and 2021, respectively, and is included in other income and expense, net within the condensed consolidated statements of operations. As a result of the Company’s management of these joint ventures, certain related party receivables and payables arise in the ordinary course of business and are included in escrow deposits, prepaid expenses and other assets or amounts payable to affiliates in the condensed consolidated balance sheets. During the first quarter of 2022, the Company acquired 200 properties in a bulk transaction from the Institutional Investor JV for total consideration of $74.6 million, of which (i) $66.2 million was paid in cash and included in cash paid for single-family properties in the condensed consolidated statements of cash flows and (ii) $8.4 million was recorded as a noncash distribution resulting in a reduction to our equity method investment. The transaction was accounted for as an asset acquisition and resulted in a gain on sale at the Institutional Investor JV. Recognition of our pro rata portion of the gain on sale has been deferred by reducing the carrying value of the acquired properties in our condensed consolidated balance sheets. During the first quarter of 2022, the J.P. Morgan JV entered into a loan agreement to borrow up to a $375.0 million aggregate commitment. During the initial three-year term, the loan bears interest at the Secured Overnight Financing Rate (“SOFR”) plus a 1.5% margin and matures on January 28, 2025. The loan agreement provides for one one-year extension option that includes additional fees and interest. As of September 30, 2022, the joint venture’s loan had a $204.2 million outstanding principal balance. During the third quarter of 2022, the Institutional Investor JV amended its existing loan agreement to increase borrowing capacity to $250.0 million. During the initial two-year term, the loan bears interest at SOFR plus a 2.40% margin and matures on July 1, 2024. The loan agreement provides for two one-year extension options that include additional fees and interest. As of September 30, 2022, the joint venture’s loan had a $232.7 million outstanding principal balance. The Company has provided customary non-recourse guarantees for the J.P. Morgan JV and Institutional Investor JV loans that may become a liability for us upon a voluntary bankruptcy filing by the joint venture or the occurrence of other actions such as fraud or a material misrepresentation by us or the joint venture. To date, the guarantees have not been invoked, and we believe that the actions that would trigger a guarantee would generally be disadvantageous to the joint ventures and us and therefore are unlikely to occur. However, there can be no assurances that actions that could trigger the guarantee will not occur.

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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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