Investments in Unconsolidated Joint Ventures

12 Months Ended

Dec. 31, 2022

Equity Method Investments and Joint Ventures [Abstract]

Investments in Unconsolidated Joint Ventures

As of December 31, 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 consolidated statements of operations.

During the second quarter of 2014, the Company entered into a joint venture with the Alaska Permanent Fund Corporation (the “Alaska JV”) to invest in homes acquired through traditional acquisition channels.

During the third quarter of 2018, the Company entered into a joint venture with another leading institutional investor (the “Institutional Investor JV”) to invest in newly constructed single-family rental homes, which was subsequently amended and upsized to $312.5 million during the third quarter of 2019. The initial term of the joint venture with Institutional Investor JV is five years from the effective date of the amended agreement, during which neither member may unilaterally market properties for sale.

During the first quarter of 2020, the Company entered into a $253.1 million strategic joint venture, which has an evergreen term, with institutional investors advised by J.P. Morgan Asset Management (the “J.P. Morgan JV”) focused on constructing and operating newly built rental homes, which was subsequently upsized to $625.0 million during the second quarter of 2020. Subsequent to December 31, 2022, the parties agreed to reinvest proceeds from debt financing obtained in the first quarter of 2022 (see below) to increase the size of the partnership up to approximately $900.0 million. The changes do not impact the accounting treatment of the joint venture.

The following table summarizes our investments in unconsolidated joint ventures (amounts in thousands, except percentages and property data):


Joint Venture Description	% Ownership at December 31, 2022		Completed Homes at December 31, 2022	Balances at December 31, 2022		Balances at December 31, 2021
Alaska JV	20	%	259	$	18,890	$	22,658
Institutional Investor JV	20	%	967	16,567		28,695
J.P. Morgan JV	20	%	1,314	71,890		70,597
			2,540	$	107,347	$	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 $13.9 million, $10.3 million and $5.8 million for the years ended December 31, 2022, 2021 and 2020, respectively, and is included in other income and expense, net within the 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 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 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 consolidated balance sheets.

During the third quarter of 2020, the Institutional Investor JV entered into a loan agreement to borrow up to a $201.0 million aggregate commitment that bore interest at the London Inter-Bank Offered Rate (“LIBOR”) plus a 3.50% margin. The Institutional Investor JV amended its loan agreement during the third quarter of 2022 to increase its borrowing capacity to $250.0 million. The amended loan bears interest at an adjusted Secured Overnight Financing Rate (“SOFR”) plus a 2.40% margin during the during the initial two-year term and matures on July 1, 2024. The amended loan agreement provides for two one-year extension options that include additional fees and interest. As of December 31, 2022, the Institutional Investor JV’s loan had a $232.7 million outstanding principal balance.

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. The loan bears interest at an adjusted SOFR plus a 1.50% margin during the initial three-year term and matures on January 28, 2025. The loan agreement provides for one one-year extension option that includes additional fees and interest. As of December 31, 2022, the J.P. Morgan JV’s loan had a $260.3 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.