Financing Arrangement

12 Months Ended

Dec. 31, 2021

Financing Arrangement:

On September 30, 2009, the Company formed a joint venture, whereby a third party acquired a 49.9% interest in Chandler Fashion Center, a 1,319,000 square foot regional town center in Chandler, Arizona, and Freehold Raceway Mall, a 1,553,000 square foot regional town center in Freehold, New Jersey, referred to herein as Chandler Freehold. As a result of the Company having certain rights under the agreement to repurchase the assets of Chandler Freehold, the transaction did not qualify for sale treatment. The Company, however, is not obligated to repurchase the assets. The transaction was initially accounted for as a co-venture arrangement, and accordingly the assets, liabilities and operations of the properties remain on the books of the Company and a co-venture obligation was established for the net cash proceeds received from the third party less costs allocated to a warrant.

Upon adoption of ASC 606 on January 1, 2018, the Company changed its accounting for Chandler Freehold from a co-venture arrangement to a financing arrangement. Under the Financing Arrangement, the Company recognizes interest expense on (i) the changes in fair value of the Financing Arrangement obligation, (ii) any payments to the joint venture partner equal to their pro rata share of net (loss) income and (iii) any payments to the joint venture partner less than or in excess of their pro rata share of net income.

During the years ended December 31, 2021, 2020 and 2019 the Company incurred interest (income) expense in connection with the financing arrangement as follows:


	2021		2020		2019
Distributions of the partner's share of net (loss) income	$	(2,763)	$	1,144	$	7,184
Distributions in excess of the partner's share of net income	14,435		3,097		6,939
Adjustment to fair value of financing arrangement obligation	(15,390)		(139,522)		(76,640)
	$	(3,718)	$	(135,281)	$	(62,517)

The fair value (Level 3 measurement) of the financing arrangement obligation at December 31, 2021 and 2020 was based upon a terminal capitalization rate of approximately 5.75% and 5.5%, respectively, a discount rate of approximately 7.25% and 7.0%, respectively, and market rents per square foot ranging from $35 to $105. The fair value of the financing arrangement obligation is sensitive to these significant unobservable inputs and a change in these inputs may result in a significantly higher or lower fair value measurement. Distributions to the partner, excluding distributions of excess loan proceeds, and changes in fair value of the financing arrangement obligation are recognized as interest (income) expense in the Company's consolidated statements of operations.

On June 27, 2019, the Company replaced the existing mortgage note payable on Chandler Fashion Center with a new $256,000 loan (See Note 10—Mortgage Notes Payable). In connection with the refinancing transaction, the Company distributed $27,945 of the excess loan proceeds to its joint venture partner, which was recorded as a reduction to the financing arrangement obligation.