Investments in Unconsolidated Joint Ventures

9 Months Ended

Sep. 30, 2023

Equity Method Investments and Joint Ventures [Abstract]

Investments in Unconsolidated Joint Ventures

Investments in Unconsolidated Joint Ventures:

The Company has made the following recent financings or other events within its unconsolidated joint ventures:

On February 2, 2022, the Company’s joint venture in FlatIron Crossing replaced the existing $197,011 loan on the property with a new $175,000 loan that bears interest at the Secured Overnight Financing Rate ("SOFR") plus 3.70% and matures on February 9, 2025, including extension options. The loan is covered by an interest rate cap agreement that effectively prevents SOFR from exceeding 4.0% through February 15, 2024.

On August 2, 2022, the Company acquired the remaining 50% ownership interest in two former Sears parcels (Deptford Mall and Vintage Faire Mall) in MS Portfolio LLC, the Company's joint venture with Seritage Growth Properties ("Seritage"), for a total purchase price of approximately $24,544. As a result of this transaction and the shortening of holding periods on certain other assets in the joint venture, an impairment loss was recorded for the twelve months ending December 31, 2022. The Company's share of the impairment loss was $27,054. Effective as of August 2, 2022, the Company now owns and has consolidated its 100% interest in these two former Sears parcels in its consolidated financial statements (See Note 15—Acquisitions).

On November 14, 2022, the Company's joint venture in Washington Square closed on a four-year maturity date extension for the existing loan to November 1, 2026, including extension options. The Company's joint venture repaid $15,000 ($9,000 at the Company's pro rata share) of the outstanding loan balance. The loan bears interest at SOFR plus 4.0% and is covered by an interest rate cap agreement that effectively prevents SOFR from exceeding 4.0% through November 1, 2024.

On March 3, 2023, the Company’s joint venture in Scottsdale Fashion Square replaced the existing $403,931 mortgage loan on the property with a $700,000 loan that bears interest at a fixed rate of 6.21%, is interest only during the entire loan term and matures on March 6, 2028.

On April 25, 2023, the Company's joint venture in Deptford Mall closed on a three-year maturity date extension for the existing loan to April 3, 2026, including extension options. The Company's joint venture repaid $10,000 ($5,100 at the Company's pro rata share) of the outstanding loan balance at closing. The interest rate on the loan remains unchanged at 3.73%.

Effective May 9, 2023, the Company’s joint venture in Country Club Plaza defaulted on the $295,210 ($147,605 at the Company’s pro rata share) non-recourse loan on the property. The Company’s joint venture is in negotiations with the lender on the terms of this non-recourse loan. During the three months ending September 30, 2023, the joint venture shortened the holding period of the property due to the uncertainty as to the outcome of discussions with the lender. As a result of shortening the holding period, the joint venture estimated the fair value of the asset and recorded an impairment loss. The Company's share of the impairment loss was $107,673 for the three and nine months ended September 30, 2023.

On May 18, 2023, the Company acquired Seritage’s remaining 50% ownership interest in the MS Portfolio LLC joint venture that owns five former Sears parcels, for a total purchase price of $46,687. These parcels are located at Chandler Fashion Center, Danbury Fair Mall, Freehold Raceway Mall, Los Cerritos Center and Washington Square. The Company previously recorded an impairment loss of $50,197, at the Company’s share, during the three months ending March 31, 2023 as a result of the joint venture shortening the holding periods on these parcels. Upon the closing of this transaction, the Company recorded an additional loss of $1,166, at the Company’s share, during the three months ending June 30, 2023. Effective as of May 18, 2023, the Company now owns and has consolidated its 100% interest in these five former Sears parcels in its consolidated financial statements (See Note 15—Acquisitions).

4. Investments in Unconsolidated Joint Ventures: (Continued)

Combined and condensed balance sheets and statements of operations are presented below for all unconsolidated joint ventures.

Combined and Condensed Balance Sheets of Unconsolidated Joint Ventures:


	September 30, 2023		December 31, 2022
Assets(1):
Property, net	$	7,715,987	$	8,156,632
Other assets	662,274		664,036
Total assets	$	8,378,261	$	8,820,668
Liabilities and partners' capital(1):
Mortgage and other notes payable	$	5,760,372	$	5,491,250
Other liabilities	466,345		451,511
Company's capital	1,145,464		1,528,348
Outside partners' capital	1,006,080		1,349,559
Total liabilities and partners' capital	$	8,378,261	$	8,820,668
Investments in unconsolidated joint ventures:
Company's capital	$	1,145,464	$	1,528,348
Basis adjustment(2)	(422,103)		(425,153)
	$	723,361	$	1,103,195

Assets—Investments in unconsolidated joint ventures	$	918,540	$	1,224,288
Liabilities—Distributions in excess of investments in unconsolidated joint ventures	(195,179)		(121,093)
	$	723,361	$	1,103,195

(1) These amounts include assets of $2,642,242 and $2,690,651 of Pacific Premier Retail LLC (the "PPR Portfolio") as of September 30, 2023 and December 31, 2022, respectively, and liabilities of $1,599,413 and $1,611,661 of the PPR Portfolio as of September 30, 2023 and December 31, 2022, respectively.

(2) The Company amortizes the difference between the cost of its investments in unconsolidated joint ventures and the book value of the underlying equity into (loss) income on a straight-line basis consistent with the lives of the underlying assets. The amortization of this difference was $(2,494) and $2,164 for the three months ended September 30, 2023 and 2022, respectively, and $(13,942) and $7,034 for the nine months ended September 30, 2023 and 2022, respectively.

Combined and Condensed Statements of Operations of Unconsolidated Joint Ventures:


	PPR Portfolio		Other Joint Ventures		Total
Three Months Ended September 30, 2023
Revenues:
Leasing revenue	$	44,446	$	173,735	$	218,181
Other	595		5,724		6,319
Total revenues	45,041		179,459		224,500
Expenses:
Shopping center and operating expenses	11,794		64,556		76,350
Leasing expenses	355		1,043		1,398
Interest expense	21,916		51,302		73,218
Depreciation and amortization	22,240		62,388		84,628
Total expenses	56,305		179,289		235,594
Loss on sale or write down of assets, net	—		(194,601)		(194,601)

Net loss	$	(11,264)	$	(194,431)	$	(205,695)
Company's equity in net loss	$	(4,614)	$	(102,851)	$	(107,465)
Three Months Ended September 30, 2022
Revenues:
Leasing revenue	$	44,157	$	164,518	$	208,675
Other	151		1,934		2,085
Total revenues	44,308		166,452		210,760
Expenses:
Shopping center and operating expenses	10,949		59,450		70,399
Leasing expenses	424		1,203		1,627
Interest expense	15,546		37,556		53,102
Depreciation and amortization	24,269		64,002		88,271
Total expenses	51,188		162,211		213,399
Gain on sale or write down of assets, net	—		25,788		25,788

Net (loss) income	$	(6,880)	$	30,029	$	23,149
Company's equity in net income	$	1,851	$	4,471	$	6,322

Significant accounting policies used by the unconsolidated joint ventures are similar to those used by the Company.

Combined and Condensed Statements of Operations of Unconsolidated Joint Ventures:


	PPR Portfolio		Other Joint Ventures		Total
Nine Months Ended September 30, 2023
Revenues:
Leasing revenue	$	129,613	$	505,490	$	635,103
Other	1,770		14,011		15,781
Total revenues	131,383		519,501		650,884
Expenses:
Shopping center and operating expenses	33,469		184,213		217,682
Leasing expenses	1,349		3,968		5,317
Interest expense	65,575		144,386		209,961
Depreciation and amortization	67,446		188,125		255,571
Total expenses	167,839		520,692		688,531
Loss on sale or write down of assets, net	—		(266,252)		(266,252)

Net loss	$	(36,456)	$	(267,443)	$	(303,899)
Company's equity in net loss	$	(15,329)	$	(160,906)	$	(176,235)
Nine Months Ended September 30, 2022
Revenues:
Leasing revenue	$	136,344	$	488,513	$	624,857
Other	269		12,040		12,309
Total revenues	136,613		500,553		637,166
Expenses:
Shopping center and operating expenses	31,807		172,681		204,488
Leasing expenses	1,258		3,724		4,982
Interest expense	46,299		109,881		156,180
Depreciation and amortization	72,760		195,408		268,168
Total expenses	152,124		481,694		633,818
Loss on sale or write down of assets, net	—		(30,870)		(30,870)

Net loss	$	(15,511)	$	(12,011)	$	(27,522)
Company's equity in net loss	$	(2,354)	$	(14,068)	$	(16,422)