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Investments in Unconsolidated Real Estate Joint Ventures | 3 Months Ended
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Mar. 31, 2013
Investments In Unconsolidated Real Estate Joint Ventures [Abstract] |
Investments in Unconsolidated Real Estate Joint Ventures | Investments in Unconsolidated Real Estate Joint Ventures Our investments in unconsolidated joint ventures as of March 31, 2013 and December 31, 2012 aggregated $134.0 million and $126.6 million, respectively. We have concluded based on the current facts and circumstances that the equity method of accounting should be used to account for each of the individual joint ventures below. At March 31, 2013 and December 31, 2012, we were members of the following unconsolidated real estate joint ventures:
As of March 31, 2013
Joint Venture |  | Center Location |  | Ownership % |  | Square Feet |  | Carrying Value of Investment (in millions) |  | Total Joint Venture Debt (in millions)
Deer Park |  | Deer Park, Long Island NY |  | 33.3 | % |  | 741,981 |  |  | $ | 2.4 |  |  | $ | 246.9 |
Galveston/Houston |  | Texas City, Texas |  | 50.0 | % |  | 352,705 |  |  | 39.8 |  |  | — |
National Harbor |  | Washington D.C. Metro Area |  | 50.0 | % |  | — |  |  | 2.6 |  |  | — |
RioCan Canada |  | Various |  | 50.0 | % |  | 434,562 |  |  | 66.8 |  |  | 19.5 |
Westgate |  | Glendale, Arizona |  | 58.0 | % |  | 332,234 |  |  | 19.6 |  |  | 38.6 |
Wisconsin Dells |  | Wisconsin Dells, Wisconsin |  | 50.0 | % |  | 265,086 |  |  | 2.6 |  |  | 24.3 |
Other |  |  |  |  |  |  | — |  |  | 0.2 |  |  | — |
|  |  |  |  |  |  |  | $ | 134.0 |  |  | $ | 329.3 |
As of December 31, 2012
Joint Venture |  | Center Location |  | Ownership % |  | Square Feet |  | Carrying Value of Investment (in millions) |  | Total Joint Venture Debt (in millions)
Deer Park |  | Deer Park, Long Island NY |  | 33.3 | % |  | 741,981 |  |  | $ | 3.0 |  |  | $ | 246.9 |
Deer Park Warehouse |  | Deer Park, Long Island NY |  | 33.3 | % |  | 29,253 |  |  | — |  |  | 1.9 |
Galveston/Houston |  | Texas City, TX |  | 50.0 | % |  | 352,705 |  |  | 36.7 |  |  | — |
National Harbor |  | Washington D.C. Metro Area |  | 50.0 | % |  | — |  |  | 2.6 |  |  | — |
RioCan Canada |  | Various |  | 50.0 | % |  | 434,562 |  |  | 62.2 |  |  | 20.1 |
Westgate |  | Glendale, AZ |  | 58.0 | % |  | 332,234 |  |  | 19.1 |  |  | 32.0 |
Wisconsin Dells |  | Wisconsin Dells, WI |  | 50.0 | % |  | 265,086 |  |  | 2.8 |  |  | 24.3 |
Other |  |  |  |  |  | — |  |  | 0.2 |  |  | — |
|  |  |  |  |  |  |  | $ | 126.6 |  |  | $ | 325.2 |
These investments are recorded initially at cost and subsequently adjusted for our equity in the venture's net income (loss), cash contributions, distributions and other adjustments required by the equity method of accounting as described below. The following management, development, leasing and marketing fees were recognized from services provided to our unconsolidated joint ventures (in thousands):
|  | Three months ended March 31,
|  | 2013 |  | 2012
Fee: |  |  |  |
Development |  | $ | 71 |  |  | $ | — |
Loan Guarantee |  | 40 |  |  | — |
Management and leasing |  | 844 |  |  | 479 |
Marketing |  | 110 |  |  | 53 |
Total Fees |  | $ | 1,065 |  |  | $ | 532 |
Our investments in real estate joint ventures are reduced by the percentage of the profits earned for leasing and development services associated with our ownership interest in each joint venture. Our carrying value of investments in unconsolidated joint ventures differs from our share of the assets reported in the "Summary Balance Sheets - Unconsolidated Joint Ventures" shown below due to adjustments to the book basis, including intercompany profits on sales of services that are capitalized by the unconsolidated joint ventures. The differences in basis are amortized over the various useful lives of the related assets. Deer Park, Long Island, New York In December 2011, the joint venture refinanced its mortgage and mezzanine loans, totaling $246.9 million. The non-default interest rates for the mortgage and mezzanine loans are LIBOR + 3.50% and LIBOR + 5.00%, respectively and both loans mature on May 17, 2014. The loans require certain financial covenants, such as debt service coverage and loan to value ratios, to be met at various measurement dates. Based on the administrative agent bank's calculation of Deer Park's debt service coverage ratio utilizing financial information as of December 31, 2012, the joint venture was not in compliance with the coverage ratio. As a result, on March 22, 2013, the lender group placed Deer Park in default. The lenders have advised the joint venture that a principal payment of approximately $14.2 million would satisfy the debt service coverage test. Such principal payment would require additional capital contributions to Deer Park by its partners. Deer Park does not agree with the lender's principal payment computation and believes the principal payment required could be substantially less. As a result, no capital contributions have been authorized by the managing member of Deer Park. The managing member continues to work with the administrative agent bank of the lender group to negotiate a resolution. The lenders have also notified Deer Park that the default interest rates will continue to accrue until the default is cured. The default interest rates for the mortgage and mezzanine loans are PRIME + 7.5% and LIBOR + 9%, respectively. The Company and its two joint venture partners have each, jointly and severally, guaranteed the payment of interest (but not principal) on the loans. The operations from Deer Park, together with cash on hand in the joint venture, have been sufficient in the past to pay interest on the loans, although the historical operations would not have generated sufficient cash flow to pay fully the monthly interest at the additional default interest rate. In addition, the managing member delivered to us a revocable notice of termination of our property management agreement with Deer Park that purports to be effective September 1, 2013. We believe the decision to terminate was improper and we continue to manage the property. We are in discussions with our partners on these management issues as well as the matters with the lenders described above. There can be no assurance that we will be able to resolve these matters on favorable terms. Deer Park Warehouse, Long Island, New York In March 2013, in connection with the Loan Forbearance Agreement signed in 2012 with the lender to the joint venture, the warehouse property was sold for approximately $1.2 million. The proceeds were used to satisfy the terms of the forbearance agreement. There was no impact to the net income of the joint venture as a result of this sale and the retirement of the associated mortgage debt. National Harbor, Washington, D.C. Metro Area In May 2011, we announced the formation of a joint venture for the development of a Tanger Outlet Center at National Harbor in the Washington, D.C. Metro area. The planned Tanger Outlet Center is expected to contain approximately 80 brand name and designer outlet stores in a center measuring up to 340,000 square feet. In November 2012, the joint venture broke ground and began site development. Both parties have made initial equity contributions of $2.6 million to fund certain pre-development costs. In February 2013, the joint venture executed a term sheet for a three year construction loan with the ability to borrow up to $61.0 million, which carries an interest rate of LIBOR + 1.65%. We will provide property management, leasing and marketing services to the joint venture; and with our partner, will jointly provide site development and construction supervision services. RioCan Canada In March of 2013 the RioCan Joint Venture acquired the land adjacent to the existing Cookstown Outlet Mall for $13.9 million. The land purchase will be used as the site for the joint venture's expansion of the Cookstown Outlet Mall which we expect to begin during the second quarter of 2013. We evaluate our real estate joint ventures in accordance with the Consolidation guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC"). As a result of our qualitative assessment, we concluded that our Westgate and Deer Park joint ventures are Variable Interest Entities ("VIEs") and all of our other joint ventures are not VIEs. Westgate is considered a VIE because the voting rights are disproportionate to the economic interests. Deer Park is considered a VIE because it does not meet the criteria of the members having a sufficient equity investment at risk. Investments in real estate joint ventures in which we have a non-controlling ownership interest are accounted for using the equity method of accounting. After making the determination that Westgate and Deer Park were VIEs, we performed an assessment to determine if we would be considered the primary beneficiary and thus be required to consolidate their balance sheets and results of operations. This assessment was based upon whether we had the following:
a. | The power to direct the activities of the VIE that most significantly impact the entity's economic performance
b. | The obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE
The operating, development, leasing, and management agreements of Westgate and Deer Park provide that the activities that most significantly impact the economic performance of the ventures require either unanimous consent or, for certain activities related to Deer Park, majority consent. Accordingly, we determined that we do not have the power to direct the significant activities that affect the economic performance of the ventures and therefore, have applied the equity method of accounting for both Westgate and Deer Park. Our equity method investments in Westgate and Deer Park as of March 31, 2013 were approximately $19.6 million and $2.4 million, respectively. We are unable to estimate our maximum exposure to loss at this time because our guarantees are limited and based on the future operating performance of Westgate and Deer Park. Condensed combined summary financial information of unconsolidated joint ventures accounted for using the equity method is as follows (in thousands):
Summary Balance Sheets - Unconsolidated Joint Ventures |  | March 31, 2013 |  | December 31, 2012
Assets |  |  |  |  |  |
Land |  | $ | 95,748 |  |  | $ | 96,455 |
Buildings, improvements and fixtures |  | 495,958 |  |  | 493,424 |
Construction in progress, including land |  | 21,974 |  |  | 16,338 |
|  | 613,680 |  |  | 606,217 |
Accumulated depreciation |  | (68,667 | ) |  | (62,547 | )
Total rental property, net |  | 545,013 |  |  | 543,670 |
Assets held for sale (1) |  | — |  |  | 1,828 |
Cash and cash equivalents |  | 20,531 |  |  | 21,879 |
Deferred lease costs, net |  | 23,080 |  |  | 24,411 |
Deferred debt origination costs, net |  | 4,399 |  |  | 5,213 |
Prepaids and other assets |  | 24,900 |  |  | 25,350 |
Total assets |  | $ | 617,923 |  |  | $ | 622,351 |
Liabilities and Owners' Equity |  |  |  |  |  |
Mortgages payable |  | $ | 329,262 |  |  | $ | 325,192 |
Construction trade payables |  | 14,232 |  |  | 21,734 |
Accounts payable and other liabilities |  | 16,726 |  |  | 31,944 |
Total liabilities |  | 360,220 |  |  | 378,870 |
Owners' equity |  | 257,703 |  |  | 243,481 |
Total liabilities and owners' equity |  | $ | 617,923 |  |  | $ | 622,351 |
(1) Assets related to our Deer Park Warehouse joint venture that were sold in March 2013.
|  | Three months ended
Summary Statements of Operations |  | March 31,
- Unconsolidated Joint Ventures |  | 2013 |  | 2012
Revenues |  | $ | 21,395 |  |  | $ | 11,658 |
Expenses |  |  |  |  |
Property operating |  | 8,803 |  |  | 4,891 |
General and administrative |  | 485 |  |  | 163 |
Acquisition costs |  | 421 |  |  | 704 |
Abandoned development costs |  | — |  |  | 954 |
Depreciation and amortization |  | 7,384 |  |  | 4,608 |
Total expenses |  | 17,093 |  |  | 11,320 |
Operating income |  | 4,302 |  |  | 338 |
Interest expense |  | 4,052 |  |  | 3,829 |
Net income (loss) |  | $ | 250 |  |  | $ | (3,491 | )
The Company and Operating Partnership's share of:
Net income (loss) |  | $ | 590 |  |  | $ | (1,452 | )
Depreciation and impairment charge (real estate related) |  | $ | 3,173 |  |  | $ | 1,815 |

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -SubTopic 10 -Section 35 -Paragraph 32 -URI http://asc.fasb.org/extlink&oid=7658923&loc=d3e32787-111569 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Principles Board Opinion (APB) -Number 18 -Paragraph 20 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.12) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6382943&loc=d3e33918-111571 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -SubTopic 10 -Section 35 -Paragraph 35 -URI http://asc.fasb.org/extlink&oid=7658923&loc=d3e32847-111569 + Details
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