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INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES | 9 Months Ended
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Sep. 30, 2012
Equity Method Investments and Joint Ventures [Abstract] |
Investments in and Advances to Unconsolidated Affiliates | INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES Core Portfolio The Company owns a 22.2% interest in an approximately one million square foot retail portfolio (the “Brandywine Portfolio”) located in Wilmington, Delaware, a 49% interest in a 311,000 square foot shopping center located in White Plains, New York (“Crossroads”), and a 50% interest in an approximately 28,000 square foot retail portfolio located in Georgetown, Washington D.C. (the "Georgetown Portfolio"). These investments are accounted for under the equity method.
5. | INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES (continued)
Opportunity Funds RCP Venture The Company along with Klaff Realty, LP (“Klaff”) and Lubert-Adler Management, Inc. (“Lubert-Adler”) formed an investment group, the RCP Venture, for the purpose of making investments in surplus or underutilized properties owned by retailers. The RCP Venture is neither a single entity nor a specific investment. Any member of this group has the option of participating, or not, in any individual investment and each individual investment has been made on a stand-alone basis through a separate limited liability company (“LLC”). These investments have been made through different investment vehicles with different affiliated and unaffiliated investors and different economics to the Company. Investments under the RCP Venture are structured as separate joint ventures as there may be other investors participating in certain investments in addition to Klaff, Lubert-Adler and Acadia. The Company has made these investments through its subsidiaries, Mervyns I, Mervyns II and Fund II, (together the “Acadia Investors”), all on a non-recourse basis. Through September 30, 2012, the Acadia Investors have made investments in Mervyns Department Stores (“Mervyns”) and Albertsons including additional investments in locations that are separate from these original investments (“Add-On Investments”). Additionally, they have invested in Shopko, Marsh and Rex Stores Corporation (collectively “Other RCP Investments”). The Acadia Investors have noncontrolling interests in the individual investee LLC’s as follows:
|  |  | Acadia Investors Ownership % in:
Investment | Investee LLC | Acadia Investors Entity | Investee LLC | Underlying entity(ies)
Mervyns | KLA/Mervyn’s, LLC | Mervyns I and Mervyns II | 10.5% | 5.8%
Mervyns Add-On investments | KLA/Mervyn’s, LLC | Mervyns I and Mervyns II | 10.5% | 5.8%
Albertsons | KLA A Markets, LLC | Mervyns II | 18.9% | 5.7%
Albertsons Add-On investments | KLA A Markets, LLC | Mervyns II | 20.0% | 6.0%
Shopko | KLA-Shopko, LLC | Fund II | 20.0% | 2.0%
Marsh and Add-On investments | KLA Marsh, LLC | Fund II | 20.0% | 3.3%
Rex Stores | KLAC Rex Venture, LLC | Mervyns II | 13.3% | 13.3%
The Company accounts for the original investments in Mervyns and Albertsons under the equity method of accounting as the Company has the ability to exercise significant influence, but does not have financial or operating control. The Company accounts for the Add-On Investments and Other RCP Investments under the cost method. Due to its minor ownership interest, based on the size of the investments as well as the terms of the underlying operating agreements, the Company has no influence over such entities' operating and financial policies. Other than the minority investor rights to which the Company is entitled pursuant to statute, it has no rights other than to receive its pro-rata share of cash distributions as declared by the managers of the Add-On Investments and Other RCP Investments. The Company has no rights with respect to the control and operation of these investment vehicles, nor with the formulation and execution of business and investment policies. During the nine months ended September 30, 2012, the Company received RCP Venture distributions from Albertsons Add-On investments and Rex Stores totaling $3.9 million of which the Operating Partnership's share totaled $0.8 million. In September 2008, the Company, certain of its subsidiaries, and other unrelated entities (the "Investor Consortium") were named as defendants in an adversary proceeding brought by Mervyn's LLC ("Mervyns") in the United States Bankruptcy Court for the District of Delaware. The action involved five claims alleging fraudulent transfers in which Mervyns was nominally seeking approximately $1.175 billion in damages from the Investor Consortium, although the actual claims made by the administrator and the unsecured creditors were substantially less. The first claim contended that, at the time of the sale of Mervyns by Target Corporation ("Target") to the Investor Consortium, a transfer of assets was made in an effort to defraud creditors. The Company 5. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES (continued) believed that this aspect of the case was without merit. The remaining four claims relate to transfers of assets of Mervyns at various times after the sale by Target. The Company believed that there were substantial defenses to these claims. During the third quarter of 2012, the parties to this litigation arrived at an agreement to settle the claim. The settlement, was approved by the bankruptcy court and provides for a payment of $163.7 million. Based on the defendants' agreement, the net cost of the settlement to the Investor Consortium would amount to approximately $143.6 million. After applying cash on hand at the investee level, Mervyns I and Mervyns II's combined contribution to this settlement will be approximately $0.9 million. In addition, the Company reduced its carrying value of these investments from $6.3 million to its fair value of $5.5 million. In total, this resulted in a charge of $1.7 million during the quarter ended September 30, 2012, of which the Operating Partnership's share, net of income taxes was $0.2 million. The following table summarizes activity related to the RCP Venture investments from inception through September 30, 2012:
(dollars in thousands) |  |  |  | Operating Partnership Share
Investment | Year Acquired | Invested Capital and Advances | Distributions | Invested Capital and Advances | Distributions
Mervyns | 2004 | $ | 26,058 |  | $ | 45,966 |  | $ | 4,901 |  | $ | 11,251 |
Mervyns Add-On investments | 2005/2008 | 6,517 |  | 3,558 |  | 1,046 |  | 819 |
Albertsons | 2006 | 20,717 |  | 81,594 |  | 4,239 |  | 16,318 |
Albertsons Add-On investments | 2006/2007 | 2,416 |  | 4,778 |  | 388 |  | 955 |
Shopko | 2006 | 1,108 |  | 1,659 |  | 222 |  | 332 |
Marsh and Add-On investments | 2006/2008 | 2,667 |  | 2,639 |  | 533 |  | 528 |
Rex Stores | 2007 | 2,701 |  | 1,623 |  | 535 |  | 325 |
|  | $ | 62,184 |  | $ | 141,817 |  | $ | 11,864 |  | $ | 30,528 |
Other Opportunity Fund Investments The unaffiliated venture partners for Fund III's investments in Lincoln Road, Parkway Crossing, Arundel Plaza, Self-Storage Management and the White City Shopping Center maintain control over these entities and, as such, the Company accounts for these investments under the equity method. Fund III owned an 84% interest in the Shop Rite at Orchard Center, which was accounted for using the equity method. During the second quarter of 2012, this property was sold for $13.8 million. During the third quarter of 2012, Fund III acquired a 90% interest in Arundel Plaza (Note 4). During the second quarter of 2012, Fund III made a 49% equity investment in an entity that holds a $2.2 million note receivable that is collateralized by a property. The note bears interest at 6% and matures February 2, 2017. As the unaffiliated venture partner maintains control over this entity, the Company accounts for this investment under the equity method. During June 2010, Fund III, in a joint venture with an unaffiliated partner, invested in an entity for the purpose of providing management services to owners of self-storage properties, including the 14 locations currently owned through Fund II and Fund III. Fund III has a 50% interest in the entity. This entity was determined to be a variable interest entity for which the Company was determined not to be the primary beneficiary. As such, the Company accounts for this investment under the equity method. Summary of Investments in Unconsolidated Affiliates The following Combined and Condensed Balance Sheets and Statements of Operations, in each period, summarize the financial information of the Company’s investments in unconsolidated affiliates.
5. | INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES (continued)
(dollars in thousands) | September 30, 2012 |  | December 31, 2011
Combined and Condensed Balance Sheets |  |  |
Assets |  |  |
Rental property, net | $ | 296,390 |  |  | $ | 280,470 |
Investment in unconsolidated affiliates | 89,099 |  |  | 156,421 |
Other assets | 40,554 |  |  | 29,587 |
Total assets | $ | 426,043 |  |  | $ | 466,478 |
Liabilities and partners’ equity |  |  |  |  |
Mortgage notes payable | $ | 318,568 |  |  | $ | 319,425 |
Other liabilities | 28,323 |  |  | 16,902 |
Partners’ equity | 79,152 |  |  | 130,151 |
Total liabilities and partners’ equity | $ | 426,043 |  |  | $ | 466,478 |
Company’s investment in and advances to unconsolidated affiliates | $ | 88,572 |  |  | $ | 84,568 |
Company's share of distributions in excess of income and investments in unconsolidated affiliates | $ | (22,409 | ) |  | $ | (21,710 | )
| Three Months Ended |  | Nine Months Ended
(dollars in thousands) | September 30, 2012 |  | September 30, 2011 |  | September 30, 2012 |  | September 30, 2011
Combined and Condensed Statements of Operations |  |  |  |  |  |  |
Total revenues | $ | 11,903 |  |  | $ | 10,290 |  |  | $ | 36,121 |  |  | $ | 30,789 |
Operating and other expenses | 4,977 |  |  | 3,699 |  |  | 13,793 |  |  | 10,993 |
Interest and other finance expense | 4,603 |  |  | 4,274 |  |  | 13,854 |  |  | 12,532 |
Equity in earnings of unconsolidated affiliates | 1,398 |  |  | 13,472 |  |  | 6,244 |  |  | 13,060 |
Depreciation and amortization | 2,573 |  |  | 2,222 |  |  | 7,216 |  |  | 6,467 |
Gain on sale of property | — |  |  | — |  |  | 3,402 |  |  | — |
Net income | $ | 1,148 |  |  | $ | 13,567 |  |  | $ | 10,904 |  |  | $ | 13,857 |
Company’s share of net income | $ | (2,440 | ) |  | $ | 3,208 |  |  | $ | 2,291 |  |  | $ | 3,318 |
Amortization of excess investment | (98 | ) |  | (98 | ) |  | (294 | ) |  | (293 | )
Company’s equity in (losses) earnings of unconsolidated affiliates | $ | (2,538 | ) |  | $ | 3,110 |  |  | $ | 1,997 |  |  | $ | 3,025 |

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- Definition The entire disclosure for the information required in the supplementary schedule applicable to management investment companies summarizing investments in and advances to majority-owned subsidiaries, other controlled companies, and other affiliates. It reflects specified information about ownership, financial results from, and financial position in such entities as of the balance sheet date and for the period then ended. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 946 -SubTopic 320 -Section S99 -Paragraph 6 -Subparagraph (SX 210.12-14) -URI http://asc.fasb.org/extlink&oid=6955306&loc=d3e611322-123010 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 14 -Article 12 + Details
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