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Investments in and Advances to Unconsolidated Affiliates | 6 Months Ended
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Jun. 30, 2017
Equity Method Investments and Joint Ventures [Abstract] |
Investments in and Advances to Unconsolidated Affiliates | Investments In and Advances to Unconsolidated Affiliates The Company accounts for its investments in and advances to unconsolidated affiliates primarily under the equity method of accounting as it has the ability to exercise significant influence, but does not have financial or operating control over the investment, which is maintained by each of the unaffiliated partners who co-invest with the Company. The Company’s investments in and advances to unconsolidated affiliates consist of the following (dollars in thousands):
|  | Nominal Ownership Interest |  | June 30, |  | December 31,
Fund | Property | at June 30, 2017 |  | 2017 |  | 2016
Core: |  |  |  |  |  |
| 840 N. Michigan (a) | 88.43% |  | $ | 72,471 |  |  | $ | 74,131 |
| Renaissance Portfolio | 20% |  | 35,783 |  |  | 36,437 |
| Gotham Plaza | 49% |  | 29,321 |  |  | 29,421 |
| Brandywine Market Square (a, b) | 61.11% |  | 21,984 |  |  | 5,469 |
| Brandywine Portfolio (a, b) | 22.22% |  | 14,791 |  |  | 15,286 |
| Georgetown Portfolio | 50% |  | 3,724 |  |  | 4,287 |
|  |  |  | 178,074 |  |  | 165,031 |
Mervyns I & II: | KLA/Mervyn's, LLC (c) | 10.5% |  | — |  |  | — |
Fund III: |  |  |  |  |  |
| Fund III Other Portfolio | 90% |  | 166 |  |  | 8,108 |
| Self Storage Management (d) | 95% |  | 241 |  |  | 241 |
|  |  |  | 407 |  |  | 8,349 |
Fund IV: |  |  |  |  |  |
| Broughton Street Portfolio (e) | 50% |  | 57,043 |  |  | 54,839 |
| Fund IV Other Portfolio | 90% |  | 20,240 |  |  | 21,817 |
| 650 Bald Hill Road | 90% |  | 13,735 |  |  | 18,842 |
|  |  |  | 91,018 |  |  | 95,498 |
| Due from Related Parties (f) |  |  | 2,280 |  |  | 2,193 |
| Other (g) |  |  | 957 |  |  | 957 |
| Investments in and advances to unconsolidated affiliates |  | $ | 272,736 |  |  | $ | 272,028 |
Core: |  |  |  |  |  |
| Crossroads (h) | 49% |  | $ | 15,358 |  |  | $ | 13,691 |
| Distributions in excess of income from, and investments in, unconsolidated affiliates |  | $ | 15,358 |  |  | $ | 13,691 |
__________
(a) | Represents a tenancy-in-common interest.
(b) | During May 2017, as discussed below, the Company increased its ownership in Brandywine Market Square, which was formerly included within the Brandywine Portfolio.
(c) | Distributions have exceeded the Company’s non-recourse investment, therefore the carrying value is zero.
(d) | Represents a variable interest entity.
(e) | The Company is entitled to a 15% return on its cumulative capital contribution which was $15.1 million and $14.5 million at June 30, 2017 and December 31, 2016, respectively. In addition the Company is entitled to a 9% preferred return on a portion of its equity, which was $46.8 million and $45.4 million at June 30, 2017 and December 31, 2016, respectively.
(f) | Represents deferred fees.
(g) | Includes a cost-method investment in Albertson’s (Note 8, Note 15) and other investments.
(h) | Distributions have exceeded the Company’s investment; however, the Company recognizes a liability balance as it may be required to fund future obligations of the entity.
Core Portfolio The Company owns a 49% interest in a 311,000 square foot shopping center located in White Plains, New York (“Crossroads”), a 50% interest in a 28,000 square foot retail portfolio located in Georgetown, Washington D.C. (the “Georgetown Portfolio”), an 88.43% tenancy-in-common interest in an 87,000 square foot retail property located in Chicago, Illinois (“840 N. Michigan”), and a 49% noncontrolling interest in an approximately 123,000 square foot retail property located in Manhattan, New York (“Gotham Plaza”). On January 4, 2017, an entity in which the Company owns a 20% noncontrolling interest (the “Renaissance Portfolio”), acquired a 6,200 square foot property in Alexandria, Virginia referred to as (“907 King Street”) for $3.0 million. The Renaissance Portfolio is now a 213,000 square-foot portfolio of 18 mixed-use properties, 16 of which are located in Georgetown, Washington D.C. and two of which are located in Alexandria, Virginia. Brandywine Portfolio and Brandywine Market Square The Company owns an interest in an approximately one million square foot retail portfolio (the “Brandywine Portfolio” joint venture) located in Wilmington, Delaware, which includes a property referred to as “Brandywine Market Square.” Prior to the second quarter of 2016, the Company had a controlling interest in the Brandywine Portfolio, and it was therefore consolidated within the Company’s financial statements. During April 2016, the arrangement with the partners of the Brandywine Portfolio was modified to change the legal ownership from a partnership to a tenancy-in-common interest, as well as to provide certain participating rights to the outside partners. As a result of these modifications, the Company de-consolidated the Brandywine Portfolio and accounts for its interest under the equity method of accounting effective May 1, 2016. Furthermore, as the owners of the Brandywine Portfolio had consistent ownership interests before and after the modification and the underlying net assets are unchanged, the Company has reflected the change from consolidation to equity method based upon its historical cost. The Brandywine Portfolio and Brandywine Market Square ventures do not include the property held by Brandywine Holdings, Inc., an entity consolidated by the Company. Additionally, in April 2016, the Company repaid the outstanding balance of $140.0 million of non-recourse debt collateralized by the Brandywine Portfolio and provided a note receivable collateralized by the partners’ tenancy-in-common interest in the Brandywine Portfolio for their proportionate share of the repayment. On May 1, 2017, the Company exchanged $16.0 million of the $153.4 million note receivable (Note 3) plus accrued interest of $0.3 million for one of the partner’s 38.89% tenancy-in-common interests in Brandywine Market Square. The Company already had a 22.22% interest in Brandywine Market Square and continues to apply the equity method of accounting for its aggregate 61.11% noncontrolling interest in Brandywine Market Square and its 22.22% interest in the rest of the Brandywine Portfolio. The incremental investment in Brandywine Market Square was recorded at $16.6 million and the excess of this amount over the venture’s book value associated with this interest, or $9.8 million, will be amortized over the remaining depreciable lives of the venture’s assets. Fund Investments Fund III Other Portfolio includes the Company’s investment in Arundel Plaza through its date of sale in February 2017. Fund IV Other Portfolio includes the Company’s investment in Promenade at Manassas and Eden Square as well as 2819 Kennedy Boulevard and 1701 Belmont Avenue through their dates of sale. Self-Storage Management, a Fund III investment, was determined to be a variable interest entity. Management has evaluated the applicability of ASC Topic 810 to this joint venture and determined that the Company is not the primary beneficiary and, therefore, consolidation of this venture is not required. On January 31, 2017, Fund IV completed the disposition of 2819 Kennedy Boulevard, for $19.0 million less $8.4 million debt repayment for net proceeds of $10.6 million, resulting in a gain on disposition of $6.3 million at the property level, of which the Fund’s share was $6.2 million, which is included in equity earnings and gains from unconsolidated affiliates in the consolidated financial statements. The Operating Partnership’s proportionate share of the gain was $1.4 million, net of noncontrolling interests. On February 15, 2017, Fund III completed the disposition of Arundel Plaza, for $28.8 million less $10.0 million debt repayments for net proceeds of $18.8 million, resulting in a gain on disposition of $8.2 million at the property level, of which the Fund’s share was $5.3 million, which is included in equity earnings and gains from unconsolidated affiliates in the consolidated financial statements. The Operating Partnership’s proportionate share of the gain was $1.3 million, net of noncontrolling interests. On June 30, 2017, Fund IV completed the disposition of 1701 Belmont Avenue, for $5.6 million less $2.9 million debt repayments for net proceeds of $2.7 million, resulting in a gain on disposition of $3.3 million at the property level, of which the Fund’s share was $3.3 million, which is included in equity earnings and gains from unconsolidated affiliates in the consolidated financial statements. The Operating Partnership’s proportionate share of the gain was $0.8 million, net of noncontrolling interests. On January 28, 2016, Fund III completed the disposition of a 65% interest in Cortlandt Town Center for $107.3 million resulting in a gain of $65.4 million and the deconsolidation of its remaining interest (Note 2). On December 21, 2016, Fund III completed the disposition of its remaining 35% interest in Cortlandt Town Center for $57.8 million less $32.6 million debt repayment for a net sales price of $25.2 million resulting in a gain on sale of $36.0 million, of which the Operating Partnership’s share was $8.8 million. Fees from Unconsolidated Affiliates The Company earned property management, construction, development, legal and leasing fees from its investments in unconsolidated partnerships totaling $0.3 million and $0.4 million for each of the three months ended June 30, 2017 and 2016, respectively, and $0.6 million and $0.6 million for the six months ended June 30, 2017 and 2016, respectively, which is included in other revenues in the consolidated financial statements. In addition, the Company paid to certain unaffiliated partners of its joint ventures, $0.4 million and $0.6 million during the three months ended June 30, 2017 and 2016, respectively, and $0.9 million and $1.2 million during the six months ended June 30, 2017 and 2016, respectively for leasing commissions, development, management, construction and overhead fees. Summarized Financial Information of Unconsolidated Affiliates The following combined and condensed Balance Sheets and Statements of Income, in each period, summarize the financial information of the Company’s investments in unconsolidated affiliates (in thousands):
|  | June 30, |  | December 31,
|  | 2017 |  | 2016
Combined and Condensed Balance Sheets |  |  |  |  |  |
Assets: |  |  |  |  |  |
Rental property, net |  | $ | 544,210 |  |  | $ | 576,505 |
Real estate under development |  | 19,381 |  |  | 18,884 |
Investment in unconsolidated affiliates |  | 6,854 |  |  | 6,853 |
Other assets |  | 106,407 |  |  | 75,254 |
Total assets |  | $ | 676,852 |  |  | $ | 677,496 |
Liabilities and partners’ equity: |  |  |  |  |  |
Mortgage notes payable |  | $ | 399,574 |  |  | $ | 407,344 |
Other liabilities |  | 58,308 |  |  | 30,117 |
Partners’ equity |  | 218,970 |  |  | 240,035 |
Total liabilities and partners’ equity |  | $ | 676,852 |  |  | $ | 677,496 |
Company's share of accumulated equity |  | $ | 179,729 |  |  | $ | 191,049 |
Basis differential |  | 70,199 |  |  | 61,827 |
Deferred fees, net of portion related to the Company's interest |  | 5,170 |  |  | 3,268 |
Amounts receivable by the Company |  | 2,280 |  |  | 2,193 |
Investments in and advances to unconsolidated affiliates, net of Company's share of distributions in excess of income from and investments in unconsolidated affiliates |  | $ | 257,378 |  |  | $ | 258,337 |
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
|  | 2017 |  | 2016 |  | 2017 |  | 2016
Combined and Condensed Statements of Income |  |  |  |  |  |  |  |  |  |
Total revenues |  | $ | 20,974 |  |  | $ | 19,022 |  |  | $ | 42,577 |  |  | $ | 32,394 |
Operating and other expenses |  | (6,272 | ) |  | (7,286 | ) |  | (12,138 | ) |  | (11,016 | )
Interest expense |  | (4,641 | ) |  | (3,377 | ) |  | (9,179 | ) |  | (6,113 | )
Depreciation and amortization |  | (6,063 | ) |  | (4,984 | ) |  | (12,512 | ) |  | (8,864 | )
Loss on debt extinguishment |  | (3 | ) |  | — |  |  | (154 | ) |  | — |
Gain on disposition of properties |  | 3,332 |  |  | — |  |  | 17,778 |  |  | — |
Net income attributable to unconsolidated affiliates |  | $ | 7,327 |  |  | $ | 3,375 |  |  | $ | 26,372 |  |  | $ | 6,401 |
Company’s share of equity in net income of unconsolidated affiliates |  | $ | 5,044 |  |  | $ | 1,838 |  |  | $ | 18,612 |  |  | $ | 3,890 |
Basis differential amortization |  | (704 | ) |  | (98 | ) |  | (1,569 | ) |  | (196 | )
Company’s equity in earnings of unconsolidated affiliates |  | $ | 4,340 |  |  | $ | 1,740 |  |  | $ | 17,043 |  |  | $ | 3,694 |

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- Definition The entire disclosure for the information 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. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 946 -SubTopic 320 -URI http://asc.fasb.org/subtopic&trid=2324412 + Details
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