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Investments in Equity Affiliates

12 Months Ended

Dec. 31, 2022

Investments in Equity Affiliates

Investments in Equity Affiliates

Note 8 —Investments in Equity Affiliates

We account for all investments in equity affiliates under the equity method. A summary of these investments is as follows (in thousands):


								UPB of Loans to
		Investments in Equity Affiliates at						Equity Affiliates at
Equity Affiliates		December 31, 2022			December 31, 2021			December 31, 2022
Arbor Residential Investor LLC		$	46,951		$	65,756		$	—
AMAC Holdings III LLC			15,825			13,772			—
Fifth Wall Ventures			13,584			5,409			—
Lightstone Value Plus REIT L.P.			1,895			1,895			—
Docsumo Pte. Ltd.			450			—			—
JT Prime			425			425			—
North Vermont Avenue			—			2,419			—
West Shore Café			—			—			1,688
Lexford Portfolio			—			—			—
East River Portfolio			—			—			—
Total		$	79,130		$	89,676		$	1,688

Arbor Residential Investor LLC (“ARI”). We invested $9.6 million for a 50% interest in ARI, with our former manager (ACM) holding the remaining 50%. ARI was formed to hold a 50% interest in Wakefield Investment Holdings LLC (“Wakefield”), an entity that was formed with a third party to hold a controlling interest (65%) in a residential mortgage banking business. ARI has no other assets, liabilities or activity other than its investment in Wakefield. At December 31, 2022, our indirect interest in this business was 12.3%. The allocation of income is based on the underlying agreements, which may be different than our indirect interest, and was 9.2% at December 31, 2022. We account for our ownership interest in ARI under the equity method of accounting and ARI accounts for its ownership interest in Wakefield under the equity method of accounting. During 2022, 2021 and 2020, we recorded income of $4.9 million, $34.6 million and $75.7 million, respectively, to income from equity affiliates in the consolidated statements of income. We also received $23.8 million and $28.0 million in cash distributions from this investment during 2022 and 2021, respectively, which were classified as returns of capital. We have included the financial statements of Wakefield in this report.

AMAC III. We committed to a $30.0 million investment (of which $25.2 million was funded at December 31, 2022) for an 18% interest in a multifamily-focused commercial real estate investment fund that is sponsored and managed by our chief executive officer and one of his immediate family members. During 2022, 2021 and 2020, we recorded a loss associated with this investment of $2.4 million, $1.3 million and $0.9 million, respectively. During 2022 and 2021, we made contributions of $4.9 million and $8.6 million, respectively, and received cash distributions totaling $0.5 million and $3.8 million, respectively, which were classified as returns of capital, related to this investment.

Fifth Wall. We committed to a $25.0 million investment (of which $15.2 million was funded at December 31, 2022) for a 7.6% interest in two related private equity funds whose investment objective is to invest primarily in technology, technology-enabled or technology-related companies that are relevant or complementary to the build environment, including real estate or real estate related industries. We have no role in the management of the investment funds. During 2022 and 2021, we made contributions of $9.7 million and $5.4 million, respectively, and, during 2022 we received cash distributions totaling $1.6 million, which were classified as returns of capital, related to this investment. Operating results from this investment were de minimis for all periods presented.

Lightstone Value Plus REIT L.P. / JT Prime. We own a $1.9 million interest in a joint venture that holds common operating partnership units of Lightstone Value Plus REIT L.P. (“Lightstone”). We also own a 50% noncontrolling interest in a joint venture, JT Prime, which holds common operating partnership units of Lightstone at a carrying value of $0.4 million. Operating results from these investments were de minimis for all periods presented.

Docsumo Pte. Ltd. (“Docsumo”). During 2022, we invested $0.5 million for a noncontrolling interest in Docsumo, a startup company that converts unstructured documents, such as bank statements and pay stubs, to accurate structured data and checks documents for fraud, such as photoshopped layers and font changes, using artificial intelligence. Operating results from this investment were de minimis.

North Vermont Avenue. We invested $2.4 million for an initial 85% noncontrolling interest in a joint venture that acquired three parcels of land with multiple structures, with the intent to tear down the existing structures and construct a new 202-unit multifamily complex with ground floor retail. Operating results from this investment were de minimis for all periods presented. During 2022, we determined that this investment exhibited indicators of impairment and, as a result of an impairment analysis performed; we recorded an other-than-temporary impairment of $2.4 million to income from equity affiliates in the consolidated statement of income for the full carrying amount of this investment.

West Shore Café. We own a 50% noncontrolling interest in the West Shore Lake Café, a restaurant/inn lakefront property in Lake Tahoe, California. We provided a $1.7 million first mortgage loan to an affiliated entity to acquire property adjacent to the original property, which is scheduled to mature in September 2025 and bears interest at LIBOR plus 4.0%. In 2018, we determined that this investment exhibited indicators of impairment and recorded an other-than-temporary impairment of $2.2 million for the full carrying amount of this investment and fully reserved the $1.7 million first mortgage loan. Operating results from this investment were de minimis for all periods presented.

Lexford Portfolio. We own a less than $0.1 million noncontrolling equity interest in Lexford, a portfolio of multifamily assets. In 2022 and 2020, we received distributions from this investment and recognized income totaling $11.1 million and $1.1 million, net of expenses, respectively. As a result of COVID-19, Lexford did not make any distributions to its equity holders in 2021.

East River Portfolio. We invested $0.1 million for a 5% interest in a joint venture that owns two multifamily properties. The joint venture is comprised of a consortium of investors (which includes, among other unaffiliated investors, certain of our officers, our chief executive officer and certain other related parties) who together own an interest of 95%. Operating results from this investment were de minimis for all periods presented.

Equity Participation Interest. During the first quarter of 2022, we received $2.6 million from an equity participation interest on a property that was sold and which we had a preferred equity loan that previously paid off.

See Note 18 for details of certain investments described above.