Investments in Equity Affiliates

12 Months Ended

Dec. 31, 2023

Equity Method Investments and Joint Ventures [Abstract]

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


	Investments in Equity Affiliates at				UPB of Loans to Equity Affiliates at December 31, 2023
Equity Affiliates	December 31, 2023		December 31, 2022
Arbor Residential Investor LLC	$	32,743	$	46,951	$	—
AMAC Holdings III LLC	13,591		15,825		—
Fifth Wall Ventures	13,365		13,584		—
AWC Real Estate Opportunity Partners I LP	11,671		—		—
ARSR DPREF I LLC	5,163		—		—
Lightstone Value Plus REIT L.P.	1,895		1,895		—
Docsumo Pte. Ltd.	450		450		—
JT Prime	425		425		—
West Shore Café	—		—		1,688
Lexford Portfolio	—		—		—
East River Portfolio	—		—		—
Total	$	79,303	$	79,130	$	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, 2023, 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, 2023. 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 2023, 2022 and 2021, we recorded income of $0.6 million, $4.9 million and $34.6 million, respectively, to income from equity affiliates in the consolidated statements of income. We also received $15.0 million and $23.8 million in cash distributions from this investment during 2023 and 2022, respectively, which were classified as returns of capital.

AMAC III. We committed to a $30.0 million investment 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 2023, 2022 and 2021, we recorded losses associated with this investment of $1.9 million, $2.4 million and $1.3 million, respectively. During 2023 and 2022, we made contributions of $0.7 million and $4.9 million, respectively, and received cash distributions totaling $1.1 million and $0.5 million, respectively, which were classified as returns of capital, related to this investment.

Fifth Wall. We committed to a $25.0 million investment 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 2023 and 2022, we made contributions of $1.0 million and $9.7 million, respectively, and, during 2022 we received cash distributions totaling $1.6 million, which was classified as returns of capital, related to this investment. During 2023, we recorded a loss associated with this investment of $1.2 million. Operating results from this investment were de minimis for 2022 and 2021.

AWC Real Estate Opportunity Partners I LP ("AWC"). In the fourth quarter of 2023, we committed to a $24.0 million investment (of which $13.0 million was funded at December 31, 2023) for an initial 99% noncontrolling interest in a fund whose objective is to make investments in sustainable affordable housing structures, with the intention to bring in additional partners. In addition, we entered into an agreement with the general partner to provide a loan, up to a maximum of $0.9 million, to fund a portion of their equity contributions. In the fourth quarter of 2023, this fund purchased our equity interest in North Vermont Avenue (described below) at a discount for $1.3 million, which was recorded as a reduction to our investment in AWC. The remaining capital contribution was used to fund additional qualified purchases.

ARSR DPREF I LLC. In the fourth quarter of 2023, we entered into a joint venture whose objective is to invest in preferred equity investments in commercial real estate and we contributed 50% of a $10.2 million preferred equity loan originated by us to the joint venture. We hold a 50% interest in the joint venture which is structured to reflect joint control, allocation of profits and losses and capital contributions. The agreement provides for a total joint venture contribution of $70.0 million, which may be upsized to $140.0 million.

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”). 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 for all periods presented.

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 matures in September 2025 and bears interest at SOFR plus 4.0% with a SOFR floor of 0.15%. 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 2023 and 2022, we received distributions from this investment and recognized income totaling $12.2 million and $11.1 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 2023 and 2022, we received $14.5 million and $2.6 million, respectively, from equity participation interests on properties that were sold and which we had loans that previously paid off. These were classified as returns of capital and recognized as income from equity affiliates.

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 for the full carrying amount of this investment. In the fourth quarter of 2023, AWC purchased our equity interest in North Vermont Avenue at a discount for $1.3 million (described above).

See Note 18 for details of certain investments described above.