Investment in Unconsolidated Entities

9 Months Ended

Sep. 30, 2022

Equity Method Investments and Joint Ventures [Abstract]

Joint Venture Interest in IAGM

As of September 30, 2022 and December 31, 2021, the Company owned a 55% interest in one unconsolidated entity, IAGM Retail Fund I, LLC ("IAGM"), a joint venture partnership between the Company and PGGM Private Real Estate Fund. IAGM was formed on April 17, 2013 for the purpose of acquiring, owning, managing, and disposing of retail properties and sharing in the profits and losses from those retail properties and their activities.

The following table reflects the retail properties disposed by IAGM since January 1, 2021.


Date	Property	Metropolitan Area	Square Feet	Gross Disposition Price		Gain on Sale
July 12, 2021	Prestonwood Town Center (a)	Dallas, TX	233	$	52,800	$	12,428
September 3, 2021	Westover Marketplace	San Antonio, TX	243	28,775		399
December 1, 2021	South Frisco Village	Frisco, TX	227	32,600		5,467
March 3, 2022	Price Plaza (b)	Houston, TX	206	39,100		3,751
April 21, 2022	The Highlands of Flower Mound (c)	Dallas, TX	175	38,000		1,244

(a)The Company purchased Prestonwood Town Center from IAGM at a purchase price determined by a third party real estate valuation specialist. The Company deferred its share of IAGM's gain on sale of $6,835 and began amortizing it over 30 years as an increase to equity in earnings of unconsolidated entities.

(b)The buyer assumed a $17,800 mortgage payable secured by the property.

(c)The Company purchased The Highlands of Flower Mound from IAGM at a purchase price determined by a third party real estate valuation specialist. The Company deferred its share of IAGM's gain on sale of $684 and began amortizing it over 30 years as an increase to equity in earnings of unconsolidated entities.

During the nine months ended September 30, 2021, IAGM prepaid mortgages payable of $23,150 with cash on hand. IAGM used cash on hand and proceeds from the sale of Prestonwood Town Center to pay down $54,103 of its mortgage debt during the nine months ended September 30, 2021.

IAGM is party to two interest rate swap agreements to achieve fixed interest rates on its senior secured term loan facility previously subject to variability in the London Inter-bank Offered Rate ("LIBOR"). As of September 30, 2022, and December 31, 2021, the interest rate swaps were recorded as assets with fair values of $3,197 and $530, respectively, on IAGM's condensed consolidated balance sheet, of which the Company's share was $1,758 and $291, respectively. The Company recognizes its share of gains or losses resulting from IAGM's interest rate swaps as an adjustment to the Company's investment in IAGM and an increase or decrease in comprehensive income.

On September 28, 2022, IAGM transitioned its senior secured term loan facility from 1-Month LIBOR to a Secured Overnight Financing Rate ("SOFR") which reprices monthly ("1-Month Term SOFR"). Although the senior secured term loan facility is priced in 1-Month Term SOFR and the interest rate swaps are priced in 1-Month LIBOR, IAGM's hedging instruments continue to qualify for cash flow hedge accounting through application of expedients provided by Financial Accounting Standards Board (“FASB”) Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform.

Condensed Financial Information

The following table presents condensed balance sheet information for IAGM:


	As of
	September 30, 2022		December 31, 2021
Assets:
Net investment properties	$	213,354	$	288,014
Other assets	36,190		98,696
Total assets	$	249,544	$	386,710
Liabilities and equity:
Mortgages debt, net	$	125,635	$	165,831
Other liabilities	8,125		12,409
Equity	115,784		208,470
Total liabilities and equity	$	249,544	$	386,710

Company's share of equity	$	64,540	$	115,513
Outside basis difference, net (a)	(8,050)		(7,569)
Carrying value of investments in unconsolidated entities	$	56,490	$	107,944

(a)The outside basis difference reflects unamortized deferred gains on historical property sales from IAGM to the Company.

The following table presents condensed income statement information of IAGM:


	Three months ended September 30				Nine months ended September 30
	2022		2021		2022		2021
Total income	$	6,518	$	10,184	$	21,501	$	33,034
Depreciation and amortization	(2,428)		(3,648)		(7,852)		(11,205)
Property operating	(1,363)		(1,586)		(3,804)		(5,715)
Real estate taxes	(929)		(1,722)		(3,174)		(6,392)
Asset management fees	(215)		(292)		(686)		(859)
Interest expense, net	(929)		(1,254)		(2,987)		(4,415)
Other income and expense, net	(142)		(79)		(35)		(324)
Loss on debt extinguishment	—		(215)		(202)		(229)
Gain on sale of real estate	—		12,827		4,995		12,827
Net income	$	512	$	14,215	$	7,756	$	16,722

Company's share of net income	$	281	$	7,817	$	4,265	$	9,197
Outside basis adjustment for investee's sale of real estate, net	71		(6,771)		(481)		(6,756)
Equity in earnings of unconsolidated entities	$	352	$	1,046	$	3,784	$	2,441

As of September 30, 2022 and December 31, 2021, none of IAGM's mortgages payable are recourse to the Company. It is anticipated that the joint venture will be able to repay, refinance or extend all of its debt on a timely basis. IAGM's remaining mortgages payable of $126,022 are scheduled to mature during the year ending December 31, 2023, not inclusive of two twelve-month extension options.