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Investment in Unconsolidated Joint Ventures | 6 Months Ended
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Jun. 30, 2022
Investment in Unconsolidated Joint Ventures |
Investment in Unconsolidated Joint Ventures |
3. | Investment in Unconsolidated Joint Ventures
We have preferred equity investments in two joint ventures (“JVs”). We determined that each of these JVs meets the accounting criteria to be considered a variable interest entity (“VIE”). We are not the primary beneficiary of the JVs as we do not have the power to direct the activities that most significantly affect the JVs’ economic performance. However, we do have significant influence over the JVs. Therefore, we have accounted for the JVs using the equity method of accounting. The following table provides information regarding these preferred equity investments (dollar amounts in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Type | ​ | Type | ​ | Total | ​ | ​ | Contractual | ​ | ​ | Number | ​ | ​ | ​ | ​
​ | ​ | of | ​ | of | ​ | Preferred | ​ | ​ | Cash | ​ | ​ | of | ​ | ​ | Carrying | ​
State | ​ | Properties | ​ | Investment | ​ | Return | ​ | ​ | Portion | ​ | ​ | Beds/ Units | ​ | ​ | Value | ​
Washington | ​ | ALF/MC | ​ | Preferred Equity | (1) | 12 | % | ​ | 7 | % | ​ | 95 | ​ | $ | 6,340 | (1)
Washington | ​ | UDP | ​ | Preferred Equity | (2) | 12 | % | ​ | 8 | % | ​ | — | ​ | ​ | 13,000 | (2)
Total | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 95 | ​ | $ | 19,340 | ​
(1) | Represents preferred equity in an entity that developed and owns a 95-unit ALF and MC in Washington. Our investment represents 15.5% of the total investment. The preferred equity investment earns an initial cash rate of 7% increasing to 9% in year four until the internal rate of return (“IRR”) is 8%. After achieving an 8% IRR, the cash rate drops to 8% until achieving an IRR ranging between 12% to 14%, depending upon timing of redemption. During the fourth quarter of 2021, the entity completed the development project and received its certificate of occupancy. We have the option to require the JV partner to purchase our preferred equity interest at any time between August 17, 2031 and December 31, 2036.
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(2) | Represents preferred equity in an entity that will develop and own a 267-unit ILF and ALF in Washington. Our investment represents 11.6% of the estimated total investment. The preferred equity investment earns an initial cash rate of 8% with an IRR of 12%. The JV partner has the option to buy out our investment at any time after August 31, 2023 at the IRR rate. Also, we have the option to require the JV partner to purchase our preferred equity interest at any time between August 31, 2027 and, upon project completion and leasing the property, prior to the end of the first renewal term of the lease.
The following table summarizes our capital contributions, income recognized, and cash interest received related to our investments in unconsolidated joint ventures for the six months ended June 30, 2022 and 2021 (in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Type | ​ | ​ | ​
​ | ​ | of | ​ | ​ | Capital | ​ | ​ | Income | ​ | ​ | Cash Interest | ​
Year | ​ | Properties | ​ | ​ | Contribution | ​ | ​ | Recognized | ​ | ​ | Earned | ​
2022 | ​ | ALF/MC | ​ | $ | — | ​ | $ | 224 | ​ | $ | 224 | ​
​ | ​ | UDP | (1) | ​ | — | ​ | ​ | 527 | ​ | ​ | 527 | ​
Total | ​ | ​ | ​ | $ | — | ​ | $ | 751 | ​ | $ | 751 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
2021 | ​ | ALF/MC | ​ | $ | — | ​ | $ | 225 | ​ | $ | 187 | ​
​ | ​ | UDP | (1) | ​ | 8,000 | ​ | ​ | 440 | ​ | ​ | 353 | ​
Total | ​ | ​ | ​ | $ | 8,000 | ​ | $ | 665 | ​ | $ | 540 | ​
(1) | During 2021, we funded the remaining $8,000 related to a $13,000 preferred equity investment commitment in an entity that will develop and own a 267-unit ILF and ALF in Washington. Additionally, we withheld $2,324 from the $8,000 funding for a total reserve of $3,777 related to this preferred equity investment.
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- References No definition available. + Details
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- Definition The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -URI http://asc.fasb.org/topic&trid=2196965 + Details
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