Assets and Liabilities of Disposal Group Held for Sale

12 Months Ended

Dec. 31, 2023

Discontinued Operations and Disposal Groups [Abstract]

Assets and Liabilities of Disposal Group Held for Sale

9. Assets and Liabilities of Disposal Group Held for Sale

In September 2022, the Company announced a repositioning of its business through the opportunistic disposition over time of the Company's joint venture equity investments in multi-family properties and reallocation of its capital away from such assets to its targeted assets. Accordingly, the Company determined that certain joint venture equity investments met the criteria to be classified as held for sale, transferred either the assets and liabilities of the respective Consolidated VIEs or its equity investment in the joint venture entity to assets and liabilities of disposal group held for sale in the accompanying consolidated balance sheets and recognized no loss.

In December 2023, the Company suspended the marketing of nine of the 14 remaining joint venture equity investments that were reported in assets and liabilities of disposal group held for sale primarily due to unfavorable market conditions and a lack of transactional activity in the multi-family market. As such, the Company determined that these joint venture equity investments no longer met the criteria to be classified as held for sale and transferred either the assets and liabilities of the respective Consolidated VIEs or its equity investment in the joint venture entity to their respective categories or equity investments, at fair value, respectively, on the accompanying consolidated balance sheets as of December 31, 2023. As a result of this transfer, the Company adjusted the carrying value of the long-lived assets in Consolidated VIEs to the lower of the carrying amount before the assets were classified as held for sale adjusted for depreciation and amortization expense that would have been recognized had the assets been continuously classified as held and used and the fair value of the assets at the date of the transfer and recognized an approximately $16.2 million loss on reclassification of disposal group. The five remaining joint venture equity investments continue to meet the criteria to be classified as held for sale as of December 31, 2023.

During the year ended December 31, 2023, five of the joint ventures in which the Company held a common equity investment sold their multi-family apartment communities for approximately $219.2 million, subject to certain prorations and adjustments typical in such real estate transactions, and repaid the related mortgages payable in the amount of approximately $173.6 million. The sales generated net gains of approximately $6.0 million and losses on extinguishment of debt of approximately $2.0 million, both of which are primarily included in other income on the accompanying consolidated statements of operations. The sales also generated net income attributable to non-controlling interest of approximately $2.2 million, resulting in net gains attributable to the Company's common shareholders of approximately $1.7 million.

The following table presents the carrying values of the major classes of assets and liabilities of disposal group held for sale as of December 31, 2023 and 2022, respectively (dollar amounts in thousands):


	December 31, 2023		December 31, 2022
Cash and cash equivalents (1)	$	5,676	$	13,944
Equity investments	—		9,010
Real estate, net (1)	407,834		1,079,942
Other assets (1)	12,507		48,888
Total assets of disposal group held for sale	$	426,017	$	1,151,784

Mortgages payable on real estate (2)	$	378,386	$	865,414
Other liabilities	7,638		18,398
Total liabilities of disposal group held for sale (1)	$	386,024	$	883,812

(1)Certain assets and liabilities of the disposal group held for sale are in Consolidated VIEs because the Company is the primary beneficiary.

(2)As of December 31, 2023, one of the joint venture equity investments is one month delinquent on its senior mortgage loan in the amount of $195.6 million as a result of increasing interest rates. The Company is not exposed to risk of loss outside of its common equity investment in the joint venture as the senior mortgage loan is non-recourse.

Also included in the disposal group held for sale are non-controlling interests in Consolidated VIEs in the amount of $3.2 million and $23.9 million as of December 31, 2023 and 2022, respectively.

Real estate, net included in assets of disposal group held for sale is recorded at the lower of the net carrying amount of the assets or the estimated fair value, net of selling costs. Fair value for real estate, net was based upon a discounted cash flow analysis using property financial information and assumptions regarding market rent, revenue and expense growth, capitalization rates and return rates. During the year ended December 31, 2023, the fair value, net of selling costs of the multi-family properties owned by five of the joint venture equity investments, two of which have since been sold, declined to a value less than the properties' net carrying value. Additionally, during the year ended December 31, 2023, the fair value, net of selling costs of the multi-family properties owned by four of the joint venture equity investments that no longer meet the criteria to be classified as held for sale declined to a value less than the properties' net carrying value. During the year ended December 31, 2022, the fair value, net of selling costs of the multi-family properties owned by one of the joint venture equity investments declined to a value less than the properties' net carrying value. Accordingly, the Company recognized net impairments of $89.5 million and $2.4 million in the years ended December 31, 2023 and 2022, respectively, which are included in impairment of real estate on the accompanying consolidated statements of operations. See Note 16 for descriptions of valuation methodologies utilized for other classes of assets and liabilities of disposal group held for sale.

The following table presents the pretax losses of the disposal group held for sale as of December 31, 2023 for the years ended December 31, 2023, 2022 and 2021, respectively (dollar amounts in thousands):


	For the Years Ended December 31,
		2023		2022		2021
Pretax loss of disposal group held for sale		$	(74,574)	$	(33,145)	$	(9,873)
Pretax loss of disposal group attributable to non-controlling interest in Consolidated VIEs		6,863		3,483		707
Pretax loss of disposal group attributable to Company's common stockholders		$	(67,711)	$	(29,662)	$	(9,166)