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VARIABLE INTEREST ENTITIES, CONSOLIDATED JOINT VENTURES AND CONTINGENT LIABILITY

9 Months Ended

Sep. 30, 2025

VARIABLE INTEREST ENTITIES, CONSOLIDATED JOINT VENTURES AND CONTINGENT LIABILITY

VARIABLE INTEREST ENTITIES, CONTINGENT LIABILITY AND CONSOLIDATED JOINT VENTURES

NOTE 7 – VARIABLE INTEREST ENTITIES, CONSOLIDATED JOINT VENTURES AND CONTINGENT LIABILITY

Variable Interest Entity – Consolidated Joint Ventures

As of September 30, 2025, the Company has one consolidated joint venture in which it holds a 95% interest. The Company has determined that (a) this joint venture is a VIE because the non-controlling interest does not hold substantive kick-out or participating rights and (b) it is the primary beneficiary of this VIE as it has the power to direct the activities that most significantly impact the joint venture’s performance including management, approval of expenditures, and the obligation to absorb the losses or rights to receive benefits. Accordingly, the Company consolidates the operations of this VIE for financial statement purposes. The VIE’s creditors do not have recourse to the assets of the Company other than those held by the joint venture.

The following is a summary of the consolidated VIEs’ carrying amounts and classification in the Company’s consolidated balance sheets, none of which are restricted (amounts in thousands):


	September 30,		December 31,
	2025		2024 (a)
Land	$	3,815	$	9,198
Buildings and improvements, net of accumulated depreciation of $3,141 and $6,516, respectively		6,406		15,599
Cash		277		1,063
Unbilled rent receivable		177		881
Unamortized intangible lease assets, net		—		118
Escrow, deposits and other assets and receivables		261		705
Mortgages payable, net of unamortized deferred financing costs of $50 and $71, respectively		7,225		13,295
Accrued expenses and other liabilities		109		751
Unamortized intangible lease liabilities, net		—		215
Non-controlling interests in consolidated joint ventures		196		1,150

(a)	2024 includes the balances of the Colorado JV which was sold during 2025 (see Note 5).

Distributions to each joint venture partner are determined pursuant to the applicable operating agreement and, in the event of a sale of, or refinancing of the mortgage encumbering, the property owned by such venture, the distributions to the Company may be less than that implied by the Company’s equity ownership interest in the venture.

Variable Interest Entity – Ground Lease

The Company determined it has a variable interest through its ground lease at its Beachwood, Ohio property (the Vue Apartments) and the owner/operator of this property is a VIE because its equity investment at risk is insufficient to finance its activities without additional subordinated financial support. The Company further determined that it is not the primary beneficiary of this VIE because the Company does not have power over the activities that most significantly impact the owner/operator’s economic performance and therefore, does not consolidate this VIE for financial statement purposes. Accordingly, the Company accounts for this investment as land and the revenues from the ground lease as Rental income, net. The ground lease provides for rent which can be deferred and paid based on the operating performance of the property; therefore, this rent is recognized as rental income when the operating performance is achieved and the rent is received. No such ground lease rental income has been collected since October 2020. On November 4, 2025, the Company and its ground lease tenant sold the entire collective interest in this multi-family property (see Note 5).

As of September 30, 2025, the VIE’s maximum exposure to loss was $16,200,000 (after giving affect to an impairment (see Note 5)), which represented the carrying amount of the land. In purchasing the property in 2016, the owner/operator obtained a $67,444,000 mortgage from a third party which, together with the Company’s purchase of the land, provided substantially all of the funds to acquire the multi-family property. The Company provided its land as collateral for the owner/operator’s mortgage loan; accordingly, the land position is subordinated to the mortgage. The mortgage balance was $61,268,000 as of September 30, 2025. Pursuant to the ground lease, as amended, the Company agreed, in its discretion, to fund 78% of (i) any operating expense shortfalls at the property and (ii) any capital expenditures required at the property. The Company funded $32,000 and $94,000 during the three and nine months ended September 30, 2025, respectively, and $100,000 during the year ended December 31, 2024. These amounts are included as part of the carrying amount of the land.