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Investments and Advances to Equity Method Investments | 6 Months Ended
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Jun. 30, 2024
Investments and Advances to Equity Method Investments [Abstract] |
Investments and advances to equity method investments |
| 4. | Investments and advances to equity method investments
The Company accounts for its investments in unconsolidated joint ventures using the equity method of accounting. The Company’s joint ventures are as follows:
| i) | Falcon’s Creative Group
As of July 27, 2023, FCG was deconsolidated and accounted for as an equity method investment in the Company’s unaudited condensed consolidated financial statements. As of July 27, 2023, the Company recorded the investment in FCG at fair value, which was determined to be $39.1 million. As described in Note 1, the LLCA contains contractual provisions regarding the distribution of FCG’s income or loss. Pursuant to these provisions, QIC is entitled to a redemption amount of the initial $30.0 million investment plus a 9% annual compounding preferred return. Refer to the footnote to the “Company’s Share of gain or (loss) from equity method” table below for further discussion on how the income and loss are shared between the Company and QIC.
| ii) | PDP
PDP is an unconsolidated joint venture with Meliá Hotels International, S.A. (“Meliá Group”) for the development and operation of hotel resorts and theme parks. The Company has 50% voting rights and shares 50% of profits and losses in this joint venture. PDP operates a hotel resort and theme park located in Mallorca, Spain and a hotel located at Tenerife in the Canary Islands.
| iii) | Sierra Parima
Sierra Parima is an equity method investment with Meliá Group focused on the development and operation of hotel resorts and theme parks. The Company has 50% voting rights and shares 50% of profits and losses in this joint venture. Sierra Parima had one theme park in Punta Cana in the Dominican Republic, the Katmandu Park DR. The Company has concluded that Sierra Parima is a variable interest entity (“VIE”), that the Company does not have the power to direct the activities that most significantly impact the economic performance of Sierra Parima, as such decisions are taken by the unanimous consent of the representatives of the joint venture partners. The Company, therefore, does not consolidate Sierra Parima and accounts for the investment as an equity method investment. Full Impairment of Investment in Sierra Parima Katmandu Park DR completed construction and opened to visitors in early 2023. Although various operational challenges encountered upon opening were resolved, Katmandu Park DR visitor levels were below management’s expectations. Melia and the Company jointly decided to wind down operations and are evaluating avenues for potential liquidation or sale of the property. On March 7, 2024, Katmandu Park DR was closed to visitors. As of December 31, 2023, equity investment in Sierra Parima was deemed to be other-than-temporarily impaired. The Company estimated the fair value of its investment in Sierra Parima utilizing a discounted cash flow analysis and supported by a market multiples approach. The impairment is the result of management’s estimates and assumptions regarding the likelihood of certain outcomes related to various liquidation and sale scenarios and pending legal matters, the timing of which remains uncertain. These estimates were determined primarily using significant unobservable inputs (Level 3). The estimates that the Company makes with respect to its equity method investment are based upon assumptions that management believes are reasonable, and the impact of variations in these estimates or the underlying assumptions could be material. Based on the estimated sale or liquidation proceeds from Sierra Parima, and Sierra Parima’s outstanding debts remaining to be settled, the fair value of the Company’s investment in Sierra Parima was determined to be zero. There are no other liquidity arrangements, guarantees or other financial commitments between the Company and Sierra Parima. The Company is not committed to provide any additional funding as of June 30, 2024. Any future capital fundings will be discretionary.
| iv) | Karnival
On November 2, 2021, the Company entered into a joint venture agreement to acquire a 50% interest in Karnival TP-AQ Holdings Limited (“Karnival”), a joint venture established with Raging Power Limited, a subsidiary of New World Development Company Limited (“Raging Power”). The purpose of the joint venture is to hold ownership interests in entities developing and operating amusement centers located in the People’s Republic of China. The first location is currently under development in Hong Kong. The Company has concluded that Karnival is a VIE, that the Company does not have the power to direct the activities that most significantly impact the economic performance of Karnival, as such decisions are taken by the unanimous consent of the representatives of the joint venture partners. The Company, therefore, does not consolidate Karnival and accounts for the investment as an equity method investment. The Company and its joint venture partners are committed to funding non-interest-bearing advances of $9 million (HKD 69.7 million) each, over a three-year period. As of June 30, 2024, the Company had funded $6.6 million (HKD 51 million). These advances are repayable to the joint venture partners based on a percentage of gross revenues from operations commencing from the first year of operations. The advances provided to Karnival are accounted for as investments and classified within Investments and advances to unconsolidated joint ventures equity method investments. There are no other liquidity arrangements, guarantees or other financial commitments between the Company and Karnival. Therefore, the Company’s maximum risk of financial loss is the investment balance and remaining unfunded capital commitment of $2.4 million (HKD 18.7 million) as of June 30, 2024. Investments and advances to equity method investments as of June 30, 2024 and December 31, 2023 consisted of the following:
|  | As of |
|  | June 30, 2024 |  |  | December 31, 2023 |
FCG |  | $ | 32,451 |  |  | $ | 30,930 |
PDP |  |  | 23,369 |  |  |  | 22,870 |
Karnival |  |  | 7,006 |  |  |  | 6,843 |
|  | $ | 62,826 |  |  | $ | 60,643 |
The Company’s Share of gain or (loss) from equity method investments for the three and six months ended June 30, 2024 and 2023 comprised of:
|  | For the three months ended June 30 |  |  | For the six months ended June 30 |
|  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
FCG(1) |  | $ | 988 |  |  | $ | - |  |  | $ | 1,521 |  |  | $ | - |
PDP |  |  | 656 |  |  |  | 284 |  |  |  | 1,190 |  |  |  | 375 |
Sierra Parima |  |  | - |  |  |  | (1,266 | ) |  |  | - |  |  |  | (2,638 | )
Karnival |  |  | 76 |  |  |  | 126 |  |  |  | 163 |  |  |  | 128 |
|  | $ | 1,720 |  |  | $ | (856 | ) |  | $ | 2,874 |  |  | $ | (2,135 | )
(1) | The share of loss from the Company’s equity method investment in FCG is subsequent to FCG’s deconsolidation on July 27, 2023. The Company recognized 100% of net income, less 9% preferred return to QIC and amortization of the basis difference of deconsolidation of FCG. For the three months ended June 30, 2024, the Company recognized $1.0 million of net income from FCG, which equals the $2.5 million total net income from FCG less adjustments of $(1.5) million comprised of $(0.7) million in accretion of preference dividend and fees, and $(0.8) million in amortization of basis difference. For the six months ended June 30, 2024, the Company recognized $1.5 million net income from FCG, which equals the $4.3 million total net income from FCG less adjustments of $(2.8) million comprised of $(1.1) million in accretion of preference dividend and fees, and $(1.7) million in amortization of basis difference. The Company will continue to recognize 100% of the gains or (losses) to its equity method investment in FCG based on the terms of the LLCA until the split in equity accounts becomes 25% related to QIC and 75% to the Company.
The following tables provide summarized balance sheet information for the Company’s equity method investments:
|  | As of June 30, 2024 |
|  | FCG |  |  | PDP |  |  | Karnival |
Current assets |  | $ | 30,332 |  |  | $ | 12,484 |  |  | $ | 16,509 |
Non-current assets |  |  | 29,198 |  |  |  | 83,451 |  |  |  | 2,434 |
Current liabilities |  |  | 13,856 |  |  |  | 17,602 |  |  |  | 18,025 |
Non-current liabilities |  |  | 6,260 |  |  |  | 31,596 |  |  |  | - |
|  | As of December 31, 2023 |
|  | FCG |  |  | PDP |  |  | Sierra Parima |  |  | Karnival |
Current assets |  | $ | 12,575 |  |  | $ | 8,283 |  |  | $ | 2,697 |  |  | $ | 16,030 |
Non-current assets |  |  | 19,730 |  |  |  | 87,280 |  |  |  | 18,714 |  |  |  | 1,805 |
Current liabilities |  |  | 7,375 |  |  |  | 14,048 |  |  |  | 62,070 |  |  |  | (17,250 | )
Non-current liabilities |  |  | 1,801 |  |  |  | 35,777 |  |  |  | 9,973 |  |  |  | — |
The following tables provide summarized related party balances of FCG, Sierra Parima and PDP:
|  | As of June 30, 2024 |
|  | FCG |  |  | PDP |
Assets |  | $ | 14,208 |  |  | $ | 2,009 |
Liabilities |  |  | 29 |  |  |  | 2,324 |
|  | As of December 31, 2023 |
|  | PDP |  |  | FCG |  |  | Sierra Parima |
Assets |  | $ | 2,288 |  |  | $ | 7,503 |  |  | $ | 2,230 |
Liabilities |  |  | 1,685 |  |  |  | 3,384 |  |  |  | 57,438 |
The following tables provide summarized statements of operations for the Company’s equity method investments:
|  | For the three months ended June 30 |
|  | 2024 |  |  | 2023 |
|  | FCG |  |  | PDP |  |  | PDP |  |  | Sierra Parima |
Total revenues |  | $ | 15,720 |  |  | $ | 11,296 |  |  | $ | 10,428 |  |  | $ | 991 |
Income (loss) from operations |  |  | 2,278 |  |  |  | 1,595 |  |  |  | 833 |  |  |  | (2,487 | )
Net income (loss) |  |  | 2,480 |  |  |  | 1,314 |  |  |  | 568 |  |  |  | (2,529 | )
|  | For the six months ended June 30 |
|  | 2024 |  |  | 2023 |
|  | FCG |  |  | PDP |  |  | PDP |  |  | Sierra Parima |
Total revenues |  | $ | 30,647 |  |  | $ | 18,751 |  |  | $ | 16,770 |  |  | $ | 1,225 |
Income (loss) from operations |  |  | 3,857 |  |  |  | 2,925 |  |  |  | 1,338 |  |  |  | (5,223 | )
Net income (loss) |  |  | 4,283 |  |  |  | 2,268 |  |  |  | 750 |  |  |  | (5,273 | )
The results of operations for Karnival for the three and six months ended June 30, 2024 and 2023 were not material for the periods presented and, as such, not included in the tables above. As of December 31, 2023, the equity investment in Sierra Parima was deemed to be other-than-temporarily impaired, and therefore, not included in the table above. The following table provides FCG, PDP and Sierra Parima’s summarized related party activity for the three months ended June 30, 2024 and 2023:
|  | For the three months ended June 30 |
|  | 2024 |  |  | 2023 |
|  | FCG |  |  | PDP |  |  | PDP |  |  | Sierra Parima |
Total revenues |  | $ | 15,542 |  |  | $ | 12 |  |  | $ | 7 |  |  | $ | 780 |
Total expenses |  |  | 1,749 |  |  |  | 1,034 |  |  |  | 922 |  |  |  | 3,434 |
The following table provides FCG, PDP and Sierra Parima’s summarized related party activity for the six months ended June 30, 2024 and 2023:
|  | For the six months ended June 30 |
|  | 2024 |  |  | 2023 |
|  | FCG |  |  | PDP |  |  | PDP |  |  | Sierra Parima |
Total revenues |  | $ | 30,298 |  |  | $ | 33 |  |  | $ | 12 |  |  | $ | 1,090 |
Total expenses |  |  | 1,831 |  |  |  | 2,026 |  |  |  | 1,781 |  |  |  | 3,857 |

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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/recommendedDisclosureRef -Topic 740 -SubTopic 323 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147478156/740-323-50-2 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 323 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 3 -Subparagraph (a)(3) -Publisher FASB -URI https://asc.fasb.org/1943274/2147481687/323-10-50-3 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 323 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 3 -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org/1943274/2147481687/323-10-50-3 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Name Accounting Standards Codification -Topic 323 -Publisher FASB -URI https://asc.fasb.org/323/tableOfContent + Details
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