XML 44 R11.htm IDEA: XBRL DOCUMENT v3.20.1
INVESTMENT IN VAA
 12 Months Ended
Dec. 31, 2019
Equity Method Investments and Joint Ventures [Abstract]  
INVESTMENT IN VAA

NOTE 2.

INVESTMENT IN VAA

 

On November 19, 2018, TCI executed an agreement with Macquarie Group (“Macquarie”) to create a joint venture, Victory Abode Apartments, LLC (“VAA”) to address existing and future demand for quality multifamily residential housing through acquisition and development of sustainable Class A multifamily housing in focused secondary and tertiary markets. In connection with the formation of the joint venture, TCI contributed a portfolio of 49 income producing apartment complexes, and 3 development projects in various stages of construction. TCI received cash consideration of $236.8 million and recognized a gain of approximately $154.1 million. At the time of the transfer of the properties, the joint venture assumed all liabilities of those properties, including mortgage debt to the Department of Housing and Urban Development (“HUD”).

 

VAA is equally owned and controlled by Abode JVP, LLC, a wholly-owned subsidiary of Southern and Summerset Intermediate Holdings 2 LLC (“Summerset”), a wholly-owned indirect subsidiary of Macquarie.  Pursuant to the Agreement, Abode JVP, LLC and Summerset each own voting and profit participation rights of 50% and 49%, respectively (“Class A Members”).  The remaining 2% of the profit participation interest is held by Daniel J. Moos ARL’s President and Chief Executive Officer (“Class B Member”) who serves also as the Manager of the joint venture. In addition, upon the closing of the agreement the Class B Member received a one-time consideration payment of $1.9 million.

 

The Company accounts for its investment in VAA under the equity method of accounting. Under the equity method of accounting, our net equity in the investment is reflected within the Consolidated Balance Sheets in the caption ‘Investment in VAA’, and our share of the net income or loss from the joint venture is included within the Consolidated Statements of Operations in the caption ‘Earnings from VAA’. The joint venture agreements may designate different percentage allocations among investors for profits and losses; however, our recognition of joint venture income or loss generally follows the joint venture’s distribution priorities, which may change upon the achievement of certain investment return thresholds and other agreed upon adjustments.

 

The following is a summary of the financial position and results of operations of VAA (dollars in thousands):

 

    As of December 31,
Balance Sheet   2019   2018
         
Net real estate assets   $ 1,242,957     $ 1,257,557  
Other assets     62,222       67,020  
Debt, net     (832,779 )     (791,225 )
Other liabilities     (271,291 )     (280,288 )
Total equity     (201,109 )     (253,064 )

 

Results of Operations   For the Year Ended December 31, 2019   For the period November 19 to December 31, 2018
Total revenue   $ 115,377     $ 12,887  
Total property, operating, and maintenance expenses     (56,967 )     (4,507 )
Interest expense     (61,487 )     (5,818 )
Depreciation and Amortization     (43,942 )     (6,987 )
Total other expense     (3,377 )     (5,297 )
Net loss   $ (50,396 )   $ (9,722 )

 

The following is a reconciliation from VAA’s net loss to TCI’s equity in earnings from VAA (dollars in thousands):

 

    For the Year Ended December 31, 2019   For the period November 19 to December 31, 2018
VAA net loss   $ (50,396 )   $ (9,722 )
Adjustments to reconcile to income (loss) from VAA                
  Interest expense on mezzanine loan     25,014       2,815  
  In-place lease intangibles - amortization expense     14,703       3,983  
  Depreciation basis differences     5,132       3,012  
 Net loss   $ (5,547 )   $ 88  
Percentage ownership in VAA     50 %     50 %
Loss from VAA   $ (2,774 )   $ 44  

 

 

The following table sets forth the location of our real estate held for investment (income-producing properties only) by asset type as of December 31, 2019:

 

 

Apartments  

 

Location

 

 

No.

 

 

 

Units

 

Alabama

 

 

1

 

 

 

168

 

Arkansas

 

 

5

 

 

 

1,122

 

Colorado

 

 

2

 

 

 

260

 

Florida

 

 

2

 

 

 

388

 

Georgia

 

 

1

 

 

 

222

 

Louisiana

 

 

3

 

 

 

464

 

Mississippi

 

 

1

 

 

 

196

 

North Carolina

 

 

1

 

 

 

201

 

Nevada

 

 

1

 

 

 

308

 

Tennessee

 

 

4

 

 

 

708

 

Texas-Greater Dallas-Ft Worth

 

 

19

 

 

 

3,709

 

Texas-Greater Houston

 

 

2

 

 

 

416

 

Texas-Other

 

 

9

 

 

 

1,726

 

 Total

 

 

51

 

 

 

9,888

 

 

At December 31, 2019, our apartment projects in development included (dollars in thousands):

 

Property   Location     No. of Units     Costs to Date (1)     Total Projected Costs (1)  
Lakeside Lofts apartments   Farmers Branch, TX       249     $    50,357     $      80,622  
Total          249   $  50,357     $    80,622  

  

(1) Costs include construction hard costs, construction soft costs and loan borrowing costs. 

 

During 2019, the Company received $19.4 million cash distribution from VAA as a result of the annual surplus cash computation from its HUD collaterized residential properties and other amounts owed to the Company as agreed to in the joint venture operating agreement.