Investment in Unconsolidated Joint Ventures

3 Months Ended

Mar. 31, 2023

Equity Method Investments and Joint Ventures [Abstract]

Investment in Unconsolidated Joint Ventures

Victory Abode Apartments, LLC

On November 16, 2018, our SPC subsidiary formed the Victory Abode Apartments, LLC ("VAA"), a joint venture with the Macquarie Group (“Macquarie”). VAA was formed as a result of a sale of the 50% ownership interest in a portfolio of multifamily properties owned by us in exchange for a 50% voting interest / 49% profit participation interest ("Class A interest") in VAA and a note payable (“Mezzanine Loan”). Concurrent with the Contribution, VAA issued Class B interests with a 2% profits participation interest and no voting rights to the manager of VAA (“Class B Member”).

In connection with the formation of VAA, ten of the initial properties were subject to an earn-out provision ("Earn Out") that provided for a remeasurement of value after a two-year period following the completion of construction. Upon the formation of VAA, we recorded an initial liability ("Earn Out Obligation") of $10,000 for the advance on the Earn Out that we received from Macquarie. Upon remeasurement, the Earn Out Obligation was determined to be approximately $39,600. In accordance with the joint venture operating agreement, the Earn Out Obligation was paid from our share of distributions from VAA in 2022.

On September 16, 2022, VAA sold 45 of its properties (“VAA Sale Portfolio”) for $1,810,700, resulting in gain on sale of $738,444 to the joint venture. In connection with sale, we received an initial distribution of $182,848 from VAA, which included the payment of the remaining balance of the Earn Out Obligation.

On November 1, 2022, we received an additional distribution from VAA, which included the full operational control of the remaining seven properties of VAA (“VAA Holdback Portfolio”) (See Note 11 - Acquisitions) and a cash payment of $204,036. We are in the process of negotiating the assumption of the mortgage notes payable on the VAA Holdback Portfolio with the lenders.

On March 23, 2023, we received $17,976 from VAA, which represented the remaining distribution of the proceeds from the sale of the VAA Sale Portfolio.

We plan to use our share of the proceeds from the sale of the VAA Sale Portfolio to invest in additional income-producing real estate, pay down our debt and for general corporate purposes.

Gruppa Florentina, LLC

We also own a 20% ownership interest in a 20% interest in Gruppa Florentina, LLC ("Milano"), which operates several pizza parlors in Central and Northern California. Milano also has 23 franchised locations, including two operating, under the trade name Angelo & Vito’s Pizzerias.

The following is a summary of our investment in unconsolidated joint ventures:


	March 31, 2023		December 31, 2022
Assets (1)

Real estate	$	13,634	$	13,140
Cash, cash equivalents and restricted cash	24,180		66,364
Other assets	55,258		35,938
Total assets	$	93,072	$	115,442
Liabilities and Partners' Capital (1)
Liabilities from discontinued operations	$	—	$	8,824
Mortgage notes payable	14,953		16,267

Other liabilities	25,977		13,412
Our share of partners' capital	12,641		27,973
Outside partner's capital	39,501		48,966
Total liabilities and partners' capital	$	93,072	$	115,442
Investment in unconsolidated joint ventures
Our share of partners' capital	$	12,641	$	27,973

Basis adjustment (2)	28		253
Total investment in unconsolidated joint ventures	$	12,669	$	28,226

(1) These amounts include the assets of VAA of $7,178 and $52,404 at March 31, 2023 and December 31, 2022, respectively, and liabilities of VAA of $162 and $10,812 at March 31, 2023 and December 31, 2022, respectively.

(2) We amortize the difference between the cost of our investments in unconsolidated joint ventures and the book value of our underlying equity into income on a straight-line basis consistent with the lives of the underlying assets.

The following is a summary of income from our investments in unconsolidated joint ventures:


	Three Months Ended March 31,
		2023		2022
Revenue (1)
Rental revenue		$	—	$	3,931
Other revenue		10,636		9,801
Total revenue		10,636		13,732
Expenses (2)
Operating expenses		9,401		11,471
Depreciation and amortization		247		1,188

Interest		(156)		5,775
Total expenses		9,492		18,434
Income (loss) from continuing operations		1,144		(4,702)
Income from discontinued operations (3)		754		3,436
Net income (loss)		$	1,898	$	(1,266)
Equity in income from unconsolidated joint ventures		$	2,419	$	5,194

(1) These amounts include revenue of VAA of $4,073 during the three months ended March 31, 2022.

(2) These amounts include expenses of VAA of $(622) and $9,179 during the three months ended March 31, 2023 and 2022, respectively.

(3) These amounts represent the VAA Sale Portfolio.