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Basis of Presentation
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3 Months Ended |
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Mar. 31, 2015
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| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Basis of Presentation |
Basis of Presentation
The unaudited consolidated financial statements included herein have been prepared pursuant to accounting principles generally accepted in the United States of America and should be read in conjunction with the consolidated financial statements and notes thereto of the Company's and the Operating Partnership's combined Annual Report on Form 10-K for the year ended December 31, 2014. The December 31, 2014 balance sheet data in this Form 10-Q was derived from audited financial statements. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the SEC's rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the financial statements for the interim periods have been made. The results of interim periods are not necessarily indicative of the results for a full year.
We consolidate properties that are wholly owned or properties where we own less than 100% but we control. Control is determined using an evaluation based on accounting standards related to the consolidation of voting interest entities and variable interest entities ("VIE"). For joint ventures that are determined to be a VIE, we consolidate the entity where we are deemed to be the primary beneficiary. Determination of the primary beneficiary is based on whether an entity has (1) the power to direct the activities of the VIE that most significantly impact the entity's economic performance, and (2) the obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE. Our determination of the primary beneficiary considers all relationships between us and the VIE, including management agreements and other contractual arrangements.
Investments in real estate joint ventures that we do not control but may exercise significant influence are accounted for using the equity method of accounting. These investments are recorded initially at cost and subsequently adjusted for our equity in the venture's net income or loss, cash contributions, distributions and other adjustments required under the equity method of accounting. These investments are evaluated for impairment when necessary.
Allocation provisions within our partnership or joint venture agreements are not always consistent with the legal ownership interests held by each partner or joint venture investee primarily due to partner preferences. We separately report investments in joint ventures for which accumulated distributions have exceeded investments in and our share of net income or loss of the joint ventures within other liabilities in the consolidated balance sheets. The net equity of our Charlotte joint ventures is less than zero because of financing or operating distributions that were greater than net income, as net income includes non-cash charges for depreciation and amortization.
We have concluded that our Westgate, Savannah and Southaven joint ventures are each considered a VIE because our voting rights are disproportionate to our economic interests. The operating, development, leasing, and management agreements of Westgate and Savannah provide that the activities that most significantly impact the economic performance of the ventures require unanimous consent. Accordingly, we determined that we are not the primary beneficiary in either instance, since we do not have the power to direct the significant activities that affect the economic performance of the ventures, and have applied the equity method of accounting. Our investment in Westgate was approximately $13.9 million and in Savannah was approximately $47.4 million as of March 31, 2015. We are unable to estimate our maximum exposure to loss at this time because our guarantees are limited and based on the future operating performance of Westgate and Savannah.
The management agreement and other contractual arrangements for Southaven give us, but not necessarily our joint venture partner, significant participating rights over activities that most significantly impact the economic performance of the ventures, thus we have concluded that we are the primary beneficiary and have consolidated the venture's balance sheet and results of operations. At March 31, 2015, total assets of this venture, which is currently under construction, were $19.3 million and total liabilities were $2.0 million. The primary classification of these assets on the consolidated balance sheets are within total rental property, net and the classification of liabilities is within accounts payable and accrued expenses. These assets include only those assets that can be used to settle obligations of the VIE. The liabilities include third party liabilities and exclude intercompany balances that are eliminated in consolidation.
"Noncontrolling interests in the Operating Partnership" reflects the Non-Company LP's percentage ownership of the Operating Partnership's units. "Noncontrolling interests in other consolidated partnerships" consist of outside equity interests in partnerships or joint ventures not wholly owned by the Company or the Operating Partnership that are consolidated with the financial results of the Company and Operating Partnership because the Operating Partnership exercises control over the entities that own the properties. Noncontrolling interests are initially recorded in the consolidated balance sheets at fair value based upon purchase price allocations. Income is allocated to the noncontrolling interests based on the allocation provisions within the partnership or joint venture agreements..
We have reclassified $566,000 related to management, leasing and other services in the consolidated statement of operations for the three ended March 31, 2014, to the caption "management, leasing and other services" from the caption "other income" to conform to the presentation of the consolidated statement of operations for the three months ended March 31, 2015.
In addition, we have reclassified certain amounts related to interest income and other income (expense) in the consolidated statement of operations for the three months ended March 31, 2014 to the caption "interest and other income" from the caption "other income" to conform to the presentation of the consolidated statement of operations for the three months ended March 31, 2015.
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