| Investments in Unconsolidated Real Estate Joint Ventures |
Investments in Unconsolidated Real Estate Joint Ventures
The equity method of accounting is used to account for each of the individual joint ventures. We have an ownership interest in the following unconsolidated real estate joint ventures:
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As of June 30, 2016 |
Joint Venture |
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Outlet Center Location |
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Ownership % |
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Square Feet
(in 000's)
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Carrying Value of Investment (in millions) |
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Total Joint Venture Debt, Net
(in millions)(1)
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Columbus |
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Columbus, OH |
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50.0 |
% |
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355 |
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$ |
36.4 |
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$ |
— |
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National Harbor |
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National Harbor, MD |
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50.0 |
% |
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339 |
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4.9 |
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86.0 |
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RioCan Canada |
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Various |
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50.0 |
% |
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902 |
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126.8 |
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11.8 |
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Savannah (2)
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Savannah, GA |
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50.0 |
% |
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419 |
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42.4 |
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95.7 |
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$ |
210.5 |
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$ |
193.5 |
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Charlotte(3)
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Charlotte, NC |
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50.0 |
% |
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398 |
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$ |
(1.6 |
) |
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$ |
89.6 |
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Galveston/Houston (3)
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Texas City, TX |
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50.0 |
% |
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353 |
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(2.9 |
) |
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64.8 |
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$ |
(4.5 |
) |
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$ |
154.4 |
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As of December 31, 2015 |
Joint Venture |
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Outlet Center Location |
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Ownership % |
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Square Feet
(in 000's)
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Carrying Value of Investment (in millions) |
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Total Joint Venture Debt, Net
(in millions)(1)
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Columbus |
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Columbus, OH |
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50.0 |
% |
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— |
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$ |
21.1 |
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$ |
— |
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National Harbor |
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National Harbor, MD |
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50.0 |
% |
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339 |
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6.1 |
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85.8 |
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RioCan Canada |
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Various |
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50.0 |
% |
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870 |
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117.2 |
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11.3 |
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Savannah (2)
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Savannah, GA |
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50.0 |
% |
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377 |
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44.4 |
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87.6 |
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Westgate |
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Glendale, AZ |
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58.0 |
% |
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411 |
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12.3 |
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61.9 |
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$ |
201.1 |
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$ |
246.6 |
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Charlotte(3)
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Charlotte, NC |
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50.0 |
% |
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398 |
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$ |
(1.1 |
) |
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$ |
89.6 |
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Galveston/Houston(3)
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Texas City, TX |
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50.0 |
% |
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353 |
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(1.5 |
) |
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64.7 |
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$ |
(2.6 |
) |
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$ |
154.3 |
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(1) |
Net of debt origination costs and including premiums of $2.3 million and $3.3 million as of June 30, 2016 and December 31, 2015, respectively.
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(2) |
Based on capital contribution and distribution provisions in the joint venture agreement, we expect our economic interest in the venture's cash flow to be greater than indicated in the Ownership column, which states our legal interest in this venture. As of June 30, 2016, based upon the liquidation proceeds we would receive from a hypothetical liquidation of our investment based on depreciated book value, our estimated economic interest in the venture was approximately 98%. Our economic interest may fluctuate based on a number of factors, including mortgage financing, partnership capital contributions and distributions, and proceeds from gains or losses of asset sales.
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(3) |
The negative carrying value is due to the distributions of proceeds from mortgage loans and quarterly distributions of excess cash flow exceeding the original contributions from the partners. |
Fees we received for various services provided to our unconsolidated joint ventures were recognized in management, leasing and other services as follows (in thousands):
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Three months ended |
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Six months ended |
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June 30, |
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June 30, |
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2016 |
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2015 |
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2016 |
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2015 |
Fee: |
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Development and leasing |
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$ |
353 |
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$ |
727 |
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$ |
545 |
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$ |
1,307 |
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Loan guarantee |
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182 |
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187 |
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364 |
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383 |
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Management and marketing |
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797 |
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813 |
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1,544 |
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1,320 |
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Total Fees |
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$ |
1,332 |
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$ |
1,727 |
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$ |
2,453 |
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$ |
3,010 |
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Our investments in real estate joint ventures are reduced by the percentage of the profits earned for leasing and development services associated with our ownership interest in each joint venture. Our carrying value of investments in unconsolidated joint ventures differs from our share of the assets reported in the "Summary Balance Sheets - Unconsolidated Joint Ventures" shown below due to adjustments to the book basis, including intercompany profits on sales of services that are capitalized by the unconsolidated joint ventures. The differences in basis (totaling $4.4 million and $3.9 million as of June 30, 2016 and December 31, 2015, respectively) are amortized over the various useful lives of the related assets.
Westgate
As described in Note 3, we acquired our partners' interest in the Westgate joint venture and have consolidated the property for financial reporting purposes since the acquisition date.
Columbus
In June 2016, we opened an approximately 355,000 square foot outlet center in Columbus, Ohio. As of June 30, 2016, we and our partner had each contributed $35.8 million to fund development activities. The projected total net cost of the development is estimated to be approximately $94.9 million.We are providing property management, marketing and leasing services to the joint venture. During construction, our partner provided development services to the joint venture and we, along with our partner, provided joint leasing services.
Savannah
In May 2016, we expanded our outlet center in Savannah by approximately 42,000 square feet, bringing the outlet center's total gross leasable area to approximately 419,000 square feet.
Condensed combined summary financial information of unconsolidated joint ventures accounted for using the equity method is as follows (in thousands):
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Condensed Combined Balance Sheets - Unconsolidated Joint Ventures |
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June 30, 2016 |
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December 31, 2015 |
Assets |
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Land |
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$ |
104,123 |
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$ |
103,046 |
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Buildings, improvements and fixtures |
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638,116 |
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615,662 |
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Construction in progress, including land |
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8,436 |
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62,308 |
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750,675 |
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781,016 |
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Accumulated depreciation |
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(64,556 |
) |
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(60,629 |
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Total rental property, net |
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686,119 |
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720,387 |
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Cash and cash equivalents |
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24,247 |
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28,723 |
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Deferred lease costs, net |
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18,887 |
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18,399 |
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Prepaids and other assets |
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16,287 |
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14,455 |
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Total assets |
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$ |
745,540 |
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$ |
781,964 |
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Liabilities and Owners' Equity |
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Mortgages payable, net |
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$ |
347,890 |
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$ |
400,935 |
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Accounts payable and other liabilities |
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28,601 |
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31,805 |
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Total liabilities |
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376,491 |
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432,740 |
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Owners' equity |
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369,049 |
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349,224 |
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Total liabilities and owners' equity |
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$ |
745,540 |
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$ |
781,964 |
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Three months ended |
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Six months ended |
Condensed Combined Statements of Operations |
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June 30, |
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June 30, |
- Unconsolidated Joint Ventures |
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2016 |
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2015 |
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2016 |
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2015 |
Revenues |
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$ |
29,341 |
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$ |
26,189 |
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$ |
57,039 |
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$ |
50,153 |
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Expenses |
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Property operating |
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11,078 |
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11,167 |
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21,396 |
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20,311 |
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General and administrative |
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179 |
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90 |
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295 |
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308 |
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Depreciation and amortization |
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9,408 |
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8,556 |
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18,208 |
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16,378 |
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Total expenses |
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20,665 |
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19,813 |
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39,899 |
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36,997 |
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Operating income |
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8,676 |
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6,376 |
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17,140 |
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13,156 |
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Interest expense |
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(2,682 |
) |
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(2,216 |
) |
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(5,236 |
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(3,980 |
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Other nonoperating income |
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2 |
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5 |
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3 |
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13 |
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Net income |
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$ |
5,996 |
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$ |
4,165 |
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$ |
11,907 |
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$ |
9,189 |
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The Company and Operating Partnership's share of: |
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Net income |
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$ |
3,466 |
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$ |
2,046 |
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$ |
6,965 |
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$ |
4,589 |
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Depreciation expense (real estate related) |
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$ |
5,808 |
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$ |
5,038 |
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$ |
11,147 |
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$ |
9,114 |
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