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 September 30, 2017 |
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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$ |
6.8 |
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$ |
84.4 |
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National Harbor |
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National Harbor, MD |
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50.0 |
% |
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341 |
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2.4 |
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86.4 |
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RioCan Canada |
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Various |
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50.0 |
% |
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924 |
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116.6 |
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11.4 |
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Investments included in total assets |
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$ |
125.8 |
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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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$ |
(3.6 |
) |
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$ |
89.8 |
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Galveston/Houston (2)(3)
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Texas City, TX |
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50.0 |
% |
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353 |
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(12.5 |
) |
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79.4 |
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Investments included in other liabilities
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$ |
(16.1 |
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As of December 31, 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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$ |
6.7 |
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$ |
84.2 |
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National Harbor |
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National Harbor, MD |
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50.0 |
% |
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341 |
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4.1 |
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86.1 |
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RioCan Canada |
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Various |
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50.0 |
% |
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901 |
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117.3 |
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11.1 |
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Investments included in total assets |
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$ |
128.1 |
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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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$ |
(2.5 |
) |
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$ |
89.7 |
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Galveston/Houston (2)(3)
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Texas City, TX |
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50.0 |
% |
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353 |
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(3.8 |
) |
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64.9 |
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Investments included in other liabilities |
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$ |
(6.3 |
) |
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(1) |
Net of debt origination costs and including premiums of $1.6 million and $1.6 million as of September 30, 2017 and December 31, 2016, respectively.
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(2) |
In July 2017, the joint venture amended and restated the initial construction loan to increase the amount available to borrow from $70.0 million to $80.0 million and extended the maturity date until July 2020 with two one-year options. The amended and restated loan also changed the interest rate from LIBOR + 1.50% to an interest rate of LIBOR + 1.65%. At the closing of the amendment, the joint venture distributed approximately $14.5 million equally between the partners.
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(3) |
The negative carrying value is due to the distributions of proceeds from mortgage loans and quarterly distributions of excess cash flow exceeding the original contributions from the partners. |
Fees we received for various services provided to our unconsolidated joint ventures were recognized in management, leasing and other services as follows (in thousands):
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Three months ended |
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Nine months ended |
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September 30, |
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September 30, |
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2017 |
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2016 |
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2017 |
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2016 |
Fee: |
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Management and marketing |
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$ |
564 |
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$ |
656 |
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1,676 |
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2,199 |
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Development and leasing |
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20 |
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65 |
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$ |
87 |
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$ |
611 |
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Loan guarantee |
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4 |
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85 |
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13 |
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449 |
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Total Fees |
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$ |
588 |
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$ |
806 |
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$ |
1,776 |
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$ |
3,259 |
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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 $3.7 million for both the period ended September 30, 2017 and the period ended December 31, 2016) are amortized over the various useful lives of the related assets.
RioCan Canada
Rental property held and used by our RioCan joint venture is reviewed for impairment in the event that facts and circumstances indicate the carrying amount of an asset may not be recoverable. In such an event, the estimated future undiscounted cash flows associated with the asset is compared to the asset's carrying amount, and if less, we recognize an impairment loss in an amount by which the carrying amount exceeds its fair value.
During the third quarter 2017, the joint venture determined for its Bromont and Saint Sauveur, Quebec outlet centers that the estimated future undiscounted cash flows of that property did not exceed the property's carrying value based on our expectations of the future performance of the centers. Therefore, the joint venture recorded a $18.0 million non-cash impairment charge in its statement of operations, which equaled the excess of the properties carrying value over its fair value. The fair value was determined using a market approach considering the prevailing market income capitalization rates for similar assets. Our share of this impairment charge, $9.0 million, was recorded in equity in earnings of unconsolidated joint ventures in our consolidated statement of operations.
Condensed combined summary financial information of unconsolidated joint ventures accounted for using the equity method is as follows (in thousands):
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Condensed Combined Balance Sheets - Unconsolidated Joint Ventures |
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September 30, 2017 |
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December 31, 2016 |
Assets |
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Land |
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$ |
95,998 |
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$ |
88,015 |
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Buildings, improvements and fixtures |
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514,865 |
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503,548 |
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Construction in progress, including land under development |
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2,849 |
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13,037 |
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613,712 |
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604,600 |
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Accumulated depreciation |
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(88,163 |
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(67,431 |
) |
Total rental property, net |
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525,549 |
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537,169 |
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Cash and cash equivalents |
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23,769 |
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27,271 |
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Deferred lease costs and other intangibles, net |
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11,436 |
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13,612 |
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Prepaids and other assets |
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16,262 |
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12,567 |
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Total assets |
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$ |
577,016 |
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$ |
590,619 |
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Liabilities and Owners' Equity |
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Mortgages payable, net |
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$ |
351,322 |
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$ |
335,971 |
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Accounts payable and other liabilities |
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13,463 |
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20,011 |
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Total liabilities |
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364,785 |
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355,982 |
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Owners' equity |
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212,231 |
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234,637 |
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Total liabilities and owners' equity |
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$ |
577,016 |
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$ |
590,619 |
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Three months ended |
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Nine months ended |
Condensed Combined Statements of Operations |
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September 30, |
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September 30, |
- Unconsolidated Joint Ventures |
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2017 |
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2016 |
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2017 |
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2016 |
Revenues |
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$ |
25,241 |
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$ |
25,654 |
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$ |
72,588 |
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$ |
82,693 |
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Expenses: |
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Property operating |
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8,987 |
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9,103 |
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27,242 |
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30,499 |
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General and administrative |
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72 |
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95 |
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289 |
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390 |
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Asset impairment |
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18,042 |
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5,838 |
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18,042 |
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5,838 |
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Depreciation and amortization |
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6,998 |
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8,001 |
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21,453 |
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26,208 |
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Total expenses |
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34,099 |
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23,037 |
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67,026 |
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62,935 |
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Operating income (loss) |
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(8,858 |
) |
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2,617 |
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5,562 |
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19,758 |
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Interest expense |
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(2,776 |
) |
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(1,925 |
) |
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(7,497 |
) |
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(7,161 |
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Other non-operating income |
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20 |
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2 |
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23 |
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5 |
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Net income (loss) |
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$ |
(11,614 |
) |
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$ |
694 |
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$ |
(1,912 |
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$ |
12,602 |
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The Company and Operating Partnership's share of: |
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Net income (loss) |
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$ |
(5,893 |
) |
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$ |
715 |
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$ |
(1,201 |
) |
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$ |
7,680 |
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Depreciation and amortization expense (real estate related) |
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$ |
3,583 |
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$ |
4,325 |
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$ |
10,971 |
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$ |
15,472 |
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