Note 3—Investments in Partnerships

The following table provides information about the carrying value of the Company’s investments in partnerships and ventures:


	At		At
	September 30,		December 31,
(in thousands)	2019		2018
Investment in Solar Ventures	$	194,647	$	126,339
Investments in U.S. real estate partnerships (includes $932 and $898 related to variable interest entities ("VIEs")) (1)		20,421		19,961
Investment in South Africa Workforce Housing Fund ("SAWHF")		7,499		8,779
Total investments in partnerships	$	222,567	$	155,079

⁽¹⁾

We do not consolidate any of the investees that were assessed to meet the definition of a VIE because the Company was deemed not to be the primary beneficiary.

Investments Related to the Solar Ventures

At September 30, 2019, the Company held 50%, 50%, 44.7% and 100% equity interests in Solar Construction Lending, LLC (“SCL”), Solar Permanent Lending, LLC (“SPL”), Solar Development Lending, LLC (“SDL”) and Renewable Energy Lending, LLC (“REL”), respectively (collectively referred to as the “Solar Ventures”). Additionally, the Company held a 5.1% equity interest in SDL at September 30, 2019, that was acquired in the second quarter of 2019 from Hunt through a transaction that was reported as a secured lending transaction. While cash paid to settle this purchase was recognized as a loan receivable and the acquired equity interest in SDL was deemed to be collateral that did not get financial statement recognition, the Company acquired all legal rights and obligations related to such 5.1% ownership interest. See Note 13, “Related Party Transactions and Transactions with Affiliates,” for more information about the Company’s acquisition of Hunt’s interest in SDL.

At September 30, 2019, the carrying value of the Company’s equity investments in SCL, SPL and SDL was $101.5 million, $0.1 million and $93.0 million, respectively. None of these investees were assessed to constitute VIEs and the Company accounts for all of these investments using the equity method of accounting. At September 30, 2019, the Solar Ventures, of which the Company is a 50% member, had $446.8 million of unfunded loan commitments to borrowers, which were anticipated to be funded primarily by capital within the Solar Ventures through a combination of idle capital and existing loan redemptions. To the extent capital within the Solar Ventures is not sufficient to meet their funding obligations additional capital contributions by the members of the Solar Ventures in proportion to their interests would be required.

During July 2019, the Company and its capital partner in SDL executed a non-pro rata funding agreement pursuant to which our capital partner contributed 98% of a $30.0 million capital call and the Company contributed the balance. However, on September 20, 2019, the Company contributed 100% of a $28.8 million capital call, which caused the non-pro rata funding agreement with our capital partner in SDL to terminate.

Prior to the Company’s buyout of a prior investment partner’s ownership interest in REL, which was effective June 1, 2018, the Company had accounted for its equity investment in Renewable Energy Lending, LLC (“REL”) pursuant to the equity method of accounting. However, subsequent to the buyout, the Company became the sole owner of REL and consolidated this entity for reporting purposes in all subsequent reporting periods. As a result, the Company’s equity investment in REL was eliminated for reporting purposes at each subsequent reporting period and REL’s equity investments in SCL and SPL are reported as direct investments of the Company at each reporting date. The $5.1 million purchase price paid by the Company to our prior investment partner on June 1, 2018, was allocated to the net assets acquired based upon their relative fair values. Such allocation resulted in a cumulative basis adjustment of $4.5 million being allocated to the Company’s investments in SCL and SPL, an adjustment which represented the difference between the Company’s acquisition cost basis of its investments and the historical cost basis of the investments at the partnership level. This basis difference is amortized over the remaining investment period of each respective partnership. For the three and nine months ended September 30, 2019, the amortization expense related to such basis difference was $0.2 million and $0.7 million, respectively. As of September 30, 2019, the unamortized balance of the Company’s basis difference was $3.3 million.

The following table provides information about the carrying amount of total assets and liabilities of all investees in which the Company had an equity method investment:


	At		At
	September 30,		December 31,
	2019		2018
(in thousands)
Total assets	$	449,917	$	279,960
Other liabilities		26,421		12,833

The following table provides information about the gross revenue, operating expenses and net income of all investees in which the Company had an equity method investment:


	For the three months ended				For the nine months ended
	September 30,				September 30,
(in thousands)	2019		2018		2019		2018
Gross revenue	$	16,081	$	6,118	$	38,367	$	18,639
Operating expenses		1,144		1,290		4,687		4,107
Net income and net income attributable to the entity		14,940		4,755		33,749		14,974

Investments in U.S. Real Estate Partnerships

At September 30, 2019, $19.5 million of the reported carrying value of investments in U.S. real estate partnerships represented the Company’s 80% ownership interest in a joint venture that owns and operates a mixed-use town center and undeveloped land parcels. The Company has the right to a preferred return on its unreturned capital contributions, as well as the right to share in excess cash flows of the real estate venture. As of September 30, 2019, the Company held a 78.5% economic interest based upon the partnership’s distribution waterfall. This entity was determined not to be a VIE because decision-making rights are shared equally among its members. As such, the Company accounts for this investment using the equity method of accounting.

At September 30, 2019, $0.9 million of the reported carrying value of investments in U.S. real estate partnerships related to three limited partner interests in three affordable housing partnerships in which our ownership interest ranged from 74.25% to 74.92%. While these entities were deemed to be VIEs, the Company was not deemed to be their primary beneficiary. Therefore, the Company did not consolidate these entities and accounts for these investments using the equity method of accounting.

At September 30, 2019 and December 31, 2018, four of the U.S. real estate partnerships in which we have investments were determined to be VIEs. The carrying value of the equity investments in these partnerships was $0.9 million at September 30, 2019 and December 31, 2018. For one of the Company’s VIEs, because the underlying real estate was sold during the fourth quarter of 2017, the Company does not expect to make additional contributions to that investment. Because we are unable to quantify the maximum amount of additional capital contributions that we may be required to fund in the future associated with our proportionate share of these investments, we measure our maximum exposure to loss based upon the carrying value of these investments. At September 30, 2019 and December 31, 2018, our maximum exposure to loss due to our involvement with these VIEs was $0.9 million.

The following table provides information about the total assets, debt and other liabilities of the U.S. real estate partnerships in which the Company held an equity investment:


	At		At
	September 30,		December 31,
	2019		2018
(in thousands)
Total assets	$	53,251	$	56,238
Debt		6,287		6,530
Other liabilities		32,271		32,165

The following table provides information about the gross revenue, operating expenses and net loss of U.S. real estate partnerships in which the Company had an equity investment:


	For the three months ended				For the nine months ended
	September 30,				September 30,
(in thousands)	2019		2018		2019		2018
Gross revenue	$	624	$	543	$	1,920	$	1,722
Operating expenses		437		487		1,380		1,377
Net loss and net loss attributable to the entity		(727)		(582)		(1,288)		(1,300)

Investment in SAWHF

At September 30, 2019, the carrying value of the Company’s 11.85% equity investment in SAWHF was $7.5 million. As SAWHF was determined not to be a VIE, the Company accounts for this investment using the equity method of accounting.

The following table provides information about the carrying value of total assets and other liabilities of SAWHF:


	At		At
	September 30,		December 31,
	2019		2018
(in thousands)
Total assets	$	63,592	$	74,803
Other liabilities		93		496

The following table provides information about the gross revenue, operating expenses and net (loss) income of SAWHF:


	For the three months ended				For the nine months ended
	September 30,				September 30,
(in thousands)	2019		2018		2019		2018
Gross revenue	$	1,321	$	1,693	$	4,090	$	3,998
Operating expenses		236		376		722		1,927
Net (loss) income and net (loss) income attributable to the entity		(1,092)		(4,463)		1,690		(2,896)