Investments in Unconsolidated Joint Ventures

12 Months Ended

Dec. 31, 2020

Equity Method Investments and Joint Ventures [Abstract]

Investments in Unconsolidated Joint Ventures

Investments in Unconsolidated Joint Ventures

We have investments in several real estate joint ventures with various partners. As of December 31, 2020, the book value of these investments was $3.8 billion, net of investments with negative book values totaling $89.6 million for which we have an implicit commitment to fund future capital needs.

As of December 31, 2020, 800 Third Avenue, 21 East 66th Street, 605 West 42nd Street, and certain properties within the Stonehenge Portfolio are VIEs in which we are not the primary beneficiary. As of December 31, 2019, 800 Third Avenue, 21 East 66th Street, 605 West 42nd Street, 333 East 22nd Street, and certain properties within the Stonehenge Portfolio were VIEs in which we are not the primary beneficiary. Our net equity investment in these VIEs was $134.0 million as of December 31, 2020 and $145.9 million as of December 31, 2019. Our maximum loss is limited to the amount of our equity investment in these VIEs. See the "Principles of Consolidation" section of Note 2, "Significant Accounting Policies". All other investments below are voting interest entities. As we do not control the joint ventures listed below, we account for them under the equity method of accounting.

The table below provides general information on each of our joint ventures as of December 31, 2020:

Property	Partner	Ownership Interest (1)	Economic Interest (1)	Unaudited Approximate Square Feet
100 Park Avenue	Prudential Real Estate Investors	49.90%	49.90%	834,000
717 Fifth Avenue	Wharton Properties/Private Investor	10.92%	10.92%	119,500
800 Third Avenue	Private Investors	60.52%	60.52%	526,000
919 Third Avenue	New York State Teacher's Retirement System	51.00%	51.00%	1,454,000
11 West 34th Street	Private Investor/Wharton Properties	30.00%	30.00%	17,150
280 Park Avenue	Vornado Realty Trust	50.00%	50.00%	1,219,158
1552-1560 Broadway (2)	Wharton Properties	50.00%	50.00%	57,718
10 East 53rd Street	Canadian Pension Plan Investment Board	55.00%	55.00%	354,300
21 East 66th Street (3)	Private Investors	32.28%	32.28%	13,069
650 Fifth Avenue (4)	Wharton Properties	50.00%	50.00%	69,214
121 Greene Street	Wharton Properties	50.00%	50.00%	7,131
55 West 46th Street (5)	Prudential Real Estate Investors	25.00%	25.00%	347,000
Stonehenge Portfolio	Various	Various	Various	1,439,016
605 West 42nd Street	The Moinian Group	20.00%	20.00%	927,358
11 Madison Avenue	PGIM Real Estate	60.00%	60.00%	2,314,000
400 East 57th Street (6)	BlackRock, Inc and Stonehenge Partners	51.00%	41.00%	290,482
One Vanderbilt	National Pension Service of Korea/Hines Interest LP	71.01%	71.01%	1,657,198
Worldwide Plaza	RXR Realty / New York REIT / Private Investor	24.35%	24.35%	2,048,725
1515 Broadway	Allianz Real Estate of America	56.87%	56.87%	1,750,000
2 Herald Square	Israeli Institutional Investor	51.00%	51.00%	369,000
115 Spring Street	Private Investor	51.00%	51.00%	5,218
885 Third Avenue (7)	Private Investor	(6)	100.00%	625,300
15 Beekman (8)	A fund managed by Meritz Alternative Investment Management	20.00%	20.00%	221,884
85 Fifth Avenue	Wells Fargo	36.30%	36.30%	12,946
One Madison Avenue (9)	National Pension Service of Korea/Hines Interest LP	50.50%	50.50%	1,048,700

(1)Ownership interest and economic interest represent the Company's interests in the joint venture as of December 31, 2020. Changes in ownership or economic interests within the current year are disclosed in the notes below.

(2)The acquisition price represents only the purchase of the 1552 Broadway interest which comprised approximately 13,045 square feet. The joint venture also owns a long-term leasehold interest in the retail space and certain other spaces at 1560 Broadway, which is adjacent to 1552 Broadway.

(3)We hold a 32.28% interest in three retail units and one residential unit at the property and a 16.14% interest in three residential units at the property.

(4)The joint venture owns a long-term leasehold interest in the retail space at 650 Fifth Avenue.

(5)In February 2021, along with our joint venture partner, we entered into contract to sell the property. This transaction is expected to close in the first quarter of 2021. If the transaction closes in accordance with the terms of the contract, we expect to recognize a loss on sale of approximately $17.8 million.

(6)In October 2016, we sold a 49% interest in this property. Our interest in the property was sold within a consolidated joint venture owned 90% by the Company and 10% by Stonehenge. The transaction resulted in the deconsolidation of the venture's remaining 51% interest in the property. Our joint venture with Stonehenge remains consolidated resulting in the combined 51% interest being shown within investments in unconsolidated joint ventures on our balance sheet.

(7)We hold 100% of the preferred equity interest in the property and believe there is no value to the common equity.

(8)In August 2020, the Company formed a joint venture, which then entered into a long-term sublease with the Company for the building at 126 Nassau Street. As a result of this transaction, we recognized a gain of $17.7 million, which is included in Gain on sale of real estate, net, in our consolidated statements of operations. This gain was calculated in accordance with ASC 842, as the Company identified the lease and non-lease components included in the sublease agreement and allocated the consideration in the agreement to each lease and non-lease component based on each components' standalone selling price, which was estimated utilizing a combination of the adjusted market assessment and residual approaches as provided for in ASC 606. In the fourth quarter of 2020, the project was renamed 15 Beekman and this name has subsequently been used in all public statements and marketing materials.

(9)In 2020, the Company admitted partners to the One Madison Avenue development project, which resulted in the Company no longer retaining a controlling interest in the entity, as defined in ASC 810, and the deconsolidation of our remaining 50.5% interest. We recorded our investment at fair value, which resulted in the recognition of a fair value adjustment of $187.5 million. The fair value of our investment was determined by the terms of the joint venture agreement governing the capitalization of the project. The partners have committed aggregate equity to the project totaling no less than $492.2 million and their ownership interest in the joint venture is based on their capital contributions, up to an aggregate maximum of 49.5%. At December 31, 2020, the total of the two partners' ownership interests based on equity contributed was 9.6%.

Disposition of Joint Venture Interests or Properties

The following table summarizes the investments in unconsolidated joint ventures sold during the years ended December 31, 2020, 2019, and 2018:

Property	Ownership Interest Sold	Disposition Date	Gross Asset Valuation (in thousands) (1)		Gain (Loss) on Sale (in thousands) (2)
333 East 22nd Street	33.33%	December 2020	$	1,640	$	2,968
21 East 66th Street (3)	1 residential unit	December 2019	2,900		279
521 Fifth Avenue	50.50%	May 2019	381,000		57,874
131-137 Spring Street	20.00%	January 2019	216,000		17,660
Stonehenge Portfolio (partial)	Various	Various - 2019	468,800		(2,408)
3 Columbus Circle	48.90%	November 2018	851,000		160,368
Mezzanine Loan (4)	33.33%	August 2018	15,000		N/A
724 Fifth Avenue	49.90%	July 2018	365,000		64,587
Jericho Plaza	11.67%	June 2018	117,400		147
1745 Broadway	56.87%	May 2018	633,000		52,038
175-225 Third Street Brooklyn, New York	95.00%	April 2018	115,000		19,483
1515 Broadway (5)	13.00%	February 2018	1,950,000		—
Stonehenge Portfolio (partial)	Various	Various - 2018	331,100		(6,063)

(1)Represents implied gross valuation for the joint venture or sales price of the property.

(2)Represents the Company's share of the gain or (loss). The gain on sale is net of $0.0 million, $4.0 million, and $11.7 million of employee compensation accrued in connection with the realization of these investment gains in the years ended December 31, 2020, 2019, and 2018, respectively. Additionally, gain (loss) amounts do not include adjustments for expenses recorded in subsequent periods.

(3)We, together with our joint venture partner, closed on the sale of one residential unit at the property.

(4)Our investment in a joint venture that owned a mezzanine loan secured by a commercial property in midtown Manhattan was repaid after the joint venture received repayment of the underlying loan.

(5)Our investment in 1515 Broadway was marked to fair value on January 1, 2018 upon adoption of ASC 610-20.

Joint Venture Mortgages and Other Loans Payable

We generally finance our joint ventures with non-recourse debt. In certain cases we may provide guarantees or master leases for tenant space, which terminate upon the satisfaction of specified circumstances or repayment of the underlying loans. The mortgage notes and other loans payable collateralized by the respective joint venture properties and assignment of leases at December 31, 2020 and 2019, respectively, are as follows (dollars in thousands):

Property	Economic Interest (1)		Initial Maturity Date	Final Maturity Date (2)	Interest Rate (3)		December 31, 2020		December 31, 2019
Fixed Rate Debt:
885 Third Avenue (4)	100.00	%	April 2021	April 2021		3.35%	$	272,000	$	—
717 Fifth Avenue (mortgage)	10.92	%	July 2022	July 2022		4.45%	300,000		300,000
717 Fifth Avenue (mezzanine)	10.92	%	July 2022	July 2022		5.50%	355,328		355,328
650 Fifth Avenue (mortgage)	50.00	%	October 2022	October 2022		4.46%	210,000		210,000
650 Fifth Avenue (mezzanine)	50.00	%	October 2022	October 2022		5.45%	65,000		65,000
21 East 66th Street	32.28	%	April 2023	April 2028		3.60%	12,000		12,000
919 Third Avenue	51.00	%	June 2023	June 2023		5.12%	500,000		500,000
1515 Broadway	56.87	%	March 2025	March 2025		3.93%	820,607		838,546
11 Madison Avenue	60.00	%	September 2025	September 2025		3.84%	1,400,000		1,400,000
800 Third Avenue	60.52	%	February 2026	February 2026		3.37%	177,000		177,000
400 East 57th Street	41.00	%	November 2026	November 2026		3.00%	97,024		97,735
Worldwide Plaza	24.35	%	November 2027	November 2027		3.98%	1,200,000		1,200,000
Stonehenge Portfolio (5)	Various		Various	Various		3.50%	195,899		196,112
Total fixed rate debt							$	5,604,858	$	5,351,721
Floating Rate Debt:
121 Greene Street	50.00	%	(6)	(6)	L+	1.50%	$	15,000	$	15,000
280 Park Avenue	50.00	%	September 2021	September 2024	L+	1.73%	1,200,000		1,200,000
One Vanderbilt (7)	71.01	%	September 2021	September 2023	L+	2.50%	1,210,329		732,928
1552 Broadway	50.00	%	October 2021	October 2022	L+	2.65%	195,000		195,000
2 Herald Square	51.00	%	November 2021	November 2023	L+	1.45%	214,500		190,000
11 West 34th Street	30.00	%	January 2022	January 2023	L+	1.45%	23,000		23,000
55 West 46th Street (8)	25.00	%	August 2022	August 2024	L+	1.25%	192,524		192,524
115 Spring Street	51.00	%	September 2023	September 2023	L+	3.40%	65,550		65,550
100 Park Avenue	49.90	%	December 2023	December 2025	L+	2.25%	360,000		356,972
15 Beekman (9)	20.00	%	January 2024	July 2025	L+	1.50%	11,212		—
10 East 53rd Street	55.00	%	February 2025	February 2025	L+	1.35%	220,000		170,000
One Madison Avenue (10)	50.50	%	November 2025	November 2026	L+	3.35%	—		—
605 West 42nd Street	20.00	%	August 2027	August 2027	L+	1.44%	550,000		550,000
21 East 66th Street	32.28	%	June 2033	June 2033	T+	2.75%	677		712
Total floating rate debt							$	4,257,792	$	3,691,686
Total joint venture mortgages and other loans payable							$	9,862,650	$	9,043,407
Deferred financing costs, net							(113,446)		(91,538)
Total joint venture mortgages and other loans payable, net							$	9,749,204	$	8,951,869

(1)Economic interest represents the Company's interests in the joint venture as of December 31, 2020. Changes in ownership or economic interests, if any, within the current year are disclosed in the notes to the investment in unconsolidated joint ventures table above.

(2)Reflects exercise of all available options. The ability to exercise extension options may be subject to certain tests based on the operating performance of the property.

(3)Interest rates as of December 31, 2020, taking into account interest rate hedges in effect during the period. Floating rate debt is presented with the stated spread over the 30-day LIBOR ("L") or 1-year Treasury ("T").

(4)The Company holds 100% of the preferred equity interest in the property and believes that there is no value to the common equity.

(5)Comprised of three mortgages totaling $132.4 million that mature in April 2028 and two mortgages totaling $63.5 million that mature in July 2029.

(6)This loan matured in November 2020. The Company is in discussions with the lender on resolution.

(7)This loan is a $1.75 billion construction facility with reductions in interest cost based on meeting conditions, the first of which has been satisfied, and has an initial term of three years with two one year extension options. Advances under the loan are subject to costs incurred. In conjunction with the loan, we provided partial guarantees for interest and principal payments, the amounts of which are based on certain construction milestones and operating metrics.

(8)This loan has a committed amount of $198.0 million, of which $5.5 million was unfunded as of December 31, 2020. In February 2021, along with our joint venture partner, we entered into contract to sell the property. This transaction is expected to close in the first quarter of 2021.

(9)This loan is a $125.0 million construction facility. Advances under the loan are subject to costs incurred.

(10)The loan is a $1.25 billion construction facility with an initial term of five years with one one year extension option. Advances under the loan are subject to costs incurred. As of December 31, 2020 no draws have been made under this facility. In conjunction with the loan, we provided partial guarantees for interest and principal payments, the amounts of which are based on certain construction milestones and operating metrics.

We are entitled to receive fees for providing management, leasing, construction supervision and asset management services to certain of our joint ventures. We earned $15.8 million, $13.0 million and $14.2 million from these services, net of our ownership share of the joint ventures, for the years ended December 31, 2020, 2019, and 2018, respectively. In addition, we have the ability to earn incentive fees based on the ultimate financial performance of certain of the joint venture properties.

The combined balance sheets for the unconsolidated joint ventures, at December 31, 2020 and 2019, are as follows (in thousands):

	December 31, 2020		December 31, 2019
Assets (1)
Commercial real estate property, net	$	16,143,880	$	14,349,628
Cash and restricted cash	357,076		336,189
Tenant and other receivables, related party receivables, and deferred rents receivable	403,883		371,065
Other assets	2,001,612		2,039,429
Total assets	$	18,906,451	$	17,096,311
Liabilities and equity (1)
Mortgages and other loans payable, net	$	9,749,204	$	8,951,869
Deferred revenue/gain	1,341,571		1,501,616
Lease liabilities	1,002,563		897,380
Other liabilities	464,107		308,304
Equity	6,349,006		5,437,142
Total liabilities and equity	$	18,906,451	$	17,096,311
Company's investments in unconsolidated joint ventures	$	3,823,322	$	2,912,842

(1)The combined assets, liabilities and equity for the unconsolidated joint ventures reflects the effect of step ups in basis on the retained non-controlling interests in deconsolidated investments as a result of the adoption of ASC 610-20 in January 2018. In addition, at December 31, 2020, $170.6 million of net unamortized basis differences between the amount at which our investments are carried and our share of equity in net assets of the underlying property will be amortized through equity in net income (loss) from unconsolidated joint ventures over the remaining life of the underlying items having given rise to the differences.

The combined statements of operations for the unconsolidated joint ventures, from acquisition date through the years ended December 31, 2020, 2019, and 2018 are as follows (unaudited, in thousands):

	Year Ended December 31,
	2020		2019		2018
Total revenues	$	1,133,217	$	1,163,534	$	1,244,804
Operating expenses	180,201		202,881		219,440
Real estate taxes	220,633		212,355		226,961
Operating lease rent	24,134		24,816		18,697
Interest expense, net of interest income	325,500		372,408		363,055
Amortization of deferred financing costs	20,427		19,336		21,634
Transaction related costs	—		—		—
Depreciation and amortization	407,834		407,697		421,458
Total expenses	$	1,178,729	$	1,239,493	$	1,271,245
Loss on early extinguishment of debt	(194)		(1,031)		—
Net loss before gain on sale (1)	$	(45,706)	$	(76,990)	$	(26,441)
Company's equity in net loss income from unconsolidated joint ventures (1)	$	(25,195)	$	(34,518)	$	7,311

(1)The combined statements of operations and the Company's equity in net (loss) income for the unconsolidated joint ventures reflects the effect of step ups in basis on the retained non-controlling interests in deconsolidated investments as a result of the adoption of ASC 610-20 in January 2018.