Investments in Joint Ventures

6 Months Ended

Jun. 30, 2011

Investments in Joint Ventures [Abstract]

4. Investments in Joint Ventures

In May 2011, we sold two operating properties, Country Walk Plaza in Miami, FL and Veranda Shoppes in Plantation, FL to a newly formed joint venture between us and CRF for gross proceeds of approximately $39.2 million. CRF holds a 70% interest in the joint venture and we own a 30% interest. We will perform the day to day accounting and property management functions for the joint venture and, as such, will earn a management fee for the services provided. Our ownership interest in this joint venture is accounted for under the equity method.

In December 2010, we acquired ownership interests in three properties through joint ventures. Two of the properties are located in California and were acquired through partnerships (the “Equity One/Vestar JVs”) with Vestar Development Company (“Vestar”). In both of these joint ventures, we hold a 95% interest, and they are consolidated. Each Equity One/Vestar JV holds a 50.5% ownership interest in each of the California properties through two separate joint ventures with Rockwood Capital (the “Rockwood JVs”). The Equity One/Vestar JVs’ ownership interests in the properties are accounted for under the equity method. Included in our investment are two bridge loans with an aggregate balance of $35.0 million, secured by the properties, made by the Equity One/Vestar JVs to the Rockwood JVs as short-term financing until longer-term mortgage financing can be obtained. If the Rockwood JVs are unable to obtain financing, the Equity One/Vestar JVs may be contractually required to convert all or a portion of the bridge loans to equity or purchase some or all of Rockwood’s remaining ownership interest. On August 2, 2011, one of the bridge loans and related accrued interest was repaid to us with proceeds from a new mortgage entered into by the JV.

The Rockwood JVs are considered VIEs for which the Equity One/Vestar JVs, which we control, are not the primary beneficiary. The Rockwood JVs were primarily established to own and operate real estate and were deemed VIEs because the initial equity investment at risk may not be sufficient to permit the entities to finance their activities without additional financial support. Additional equity may be required from the partners if the ventures are unable to refinance with longer term mortgage debt in excess of the $35.0 million bridge loans. We determined that the Equity One/Vestar JVs are not the primary beneficiaries of these VIEs based on shared control of the VIEs and the lack of controlling financial interest.

Our aggregate investment in these VIEs was approximately $46.7 million as of June 30, 2011, which is included in investments in and advances to joint ventures in the accompanying condensed consolidated balance sheets. Our maximum exposure to loss as a result of our involvement with these VIEs is estimated to be $46.7 million, which primarily represents our current investment and estimated future funding commitments and buyout provisions. We have not provided financial support to these VIEs, other than as contractually required, and all future funding will be provided in the form of capital contributions by Rockwood and the Equity One/Vestar JVs in accordance with the respective ownership percentages.

In connection with the CapCo acquisition on January 4, 2011, we acquired ownership interests in three properties located in California through joint ventures, tenants-in-common or other shared ownership. The joint ventures include Pacific Financial Center, Parnassus Heights Medical Center, and Trio Apartments. The aggregate fair value of these joint ventures as of January 4, 2011 was $48.1 million. Our ownership interests in these properties are accounted for under the equity method.

In addition, in connection with our acquisition of CapCo, we acquired a special purpose entity which holds a 58% controlling interest in the Senator office building located in Sacramento, California. At the time of our acquisition, the special purpose entity and the other co-owners in the Senator building were in default of a $38.3 million loan secured by the property. The loan is non-recourse, other than for certain customary carve-outs which are also guaranteed by Equity One Realty & Management CA, Inc., the entity formerly known as Capital & Counties USA, Inc. As a result of the continuing default, the lender and special servicer have accelerated the loan and have commenced foreclosure proceedings with respect to our interest in the property. It has been our intention since the date we acquired our interest in the property to cooperate with the special servicer and lender to relinquish title. Accordingly, we recently consented to the lender’s appointment of a receiver to manage the property and we have agreed not to obstruct the the lender and special servicer’s efforts to consummate the foreclosure. Although we and the other co-owners continued to hold title to the property as of June 30, 2011, we have assigned no value to our interest in this special purpose entity and we recorded a liability of $3.4 million for costs related to the disposition of this property which is included in other liabilities in the condensed consolidated balance sheet at June 30, 2011. There can be no assurance that we will be able to resolve this matter in a short period of time.

As of June 30, 2011, our investments in and advances to unconsolidated joint ventures was composed of the following:


				Investment Balance
	Number of			June 30,		December 31,
Joint Venture	Properties	Location	Ownership	2011		2010
				(In thousands)
Investments in unconsolidated joint ventures:
GRI-EQY I, LLC ⁽¹⁾	10	GA, SC, FL	10.0%	$	6,672	$	7,046
G&I Investment South Florida Portfolio, LLC	3	FL	20.0%		3,357		3,109
Madison 2260, Realty, LLC	1	NY	8.6%		1,066		1,066
Madison 1235, Realty, LLC	1	NY	20.1%		1,000		1,000
Talega Village Center JV, LLC ⁽²⁾	1	CA	50.5%		3,822		3,916
Vernola Marketplace JV, LLC ⁽²⁾	1	CA	50.5%		7,868		8,127
Parnassus Heights Medical Center	1	CA	50.0%		14,261		—
621 Colorado Associates, LLC ⁽³⁾	1	CA	68.2%		26,235		—
Pacific Financial Center, LLC	1	CA	50.0%		9,397		—
Equity One JV Portfolio, LLC ⁽⁴⁾	2	FL	30.0%		7,376		—

Total					81,054		24,264


Advances to unconsolidated joint ventures ⁽⁵⁾					40,129		35,472


Investments in and advances to unconsolidated joint ventures				$	121,183	$	59,736


⁽¹⁾		The investment balance is presented net of deferred gains of approximately $3.3 million associated with the disposition of assets by us to the joint venture.

⁽²⁾		Our effective interest is 48% when considering the 5% noncontrolling interest held by Vestar.

⁽³⁾		Ownership percentage based on a hypothetical liquidation which considers the preferred return structure of the joint venture.

⁽⁴⁾		The investment balance is presented net of a deferred gain of approximately $404,000 associated with the disposition of assets by us to the joint venture.

⁽⁵⁾		Included in this amount is the $35.0 million in bridge loans to the Rockwood JVs and a $4.6 million receivable associated with the sale of an outparcel to the GRI JV.

Equity in income (loss) in unconsolidated joint ventures totaled approximately $177,000 and $811,000 for the three and six months ended June 30, 2011, respectively, and totaled $(42,000) and $(82,000), respectively, for the same periods in 2010. Fees paid to us associated with these joint ventures, which are included in management and leasing services revenue in the accompanying condensed consolidated statements of income, totaled approximately $547,000 and $914,000 for the three and six months ended June 30, 2011, respectively, and $381,000 and $741,000, respectively, for the three and six months ended June 30, 2010.

- Definition

The entire disclosure for equity investment, or group of investments, for which combined disclosure is appropriate, including: (a) the name of each investee and percentage of ownership of common stock, (b) accounting policies for investments in common stock, (c) difference between the amount at which the investment is carried and the amount of underlying equity in net assets and the accounting treatment of the difference, (d) the total fair value of each identified investment for which a market value is available, (e) summarized information as to assets, liabilities, and results of operations of the investees (for investments in unconsolidated subsidiaries, common stock of joint ventures, or other investments using the equity method), and (f) material effects of possible conversions, exercises, or contingent issuances of the investee. Other disclosures include (a) the names of any investee in which the investor owns 20 percent or more of the voting stock and investment is not accounted for using the equity method, and the reasons why not, and (b) the names of any investee in which the investor owns less than 20 percent of the voting stock and the investment is accounted for using the equity method, and the reasons why it is.

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