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Investment in Unconsolidated Joint Ventures
 6 Months Ended
Jun. 30, 2021
Equity Method Investments and Joint Ventures [Abstract]  
Investment in Unconsolidated Joint Ventures Investment in Unconsolidated Joint Ventures
On November 19, 2018, we formed the VAA joint venture with the Macquarie Group (“Macquarie”). In connection with the formation of VAA, we sold a 50% ownership interest in certain multifamily properties to Macquarie for a $236,800 cash payment, resulting in a gain on sale of assets of $154,100. In connection with the formation of VAA, ten out of the 51 properties were subject to an earn-out provision ("Earn Out") that provides for a remeasurement of value after a two-year period following the completion of construction. Upon the formation of VAA, we recorded a liability ("Earn Out Obligation") for the $10,000 advance on the Earn Out that we received from Macquarie.
Upon receipt of funds, both parties transferred their respective ownership interests in the multifamily projects ("VAA Portfolio") to VAA in exchange for a 50% voting interest and a 49% profit participation interest ("Class A interest") in VAA and note payable (“Mezzanine Loan”) in accordance with the terms of a contribution agreement (the “Contribution”). Upon completion of the Contribution, VAA owned and controlled 51 multifamily properties. VAA assumed all liabilities of those properties, including mortgage debt insured by the Department of Housing and Urban Development (“HUD”).
Concurrent with the formation of the joint venture, VAA issued Class B interests with a 2% profits participation interest and no voting rights to Daniel J. Moos, our former President and Chief Executive Officer (“Class B Member”). The Class B Member serves as the manager of VAA.
Interest on the Mezzanine loan is limited to cash generated from the properties and matures concurrently with the termination of VAA. Accordingly, we account for our interest in the Mezzanine Loan as an addition to our equity interest and include interest income on the Mezzanine loan in income from unconsolidated joint ventures.
On March 30, 2021, we sold a 50% ownership interest in Overlook at Allensville Phase II, a 144 unit multifamily property in Sevierville, Tennessee to Macquarie for $2,551, resulting in gain on sale of $1,417. Concurrent with the sale, we each contributed our 50% ownership interests in Overlook at Allensville Phase II into VAA.
On July 13, 2021, we received the arbitration result of our dispute with Macquarie regarding the measurement of the Earn Out Obligation. Our position and claims were declined, and the position of Macquarie was fully accepted. As a result, we are required to pay approximately $39,600 to Macquarie to satisfy the Earn Out Obligation, and therefore, recorded a charge of $29,600 during the three and six months ended June 30, 2021 (See Note 7 – Real Estate Activity).
We plan to pay the Earn Out Obligation from our share of future distributions from VAA, which generally occur each six months.
We also own a 20% ownership interest in a 20% interest in Gruppa Florentina, LLC ("Milano"), which operates several pizza parlors in Central and Northern California. Milano also has 23 franchised locations, including two operating, under the trade name Angelo & Vito’s Pizzerias.
The following is a summary of our investment in unconsolidated joint ventures:
June 30, 2021December 31, 2020
Assets (1)
Real estate$1,235,313 $1,230,197 
Other assets113,474 113,537 
   Total assets$1,348,787 $1,343,734 
Liabilities and Partners Capital (1)
Mortgage notes payable$871,503 $843,522 
Mezzanine notes payable245,356 239,878 
Other liabilities36,783 45,619 
Our share of partners' capital84,964 93,334 
Outside partner's capital110,181 121,381 
   Total liabilities and partners' capital$1,348,787 $1,343,734 
Investment in unconsolidated joint ventures
Our share of partners' capital$122,678 $93,334 
Our share of Mezzanine note payable84,964 119,939 
Basis adjustment (2)(147,306)(152,848)
   Total investment in unconsolidated joint ventures$60,336 $60,425 
(1)    These amounts include the assets of VAA of $1,284,063 and $1,279,197 at June 30, 2021 and December 31, 2020, respectively, and liabilities of VAA of $1,130,957 and $1,106,231 at June 30, 2021 and December 31, 2020, respectively.
(2)     We amortize the difference between the cost of our investments in unconsolidated joint ventures and the book value of our underlying equity into income on a straight-line basis consistent with the lives of the underlying assets.
The following is a summary of income (loss) from our investments in unconsolidated joint ventures:
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Revenue (1)
   Rental revenue$32,037 $28,648 $63,107 $56,842 
   Other revenue17,762 14,057 33,051 28,836 
      Total revenue49,799 42,705 96,158 85,678 
Expenses (2)
   Operating expenses31,214 27,584 59,253 54,681 
   Depreciation and amortization8,137 8,114 16,199 16,122 
   Other income— — (2,356)— 
   Interest13,890 14,337 28,065 29,519 
      Total expenses53,241 50,035 101,161 100,322 
Net loss$(3,442)$(7,330)$(5,003)$(14,644)
Our equity in the income (loss) in unconsolidated joint ventures$4,572 $(719)$7,908 $(979)
(1)    These amounts include revenue of VAA of $34,146 and $29,725 during the three months ended June 30, 2021 and 2020, respectively, and $66,831 and $59,284 during the six months ended June 30, 2021 and 2020, respectively.
(2)    These amounts include expenses of VAA of $38,904 and $37,593 during the three months ended June 30, 2021 and 2020, respectively, and $74,005 and $75,046 during the six months ended June 30, 2021 and 2020, respectively.