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Investment in Unconsolidated Joint Ventures
 3 Months Ended
Mar. 31, 2022
Equity Method Investments and Joint Ventures [Abstract]  
Investment in Unconsolidated Joint Ventures Investment in Unconsolidated Joint Ventures
On November 16, 2018, we formed Victory Abode Apartments, LLC ("VAA"), a joint venture with the Macquarie Group (“Macquarie”). VAA was formed as a result of a sale of the 50% ownership interest in 51 multifamily properties owned by us in exchange for a 50% voting interest / 49% profit participation interest ("Class A interest") in VAA and a note payable (“Mezzanine Loan”). Concurrent with the Contribution, 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 additional equity interest and include any interest payments accrued as income from unconsolidated joint ventures.In connection with the formation of VAA, ten out of the initial 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.
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 a dispute 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 months ended March 31, 2022 (See Note 7 – Real Estate Activity). In accordance with the joint venture operating agreement, the Earn Out Obligation will be paid from our share of future distributions from VAA, which generally occur each six months. As of March 31, 2022, we owe $27,147 under the Earn Out Obligation.
On November 17, 2021, we entered into a Major Decision with Macquarie to engage a broker and initiate a sale of all the properties held by the VAA. In connection with the sale, VAA will distribute seven of its existing properties to us (referred to herein as the "Holdback Properties") and we in turn, will contribute one of our properties ("Contributed Property") into the portfolio offered for sale to third-parties. The remaining forty-five properties are referred to herein as the VAA Portfolio. The sales price for the Holdback Properties and Contributed Property will be the estimated value of these properties as stated in the agreement, multiplied by the ratio of the actual sales price of the VAA Portfolio over the estimated value of the portfolio as stated in the agreement.
Each of the properties in the VAA Portfolio is appraised on an annual basis as part of our filing requirement with the TASE. As of March 31, 2022, the fair value of the VAA Portfolio, based on these appraisals was $1.4 billion. The appraised value reflects an aggregate of individual property appraised value and does not reflect a premium that is sometimes offered in a portfolio sale. These values reflect a compression of cap rates for multifamily properties during the last year. However, there can be no assurances that these values will be realized. The Major Decision agreement will terminate on August 1, 2022, if the VAA Portfolio has not been sold.
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:
March 31, 2022December 31, 2021
Assets (1)
Real estate$1,213,324 $1,220,391 
Other assets108,877 127,464 
   Total assets$1,322,201 $1,347,855 
Liabilities and Partners' Capital (1)
Mortgage notes payable$860,489 $867,430 
Mezzanine notes payable238,952 242,942 
Other liabilities34,837 49,877 
Our share of partners' capital80,165 80,602 
Outside partner's capital107,758 107,004 
   Total liabilities and partners' capital$1,322,201 $1,347,855 
Investment in unconsolidated joint ventures
Our share of partners' capital$80,165 $80,602 
Our share of Mezzanine note payable120,842 125,306 
Basis adjustment (2)(141,204)(144,287)
   Total investment in unconsolidated joint ventures$59,803 $61,621 
(1)    These amounts include the assets of VAA of $1,255,390 and $1,280,867 at March 31, 2022 and December 31, 2021, respectively, and liabilities of VAA of $1,113,466 and $1,137,273 at March 31, 2022 and December 31, 2021, 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 March 31,
20222021
Revenue (1)
   Rental revenue$34,848 $31,070 
   Other revenue11,477 15,289 
      Total revenue46,325 46,359 
Expenses (2)
   Operating expenses25,874 28,039 
   Depreciation and amortization8,151 8,062 
   Other income— (2,356)
   Interest13,566 14,175 
      Total expenses47,591 47,920 
Net loss$(1,266)$(1,561)
Our equity in the income (loss) in unconsolidated joint ventures$5,194 $3,336 
(1)    These amounts include revenue of VAA of $36,666 and $32,685 during the three months ended March 31, 2022 and 2021, respectively.
(2)    These amounts include expenses of VAA of $38,336 and $35,101 during the three months ended March 31, 2022 and 2021, respectively.