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Investment in Unconsolidated Joint Ventures
 6 Months Ended
Jun. 30, 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 of the initial properties were subject to an earn-out provision ("Earn Out") that provided for a remeasurement of value after a two-year period following the completion of construction. Upon the formation of VAA, we recorded an initial 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 and six months ended June 30, 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. At June 30, 2022, we owed $27,147 under the Earn Out Obligation. On July 16, 2022, our $10,178 distribution from VAA was paid directly to Macquarie as an additional reduction of the Earn Out Obligation.
On November 17, 2021, we entered into an agreement with Macquarie to pursue a sale of forty-five properties ("Sale Portfolio") owned by VAA in accordance with the provisions of the joint venture agreement. The parties further agreed that we would be able to acquire the remaining seven of the properties (“Holdback Properties”) from VAA at an agreed upon market price.
On June 17, 2022, VAA entered into an agreement (“PSA”) to sell Sale Portfolio to two private equity funds (collectively, the “Buyer”) for $1,825,000. In connection with the transaction, we plan to sell Sugar Mill Phase III to the Buyer. The PSA provides for an inspection period in which the Buyer may decrease the number of properties acquired by up to five properties. In connection with the PSA, the Buyer deposited $50,000 into escrow. The sale is expected to be completed in the third quarter of 2022. VAA intends to distribute the net proceeds and the Holdback Properties to the Members immediately following the completion of the sale.
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, 2022December 31, 2021
Assets (1)
Assets held for sale$1,119,125 $1,135,769 
Real estate142,481 142,629 
Other assets62,686 69,457 
   Total assets$1,324,292 $1,347,855 
Liabilities and Partners' Capital (1)
Liabilities on assets held for sale$796,076 $807,382 
Mortgage notes payable86,478 83,955 
Mezzanine notes payable238,952 242,942 
Other liabilities34,512 25,970 
Our share of partners' capital73,623 80,602 
Outside partner's capital94,651 107,004 
   Total liabilities and partners' capital$1,324,292 $1,347,855 
Investment in unconsolidated joint ventures
Our share of partners' capital$73,623 $80,602 
Our share of Mezzanine note payable123,512 125,306 
Basis adjustment (2)(137,884)(144,287)
   Total investment in unconsolidated joint ventures$59,251 $61,621 
(1)    These amounts include the assets of VAA of $1,261,647 and $1,280,867 at June 30, 2022 and December 31, 2021, respectively, and liabilities of VAA of $332,353 and $329,891 at June 30, 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 from our investments in unconsolidated joint ventures:
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Revenue (1)
   Rental revenue$4,032 $3,613 $7,963 $7,135 
   Other revenue15,901 15,842 25,702 29,673 
      Total revenue19,933 19,455 33,665 36,808 
Expenses (2)
   Operating expenses25,060 16,385 36,531 30,818 
   Depreciation and amortization1,134 1,199 2,322 2,398 
   Interest6,253 5,999 12,028 11,937 
      Total expenses32,447 23,583 50,881 45,153 
Loss from continuing operations(12,514)(4,128)(17,216)(8,345)
Income from discontinued operations4,512 686 7,948 3,342 
Net loss$(8,002)$(3,442)$(9,268)$(5,003)
Equity in the income in unconsolidated joint ventures$2,048 $4,572 $7,242 $7,908 
(1)    These amounts include revenue of VAA of $4,268 and $3,802 for the three months ended June 30, 2022 and 2021, respectively, and $8,341 and $7,481 during the six months ended June 30, 2022 and 2021, respectively.
(2)    These amounts include expenses of VAA of $17,486 and $9,246 for the three months ended June 30, 2022 and 2021, respectively, and $26,665 and $17,997 during the six months ended June 30, 2022 and 2021, respectively.