Investment in Unconsolidated Joint Ventures

Investment Summary

The following table summarizes the Company's investments in unconsolidated joint ventures:



		Ownership Interest				Investment at
Joint Venture	Date of Investment	September 30, 2012		December 31, 2011		September 30, 2012		December 31, 2011
MS Inland Fund, LLC (a)	4/27/2007	20.0	%	20.0	%	$	6,348	$	9,246
Hampton Retail Colorado, L.L.C. (b)	8/31/2007	95.9	%	95.9	%	—		1,124
RC Inland L.P. (c)	9/30/2010	20.0	%	20.0	%	40,894		53,800
Oak Property and Casualty LLC (d)	10/1/2006	25.0	%	25.0	%	6,375		8,759
Britomart (e)	12/15/2011	N/A		15.0	%	—		8,239
						$	53,617	$	81,168


(a)	The MS Inland Fund, LLC (MS Inland) joint venture was formed with a large state pension fund; the Company is the managing member of the venture and earns fees for providing property management, acquisition and leasing services.


(b)	The ownership percentage in Hampton Retail Colorado, L.L.C., or Hampton, is based upon the Company's pro rata capital contributions to date. Subject to the maximum capital contributions specified within the organizational documents, the Company's ownership percentage could increase to 96.3%.

During the nine months ended September 30, 2012, the Company's share of net losses realized by and distributions received from the venture since its inception exceeded the carrying amount of the Company's investment in Hampton. At such point and because the Company has no obligation to fund additional losses, application of the equity method of accounting was discontinued and through September 30, 2012, $88, representing the Company's share of losses in excess of its investment in Hampton, was not recorded in the Company's condensed consolidated financial statements.

(c)

The joint venture (RioCan) was formed with a wholly-owned subsidiary of RioCan Real Estate Investment Trust, a REIT based in Canada. The initial investment in 2010 included eight grocery and necessity-based-anchored shopping centers located in Texas. RioCan contributed cash for an 80% interest in the venture and the Company contributed a 20% interest in the properties. For properties contributed to the venture by the Company, the joint venture acquired an 80% interest from the Company in exchange for cash. Such transactions were accounted for as partial sales by the Company. Certain of the properties contained earnout provisions which, when met, resulted in or could result in additional sales proceeds to the Company. Activity subsequent to inception of the joint venture has also included acquisitions of multi-tenant retail properties from third parties. A subsidiary of the Company is the general partner of the joint venture and earns fees for providing property management, asset management and other customary services.


(d)	Oak Property & Casualty LLC (Oak Property and Casualty), or the Captive, is accounted for as an equity method investment by the Company pursuant to the terms and conditions of the Oak Property and Casualty organizational documents. Refer to Note 1 for further information.

(e)

In a non-cash transaction on December 15, 2011, the Company, through a consolidated joint venture, contributed an $8,239 note receivable to two joint ventures under common control (collectively referred to as Britomart) in return for a 15% noncontrolling ownership interest. Neither the Company nor its consolidated joint venture had any management responsibilities with respect to Britomart, which as of December 31, 2011 owned one vacant land parcel and one single-tenant office building in Auckland, New Zealand.

Pursuant to the terms and conditions of the organizational documents, the noncontrolling interest holder's ownership interests were redeemed in full effective February 15, 2012. Such redemption was settled on February 15, 2012 by transferring to the noncontrolling interest holder $525 in restricted cash and the Company's entire interest in Britomart. This resulted in a $525 decrease in "Redeemable noncontrolling interests" and an $8,477 decrease in "Other financings" in the accompanying condensed consolidated balance sheets as well as a gain of $241 recognized within "Other income (expense), net" in the accompanying condensed consolidated statements of operations and other comprehensive loss.

The Company has the ability to exercise significant influence, but does not have the financial or operating control over these investments, and as a result the Company accounts for these investments pursuant to the equity method of accounting, except as discussed above. Under the equity method of accounting, the net equity investment of the Company is reflected in the accompanying condensed consolidated balance sheets and the accompanying condensed consolidated statements of operations and other comprehensive loss includes the Company's share of net income or loss from each unconsolidated joint venture. Distributions from these investments that are related to income from operations are included as operating activities and distributions that are related to capital transactions are included in investing activities in the Company's condensed consolidated statements of cash flows.

Profits, Losses and Capital Activity

The following tables summarize the Company's share of net income (loss) as well as net cash distributions from (contributions to) each unconsolidated joint venture:



	The Company's Share of Net Income (Loss) for the Three Months Ended September 30,						Net Cash Distributions from/(Contributions to) Joint Ventures for the Three Months Ended September 30,					Fees Earned by the Company for the Three Months Ended September 30,
Joint Venture	2012			2011			2012		2011			2012		2011
MS Inland	$	2		$	(361	)	$	370	$	(470	)	$	188	$	244
Hampton (a)	—			(1		)	16		(50		)	—		22
RioCan	(672		)	(464		)	682		(3,158		)	512		308
Oak Property and Casualty	(1,252		)	(1,090		)	—		(3		)	—		—
Britomart (b)	—			—			—		—			—		—
	$	(1,922	)	$	(1,916	)	$	1,068	$	(3,681	)	$	700	$	574



	The Company's Share of Net Income (Loss) for the Nine Months Ended September 30,						Net Cash Distributions from/(Contributions to) Joint Ventures for the Nine Months Ended September 30,						Fees Earned by the Company for the Nine Months Ended September 30,
Joint Venture	2012			2011			2012			2011			2012		2011
MS Inland	$	(122	)	$	(552	)	$	3,761		$	(30	)	$	618	$	795
Hampton (a)	(1,092		)	(3,547		)	53			(365		)	2		65
RioCan	(1,815		)	(1,041		)	10,224			(5,765		)	1,559		722
Oak Property and Casualty	(2,577		)	(1,063		)	(193		)	60			—		—
Britomart (b)	—			—			—			—			—		—
	$	(5,606	)	$	(6,203	)	$	13,845		$	(6,100	)	$	2,179	$	1,582

(a)

During the three and nine months ended September 30, 2012, Hampton determined that the carrying value of certain of its assets was not recoverable and, accordingly, recorded impairment charges in the amounts of $71 and $1,593, of which the Company's share was $68 and $1,527, respectively. During the nine months ended September 30, 2011, Hampton recorded impairment charges in the amount of $4,067, of which the Company's share was $3,897, No impairment charges were recorded during the three months ended September 30, 2011. The joint venture's estimates of fair value relating to these impairment assessments were based upon bona fide purchase offers.


(b)	As previously discussed, the Company transferred its entire interest in Britomart in a non-cash transaction to the noncontrolling interest holder in a consolidated joint venture of the Company on February 15, 2012.

In addition to the Company's share of net income (loss) for each unconsolidated joint venture, amortization of basis differences resulting from the Company's previous contributions of investment properties to its unconsolidated joint ventures is recorded within "Equity in loss of unconsolidated joint ventures, net" in the condensed consolidated statements of operations and other comprehensive loss. Such basis differences resulted from the differences between the historical cost net book values and fair values of the contributed properties and are amortized over the depreciable lives of the joint ventures' property assets. The Company recorded amortization of $59 and $47 during the three months ended September 30, 2012 and 2011, respectively, related to this difference. The Company recorded amortization of $139 and $175 related to this difference during the nine months ended September 30, 2012 and 2011, respectively.

Property Acquisitions and Dispositions

The following table summarizes the acquisition activity during the nine months ended September 30, 2012 for the Company's unconsolidated joint ventures:

Joint Venture

Date

Square

Footage

Property Type

Property Name

Purchase

Price

Pro Rata Equity

Contribution (a)

RioCan

February 23, 2012

134,900

Multi-tenant retail

Southlake Corners

35,366

2,738

(b)


(a)	Amount represents the Company's contribution of its proportionate share of the acquisition price net of customary prorations and net of mortgage proceeds.

(b)

The RioCan joint venture acquired Southlake Corners from the MS Inland joint venture. The Company did not recognize its proportionate share of the gain realized by MS Inland upon disposition through "Equity in loss of unconsolidated joint ventures" due to its continuing involvement in the property. The Company received a cash distribution in the amount of $2,723 from the MS Inland joint venture representing its share of the sales price net of mortgage debt repayment.

During the nine months ended September 30, 2012, Hampton sold a single-user retail property and a multi-tenant retail property aggregating 86,700 square feet for a combined sales price of $5,450. No gain or loss was recognized at disposition as impairment charges of $71 and $1,593 were recognized during the three and nine months ended September 30, 2012, respectively. Proceeds from the sales were used to pay down $5,035 of the joint venture's outstanding debt. As of September 30, 2012, there were two properties remaining in the Hampton joint venture.

The Company's investments in unconsolidated joint ventures are reviewed for potential impairment, in addition to impairment evaluations of the individual assets underlying these investments, whenever events or changes in circumstances warrant such an evaluation. To determine whether impairment is other-than-temporary, the Company considers whether it has the ability and intent to hold the investment until the carrying value is fully recovered. As a result, the carrying value of its investment in the unconsolidated joint ventures was determined to be fully recoverable as of September 30, 2012 and 2011.