VARIABLE INTEREST ENTITIES

3 Months Ended

May 04, 2024

VARIABLE INTEREST ENTITIES

VARIABLE INTEREST ENTITIES

NOTE 5—VARIABLE INTEREST ENTITIES

Consolidated Variable Interest Entities and Noncontrolling Interests

In fiscal 2022, we formed eight privately-held limited liability companies (each, a “Member LLC” and collectively, the “Member LLCs” or the “consolidated variable interest entities”) for real estate development activities related to our Gallery transformation and global expansion strategies.

The carrying amounts and classification of the Member LLCs’ assets and liabilities included in the condensed consolidated balance sheets were as follows:

	MAY 4,		FEBRUARY 3,
	2024		2024
	(in thousands)
ASSETS
Cash and cash equivalents	$	9,324	$	8,918
Prepaid expense and other current assets		1,401		1,876
Total current assets		10,725		10,794
Property and equipment—net(1)		263,798		256,523
Other non-current assets		6		6
Total assets	$	274,529	$	267,323
LIABILITIES
Accounts payable and accrued expenses	$	4,950	$	8,735
Other current liabilities		232		1,041
Total current liabilities		5,182		9,776
Real estate loans—net(2)		17,679		17,766
Other non-current obligations		941		947
Total liabilities	$	23,802	$	28,489

(1) Includes $49 million and $77 million of construction in progress as of May 4, 2024 and February 3, 2024, respectively.

(2) Real estate loans are secured by the assets of each respective Member LLC and the associated creditors do not have recourse against RH’s general assets. Excludes $0.2 million and $0.1 million of current obligations related to such loans that are included in other current liabilities on the condensed consolidated balance sheets as of May 4, 2024 and February 3, 2024, respectively.

On August 3, 2022, a Member LLC as the borrower executed a Secured Promissory Note (the “Secured Promissory Note”) with a third-party in an aggregate principal amount equal to $2.0 million with a maturity date of August 1, 2032. The Secured Promissory Note bears interest at a fixed rate per annum equal to 6.00%.

On September 9, 2022, a Member LLC as the borrower executed a Promissory Note (the “Promissory Note”) with a third-party bank in an aggregate principal amount equal to $16 million with a maturity date of September 9, 2032. The Promissory Note bears interest at a fixed rate per annum equal to 5.37% until September 15, 2027, on which date the interest rate will reset based on the five-year treasury rate plus 2.00%, subject to a total interest rate floor of 3.00%.

Equity Method Investments

Equity method investments primarily represent our membership interests in three privately-held limited liability companies in Aspen, Colorado (each, an “Aspen LLC” and collectively, the “Aspen LLCs”) that were formed for the purpose of acquiring, developing, operating and selling certain real estate projects in Aspen, Colorado. As of May 4, 2024, we have made capital contributions of approximately $140 million to the Aspen LLCs. Additionally, Waterworks has membership interests in two European entities that are equity method investments.

Our maximum exposure to loss is the carrying value of each of the equity method investments as of May 4, 2024. During the three months ended May 4, 2024 and April 29, 2023, we did not receive any distributions or have any undistributed earnings of equity method investments.