Note 4 – Investments in Unconsolidated Joint Ventures

The Company conducts a portion of its property rental activities through investments in unconsolidated joint ventures for which the Company holds less than a controlling interest. The Company’s partners in these unconsolidated joint ventures are unrelated real estate entities or commercial enterprises. The Company and its unconsolidated joint venture partners make initial and/or ongoing capital contributions to these unconsolidated joint ventures. The obligations to make capital contributions are governed by each unconsolidated joint venture’s respective operating agreement and related governing documents.

The Company currently has investments in four unconsolidated entities: (i) GS Portfolio Holdings II LLC (the “GGP I JV”), a joint venture between Seritage and a subsidiary of GGP Inc. (together with its subsidiaries, “GGP”); (ii) GS Portfolio Holdings (2017) LLC (the “GGP II JV” and, together with GGP I JV, the “GGP JVs”), a joint venture between Seritage and a subsidiary of GGP; (iii) SPS Portfolio Holdings II LLC (the “Simon JV”), a joint venture between Seritage and a subsidiary of Simon Property Group, Inc. (together with its subsidiaries, “Simon”); and (iv) MS Portfolio LLC (the “Macerich JV”), a joint venture between Seritage and a subsidiary of The Macerich Company (together with its subsidiaries, “Macerich”). A substantial majority of the space at the JV Properties is leased to Sears Holdings under the JV Master Leases which include recapture rights and termination rights with similar terms as those described under the Master Lease.

GGP Transactions

On July 12, 2017, the Company completed two transactions with GGP for gross consideration of $247.6 million whereby the Company (i) sold to GGP the Company’s 50% JV Interests in eight of the 12 assets in the GGP I JV for $190.1 million and recorded a gain of $43.7 million which is included in gain on sale of interest in unconsolidated joint venture within the consolidated statements of operations; and (ii) contributed five Wholly Owned Properties to the GGP II JV and sold a 50% interest in the new JV Properties to GGP for $57.5 million and recorded a gain of $11.5 million which is included in gain on sale of real estate within the consolidated statements of operations.

As a result of the transactions, the Company reduced amounts outstanding under its Mortgage Loans and Future Funding Facility by $50.6 million and received approximately $171.6 million of additional cash proceeds before closing costs, which it has used to fund the Company’s redevelopment pipeline and for general corporate purposes.

Simon Transaction

On November 3, 2017, the Company sold to Simon the its 50% JV Interests in five of the ten assets in the Simon JV for $68.0 million and recorded a gain of $16.6 million which is included in gain on sale of interest in unconsolidated joint venture within the consolidated statements of operations. Net proceeds from the sale have been used to fund the Company’s redevelopment pipeline and for general corporate purposes.

The Company’s investments in unconsolidated joint ventures at December 31, 2017, consisted of (in thousands, except number of properties):

	Seritage %			# of		Total		Contribution
Joint Venture	Ownership			Properties		GLA		Value (1)
GGP I JV		50	%		4		598	$	37,570
GGP II JV		50	%		5		1,187		57,500
Macerich JV		50	%		9		1,576		150,000
Simon JV		50	%		5		872		52,590
Total					23		4,233	$	297,660

(1)	Represents contribution value at formation of each JV.

Each unconsolidated joint venture is obligated to prepare financial statements in accordance with GAAP. The Company generally shares in the profits and losses of these unconsolidated joint ventures in accordance with the Company’s respective equity interests. In some instances, the Company may recognize profits and losses related to investment in an unconsolidated joint venture that differ from the Company’s equity interest in the unconsolidated joint venture. This may arise from impairments that the Company recognizes related to its investment that differ from the impairments the unconsolidated joint venture recognizes with respect to its assets; differences between the Company’s basis in assets it has transferred to the unconsolidated joint venture and the unconsolidated joint venture’s basis in those assets; the Company’s deferral of the unconsolidated joint venture’s profits from land sales to the Company; or other items. There were no joint venture impairment charges during the years ended December 31, 2017 or December 31, 2016, or the period from July 7, 2015 (Date Operations Commenced) to December 31, 2015.

The following tables presents combined condensed financial data for all of the Company’s unconsolidated joint ventures as of December 31, 2017 and December 31, 2016, and for the years ended December 31, 2017 and December 31, 2016, and the period from July 7, 2015 (Date Operations Commenced) to December 31, 2015:

	December 31, 2017			December 31, 2016
ASSETS
Investment in real estate
Land	$	191,853		$	214,109
Buildings and improvements		388,363			598,978
Accumulated depreciation		(48,306	)		(56,324	)
		531,910			756,763
Construction in progress		21,000			48,885
Net investment in real estate		552,910			805,648
Cash and cash equivalents		4,549			3,434
Tenant and other receivables, net		3,843			6,133
Other assets, net		45,605			38,646
Total assets	$	606,907		$	853,861
LIABILITIES AND MEMBERS INTERESTS
Liabilities
Mortgage loans payable, net	$	122,875		$	—
Accounts payable, accrued expenses and other liabilities		28,201			14,177
Total liabilities		151,076			14,177
Members Interest
Additional paid in capital		473,098			830,389
Retained earnings		(17,267	)		9,295
Total members interest		455,831			839,684
Total liabilities and members interest	$	606,907		$	853,861

							July 7, 2015
	Year Ended December 31,						(date operations commenced) to
	2017			2016			December 31, 2015
EQUITY IN INCOME OF UNCONSOLIDATED JOINT VENTURES
Total revenue	$	58,264		$	66,417		$	35,150
Property operating expenses		(11,358	)		(12,787	)		(7,339	)
Depreciation and amortization		(47,948	)		(42,233	)		(17,975	)
Operating income		(1,042	)		11,397			9,836
Other expenses		(14,533	)		(2,105	)		(292	)
Net (loss) income	$	(15,575	)	$	9,292		$	9,544
Equity in (loss) income of unconsolidated joint ventures	$	(7,788	)	$	4,646		$	4,772