Net Gain on Disposition of Partial Interests in Rental Properties

The net gain on disposition of partial interests in rental properties is comprised of the following:



	Three Months Ended October 31,				Nine Months Ended October 31,
	2013		2012		2013		2012
	(in thousands)
QIC Joint Venture	$	381,627	$	—	$	381,627	$	—
New York Retail Joint Venture	109,533		—		114,465		—
	$	491,160	$	—	$	496,092	$	—

QIC Joint Venture

On September 10, 2013, the Company entered into joint venture agreements with an outside partner, an affiliated entity of QIC, one of the largest institutional investment managers in Australia. The outside partner invested in and received 49% of the Company's equity interests in seven regional retail malls.

For its 49% equity interests, the outside partner invested cash and assumed debt of $448,900,000, representing 49% of the nonrecourse mortgage debt on the seven properties. As of October 31, 2013, the Company received approximately $412,300,000 of proceeds, net of transaction costs, of which approximately $188,200,000 represented cash, with the remainder being in the form of a loan. Based on the amount of cash received, the outside partner's minimum initial investment requirement was met and the transaction qualified for full gain recognition. As such, the Company recognized a net gain on disposition of partial interests in rental properties of $381,627,000 during the three and nine months ended October 31, 2013. The seven properties are adequately capitalized and do not contain the characteristics of a VIE. Based on this and the substantive participating rights held by the outside partner with regards to the properties, the Company concluded it appropriate to deconsolidate the entities and account for them under the equity method of accounting. During the three months ended October 31, 2013 and prior to admitting the outside party into the joint ventures, the Company acquired noncontrolling interests in two of the regional retail malls for approximately $92,400,000.

The September 2013 QIC Joint Venture transaction, which resulted in the deconsolidation of the seven regional retail properties, inclusive of the Company's acquisition of noncontrolling interests, resulted in the following increases (decreases) to the Consolidated Balance Sheet financial statement line items (in thousands):



Assets
Real estate, net	$	(920,602	)
Cash and equivalents	315,147
Restricted cash and escrowed funds	(4,326		)
Notes and accounts receivable, net	(23,201		)
Investments in and advances to unconsolidated entities	22,571
Other assets	(90,098		)
Total Assets	$	(700,509	)
Liabilities
Mortgage debt and notes payable, nonrecourse	$	(979,448	)
Accounts payable, accrued expenses and other liabilities	(17,446		)
Total Liabilities	$	(996,894	)
Equity
Additional paid-in capital	$	(89,644	)
Retained earnings	381,627
Noncontrolling interest	4,402
Total Equity	296,385
Total Liabilities and Equity	$	(700,509	)

New York Retail Joint Venture

In March 2011, the Company entered into joint venture agreements with an outside partner, an affiliated entity of Madison International Realty LLC. The outside partner invested in and received a 49% equity interest in 15 mature retail properties located in the New York City metropolitan area. For its 49% equity interests, the outside partner invested cash and assumed debt of $244,952,000, representing 49% of the nonrecourse mortgage debt on the 15 properties. As of January 31, 2012, the Company received proceeds of $178,286,000, primarily in the form of a loan. Based on the net amount of cash received, the outside partner’s minimum initial investment requirement of 20% was not met. Since the transaction did not qualify for full gain recognition, the installment method of gain recognition was applied and a net gain on disposition of partial interests in rental properties of $9,561,000 was recorded during the year ended January 31, 2012. As of January 31, 2013, the remaining gain of $114,465,000 continued to be deferred and was included in accounts payable, accrued expenses and other liabilities.

During the three months ended July 31, 2013, the Company used distribution proceeds from the joint ventures to pay down a portion of the loan which increases the net cash received for purposes of measuring whether full gain recognition is appropriate. However, the outside partner's investment requirement was still not met and the installment method of gain recognition was applied, resulting in an additional net gain on disposition of partial interests in rental properties of $4,932,000 during the three months ended July 31, 2013.

During the three months ended October 31, 2013, the Company paid down additional amounts of the loan, resulting in the outside partner's investment requirement being met. As a result, the Company recognized the remaining deferred gain of $109,533,000 as net gain on disposition of partial interests in rental properties.