Investments in Unconsolidated Entities

12 Months Ended

Dec. 31, 2023

Equity Method Investments and Joint Ventures [Abstract]

The following is a summary of our investments in unconsolidated entities as of December 31, 2023 and 2022 (in thousands):


	Ownership %	Number of Properties	Carrying Amount(1) of Investment as of
Investment	As of December 31, 2023		12/31/2023		12/31/2022
Bellagio Las Vegas Joint Venture - Common Equity Interest	21.9%	1	$	296,097	$	—
Bellagio Las Vegas Joint Venture - Preferred Equity Interest	n/a	n/a	650,000		—
Data Center Development Joint Venture	80.0%	2	226,021		—
Industrial Partnerships	20.0%	—	—		—
Total investment in unconsolidated entities			$	1,172,118	$	—

(1) The total carrying amount of the investments was greater than the underlying equity in net assets (i.e., basis difference) by $2.2 million as of December 31, 2023.

Equity in income and impairment of investment in unconsolidated entities consists of the following (in thousands):


	Years ended December 31,
Investment	2023		2022		2021
Bellagio Las Vegas Joint Venture - Common Equity Interest	$	2,139	$	—	$	—
Data Center Development Joint Venture	—		—		—
Industrial Partnerships	407		(6,448)		1,106
Equity in income and impairment of investment in unconsolidated entities	$	2,546	$	(6,448)	$	1,106

A. Bellagio Las Vegas Joint Venture Interests

In October 2023, we invested $951.4 million to acquire common and preferred interests from Blackstone Real Estate Trust, Inc. ("BREIT") in a joint venture that owns a 95.0% interest in the real estate of The Bellagio Las Vegas. The investment included $301.4 million of common equity in the joint venture in exchange for an indirect interest of 21.9% in the property and a $650.0 million preferred equity interest in the joint venture. The unconsolidated entity had total debt outstanding of $3.0 billion as of December 31, 2023, all of which was non-recourse to us with limited customary exceptions.

The Company's preferred equity investment entitles it to certain preferential cumulative distributions out of operating and capital proceeds pursuant to the terms and conditions of the preferred equity. There is no maturity date on the preferred equity investment, which bears interest of 8.1%, payable monthly in arrears in cash, with rate increases commencing in year 7. BREIT may cause the joint venture to redeem all or a portion of the preferred equity investment, and Realty Income may cause the joint venture to redeem all or a portion of the preferred equity investment if BREIT or its affiliates cease to control the joint venture, in each case, for a cash payment equaling the sum of the amount to be redeemed plus, prior to the first anniversary of the transaction, a redemption fee of 3.0%, or, after the first anniversary and prior to the fourth anniversary of the transaction, a redemption fee of 2.0%. Interest income is determined by applying the interest rate to the sum of the outstanding balance of preferred equity and any accrued but unpaid interests. During the year ended December 31, 2023, we recognized interest income of $13.0 million included within 'Other revenue' in our consolidated statements of income and comprehensive income.

We have determined that this joint venture is a VIE, and we are not the primary beneficiary as we do not have power to direct activities that most significantly impact the joint venture's economic performance. As a holder of preferred interests, we do not receive any additional voting rights, nor do we have conversion and redemption rights. Our maximum exposure to loss associated with this VIE is limited to our common and preferred equity investments.

B. Data Center Development Joint Venture

In November 2023, we established a joint venture with Digital Realty Trust, Inc. ("Digital Realty") to support the development of two build-to-suit data centers in Northern Virginia. We invested $201.2 million to acquire an 80.0% equity interest in the venture, while Digital Realty maintains a 20.0% interest. We have determined that this joint venture is a VIE. While we have an 80.0% interest in the joint venture, we are not the primary beneficiary because we do not have power to direct activities that significantly impact the joint venture's economic performance as we were not engaged when the joint venture partner initially developed the construction plan and entered into the lease agreement. Digital Realty is the managing member, and we do not have substantive kick-out rights. We will continuously evaluate whether we are the primary beneficiary as the power to direct activities that most significantly affect economic performance can change over the life of the joint venture. Our maximum exposure to loss associated with this VIE is limited to our equity investment and our pro rata share of the remaining $117.7 million of estimated development costs for the first phase of the project.

C. Industrial Partnerships

All seven assets held by our industrial partnerships were sold during the year ended December 31, 2022. As the portion of the net proceeds applied to our investment basis that we expected to receive at closing was less than our $121.4 million carrying amount of investment in unconsolidated entities, we recognized an other than temporary impairment of $8.5 million during the year ended December 31, 2022. The other than temporary impairments are included in 'Equity in income and impairment of investment in unconsolidated entities' in our consolidated statements of income and comprehensive income for the periods presented.