Investment in Unconsolidated Joint Ventures

12 Months Ended

Dec. 31, 2020

Equity Method Investments and Joint Ventures [Abstract]

Investment in Unconsolidated Joint Ventures

On November 19, 2018, we formed the VAA joint venture with the Macquarie Group (“Macquarie”). In connection with the formation of VAA, we sold a 50% ownership interest in certain multifamily properties to Macquarie for a $236.8 million cash payment, resulting in a gain on sale of assets of $154.1 million. We then immediately transferred our respective ownership interests in the multifamily projects ("VAA Portfolio") to VAA in exchange for a 50% voting interest / 49% profit participation interest ("Class A interest") in VAA and note payable (“Mezzanine Loan”) in accordance with the terms of a contribution agreement (the “Contribution”). Upon completion of the Contribution, VAA owned and controlled 52 multifamily properties. VAA assumed all liabilities of those properties, including mortgage debt insured by the Department of Housing and Urban Development (“HUD”).

Concurrent with the Contribution, VAA issued Class B interests with a 2% profits participation interest and no voting rights to Daniel J. Moos, our former President and Chief Executive Officer (“Class B Member”). The Class B Member serves as the Manager of VAA.

Interest on the Mezzanine loan is limited to cash generated from the properties and matures concurrently with the termination of VAA. Accordingly, we account for our interest in the Mezzanine Loan as additional equity interest and includes any interest payments accrued as income from unconsolidated joint ventures.

On December 31, 2018, we purchased 900,000 shares of ARL Series A convertible preferred shares ("ARL Preferred Shares") from Realty Advisors, Inc. ("RAI"). On December 22, 2020, we transferred our ownership of the ARL Preferred Shares and the ARL common shares that we had previously acquired to RAI for $18,878 and $3,747, respectively. RAI has a controlling ownership interest in ARL and is therefore deemed a related party. The transfer was recorded at cost as an increase to related party receivable.

The following is a summary of our investment in unconsolidated joint ventures:


	As of December 31,
	2020		2019
Condensed Balance Sheets of VAA
Assets
Real estate	$	1,217,725	$	1,242,957
Other assets	63,102		62,222
Total assets	$	1,280,827	$	1,305,179
Liabilities and Partners Capital
Mortgage notes payable	$	830,721	$	832,858
Mezzanine notes payable	239,878		240,422
Other liabilities	37,262		30,790
Our share of partners' capital	84,983		99,775
Outside partner's capital	87,983		101,334
Total liabilities and partners' capital	$	1,280,827	$	1,305,179
Investment in unconsolidated joint ventures
Our share of partners' capital	$	84,983	$	99,775
Our share of Mezzanine note payable	119,939		120,211
Basis adjustment (1)	(153,136)		(160,838)
Our investment in unconsolidated joint ventures	51,786		59,148
Investment ARL common shares	—		606
Investment in ARL preferred shares	—		22,026
Total investment in unconsolidated joint ventures	$	51,786	$	81,780

(1) We amortize the difference between the cost of our investment in unconsolidated joint ventures and the book value of our underlying equity into income on a straight-line basis consistent with the lives of the underlying assets.

The following is a summary of our (loss) income from investments in unconsolidated joint ventures:


	For the Years Ended December 31,
	2020		2019		2018
Condensed Statements of Operations of VAA
Revenue
Rental revenue	$	117,336	$	109,746	$	11,568
Other revenue	5,779		5,631		1,319
Total revenue	123,115		115,377		12,887
Expenses
Operating expenses	62,458		60,516		9,827
Depreciation and amortization	30,456		43,942		6,987
Interest	56,903		61,315		5,795
Total expenses	149,817		165,773		22,609
Net loss	$	(26,702)	$	(50,396)	$	(9,722)
Our share of net (loss) income in unconsolidated joint ventures	$	(519)	$	(2,758)	$	1,129