JOINT VENTURES AND PARTNERSHIPS

3 Months Ended

Mar. 31, 2024

JOINT VENTURES AND PARTNERSHIPS

JOINT VENTURES AND PARTNERSHIPS

5. JOINT VENTURES AND PARTNERSHIPS

UDR has entered into joint ventures and partnerships with unrelated third parties to own, operate, acquire, renovate, develop, redevelop, dispose of, and manage real estate assets that are either consolidated and included in Real estate owned on the Consolidated Balance Sheets or are accounted for under the equity method of accounting, and are included in Investment in and advances to unconsolidated joint ventures, net, on the Consolidated Balance Sheets. The Company consolidates the entities that we control as well as any variable interest entity where we are the primary beneficiary. Under the VIE model, the Company consolidates an entity when it has control to direct the activities of the VIE and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. Under the voting model, the Company consolidates an entity when it controls the entity through ownership of a majority voting interest.

UDR’s joint ventures and partnerships are funded with a combination of debt and equity. Our losses are typically limited to our investment and except as noted below, the Company does not guarantee any debt, capital payout or other obligations associated with our joint ventures and partnerships.

Consolidated joint venture

The Company previously held a preferred equity investment in a joint venture that owned a 173 apartment home community located in Oakland, California. In 2023, the joint venture was deemed to be a VIE and the Company concluded that it was the primary beneficiary of the VIE, and therefore began consolidating the joint venture. In January 2024, the Company took title to the developer’s equity interest in the joint venture resulting in it being a wholly-owned community. (See Note 3, Real Estate Owned for more information).

Unconsolidated joint ventures and partnerships

The Company recognizes earnings or losses from our investments in unconsolidated joint ventures and partnerships consisting of our proportionate share of the net earnings or losses of the joint ventures and partnerships. In addition, we may earn fees for providing management services for the communities held by the unconsolidated joint ventures and partnerships.

The following table summarizes the Company’s investment in and advances to unconsolidated joint ventures and partnerships, net, which are accounted for under the equity method of accounting as of March 31, 2024 and December 31, 2023 (dollars in thousands):

	Number of	Number of
	Operating	Apartment	UDR's Weighted Average									Income/(loss) from investments
	Communities	Homes	Ownership Interest					Investment at				Three Months Ended
	March 31,	March 31,	March 31,			December 31,		March 31,		December 31,		March 31,
Joint Ventures	2024	2024	2024		2023			2024		2023		2024		2023
Operating:
UDR/MetLife (a)	13	2,837	50.2	%		50.2	%	$	219,387	$	225,195	$	(1,846)	$	(1,350)
UDR/LaSalle	5	1,590	51.0	%		51.0	%		281,314		286,723		(2,878)		—
Total Joint Ventures	18	4,427						$	500,701	$	511,918	$	(4,724)	$	(1,350)

	Number of	Apartment										Income/(loss) from investments
	Communities	Homes	Weighted					Investment at				Three Months Ended
Developer Capital Program	March 31,	March 31,	Average		Years To	UDR		March 31,		December 31,		March 31,
and Real Estate Technology Investments (b)	2024	2024	Rate		Maturity	Commitment (c)		2024		2023		2024		2023
Preferred equity investments:
Operating	21	4,545	9.3	%	3.1	$	252,889	$	308,820	$	304,699	$	5,920	$	6,643
Development	2	1,073	10.7	%	3.3		68,207		85,315		83,072		2,243		1,992
Total Preferred Equity Investments	23	5,618	9.6	%	3.1	$	321,096		394,135		387,771		8,163		8,635
Real estate technology and sustainability investments:
Real estate technology and sustainability investments	N/A	N/A	N/A		N/A	$	86,000		50,528		44,382		5,646		935
Total Preferred Equity Investments and Real Estate Technology and Sustainability Investments									444,663		432,153		13,809		9,570
Sold joint ventures and other investments									—		—		—		1,487
Total investment in and advances to unconsolidated joint ventures, net (a)								$	945,364	$	944,071	$	9,085	$	9,707

(a) As of March 31, 2024 and December 31, 2023, the Company’s negative investment in one UDR/MetLife community of $8.9 million and $8.9 million, respectively, is recorded in Accounts payable, accrued expenses, and other liabilities on the Consolidated Balance Sheets.

(b) The Developer Capital Program is the program through which the Company makes investments, including preferred equity investments, mezzanine loans or other structured investments that may receive a fixed yield on the investment and may include provisions pursuant to which the Company participates in the increase in value of the property upon monetization of the applicable property. At March 31, 2024, our preferred equity investment portfolio consisted of 23 communities located in various markets, consisting of 5,618 completed or under development homes. In addition, the Company’s preferred equity investments include four investments that receive a variable percentage of the value created from the project upon a capital or liquidating event. During the three months ended March 31, 2024, the Company did not enter into or fund any new preferred equity investments and no preferred equity investments were redeemed.

(c) Represents UDR’s maximum funding commitment only and therefore excludes other activity such as income from investments.

As of March 31, 2024 and December 31, 2023, the Company had deferred fees of $7.5 million and $7.6 million, respectively, which will be recognized through earnings over the weighted average life of the related properties, upon the disposition of the properties to a third party, or upon completion of certain development obligations.

The Company recognized management fees of $2.0 million and $1.2 million for the three months ended March 31, 2024 and 2023, respectively, for management of the communities held by the joint ventures and partnerships. The management fees are included in Joint venture management and other fees on the Consolidated Statements of Operations.

The Company may, in the future, make additional capital contributions to certain of our joint ventures and partnerships should additional capital contributions be necessary to fund acquisitions or operations.

We consider various factors to determine if a decrease in the value of our Investment in and advances to unconsolidated joint ventures, net is other-than-temporary. These factors include, but are not limited to, age of the venture, our intent and ability to retain our investment in the entity, the financial condition and long-term prospects of the entity, and the relationships with the other joint venture partners and its lenders. Based on the significance of the unobservable inputs, we classify these fair value measurements within Level 3 of the valuation hierarchy. The Company did not incur any other-than-temporary impairments in the value of its investments in unconsolidated joint ventures during the three months ended March 31, 2024 and 2023.

Combined summary balance sheets relating to the unconsolidated joint ventures and partnerships (not just our proportionate share) are presented below as of March 31, 2024 and December 31, 2023 (dollars in thousands):

	March 31,		December 31,
	2024		2023
Total real estate, net	$	3,180,973	$	3,158,057
Investments, at fair value		304,826		257,832
Cash and cash equivalents		69,247		61,670
Other assets		135,491		146,976
Total assets	$	3,690,537	$	3,624,535
Third party debt, net	$	2,027,146	$	2,012,816
Accounts payable and accrued liabilities		178,704		171,502
Total liabilities		2,205,850		2,184,318
Total equity	$	1,484,687	$	1,440,217

Combined summary financial information relating to the unconsolidated joint ventures’ and partnerships’ operations (not just our proportionate share) is presented below for the three months ended March 31, 2024 and 2023 (dollars in thousands):

	Three Months Ended
	March 31,
	2024		2023
Total revenues	$	76,256	$	60,675
Property operating expenses		34,935		28,033
Real estate depreciation and amortization		36,962		24,428
Operating income/(loss)		4,359		8,214
Interest expense		(24,537)		(23,951)
Net unrealized/realized gain/(loss) on held investments		27,400		9,789
Other income/(loss)		(1,828)		2,322
Net income/(loss)	$	5,394	$	(3,626)