Investments in Partnerships

9 Months Ended

Sep. 30, 2020

Equity Method Investments And Joint Ventures [Abstract]

3. INVESTMENTS IN PARTNERSHIPS

The following table presents summarized financial information of the equity investments in our unconsolidated partnerships as of September 30, 2020 and December 31, 2019:

(in thousands of dollars)	September 30, 2020			December 31, 2019
ASSETS:
Investments in real estate, at cost:
Operating properties	$	1,147,457		$	883,530
Construction in progress		35,940			251,029
Total investments in real estate		1,183,397			1,134,559
Accumulated depreciation		(256,471	)		(229,877	)
Net investments in real estate		926,926			904,682
Cash and cash equivalents		29,058			34,766
Deferred costs and other assets, net		117,609			43,476
Total assets		1,073,593			982,924
LIABILITIES AND PARTNERS’ INVESTMENT:
Mortgage loans payable, net		493,634			499,057
FDP Term Loan, net		299,575			299,091
Other liabilities		124,703			79,166
Total liabilities		917,912			877,314
Net investment	$	155,681		$	105,610
Partners’ share		76,128			50,997
PREIT’s share		79,553			54,613
Excess investment⁽¹⁾		18,669			17,464
Net investments and advances	$	98,222		$	72,077
Reconciliation to comparable GAAP balance sheet item:
Investment in partnerships, at equity	$	176,070		$	159,993
Distributions in excess of partnership investments		(77,848	)		(87,916	)
Net investment	$	98,222		$	72,077

_____________________

⁽¹⁾

Excess investment represents the unamortized difference between our investment and our share of the equity in the underlying net investment in the unconsolidated partnerships. The excess investment is amortized over the life of the properties, and the amortization is included in “Equity in income of partnerships.”

We record distributions from our equity investments using the nature of the distribution approach.

The following table summarizes our share of equity in (loss) income of partnerships for the three and nine months ended September 30, 2020 and 2019:

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands of dollars)	2020			2019			2020			2019
Real estate revenue	$	24,198		$	23,742		$	75,484		$	70,636
Operating expenses:
Property operating and other expenses		(13,924	)		(8,805	)		(35,884	)		(24,331	)
Interest expense⁽¹⁾		(6,038	)		(5,771	)		(18,008	)		(17,428	)
Depreciation and amortization		(10,570	)		(5,317	)		(25,965	)		(14,675	)
Total expenses		(30,532	)		(19,893	)		(79,857	)		(56,434	)
Net (loss) income		(6,334	)		3,849			(4,373	)		14,202
Partners’ share		3,183			(2,191	)		1,884			(7,777	)
PREIT’s share		(3,151	)		1,658			(2,489	)		6,425
Amortization of and adjustments to excess investment, net		(108	)		(127	)		(309	)		(289	)
Equity in (loss) income of partnerships	$	(3,259	)	$	1,531		$	(2,798	)	$	6,136

⁽¹⁾ Net of capitalized interest expense of $467 and $1,602 for the three months ended September 30, 2020 and 2019, respectively, and $2,394 and $4,554 for the nine months ended September 30, 2020 and 2019, respectively.

Dispositions

In March 2019, a partnership in which we hold a 25% interest sold an undeveloped land parcel adjacent to Gloucester Premium Outlets for $3.8 million. The partnership recorded a gain on sale of $2.3 million, of which our share was $0.6 million, which is recorded in gain on sales of real estate by equity method investee in the accompanying consolidated statement of operations.

Term Loan

In January 2018, our Fashion District Philadelphia redevelopment project joint venture entity entered into a $250.0 million term loan (the “FDP Term Loan”). We and our partner in the project, The Macerich Company (“Macerich”), each own a 50% partnership interest in Fashion District Philadelphia. The FDP Term Loan matures in January 2023, and bears interest at a variable rate of LIBOR plus 2.00%. PREIT and Macerich secured the FDP Term Loan by pledging their respective equity interests in the entities that own Fashion District Philadelphia. The entire $250.0 million available under the FDP Term Loan was drawn during the first quarter of 2018, and we received an aggregate $123.0 million as a distribution of our share of the draws in 2018. In July 2019, the FDP Term Loan was modified to increase the total potential borrowings from $250.0 million to $350.0 million. A total of $51.0 million was drawn during the third quarter of 2019 and we received aggregate distributions of $25.0 million as our share of the draws. As discussed in Note 4, on October 19, 2020, the borrower under the FDP Term Loan received a letter from the administrative agent under the FDP Term Loan alleging an event of default under the FDP Term Loan as a result of the alleged breach of the 2018 Credit Agreement and outlining the 45-day cure period that will expire on December 3, 2020. On November 2, 2020, the borrower under the FDP Term Loan received a subsequent letter from the administrative agent asserting an event of default as a result of the filing of the Chapter 11 Cases and the automatic acceleration of the FDP Term Loan. The administrative agent under the FDP Term Loan is a party to the RSA, and PREIT has responded to the administrative agent with a letter expressly reserving its rights in connection with the FDP Term Loan and, in the event the Prepackaged Plan is not confirmed or the RSA is otherwise terminated, expressly reserving its rights under the RSA and the Prepackaged Plan.

Mortgage Loan activity

During the nine months ended September 30, 2020, we executed forbearance and loan modification agreements for Metroplex and Springfield Mall. These arrangements allowed us to defer principal payments, and in some cases interest as well, between May and August 2020 depending on the terms of each agreement. At the end of the deferral period, repayment of deferred amounts spans from four to six months. The repayment periods range from August 2020 through February 2021 depending on the terms of the specific agreements.

Significant Unconsolidated Subsidiary

We have a 50% ownership interest in Lehigh Valley Associates L.P. (“LVA”) and Fashion District Philadelphia (“FDP”). The financial information of LVA and FDP are included in the amounts above. Summarized balance sheet information as of September 30, 2020 and December 31, 2019, and summarized statement of operations information for the three and nine months ended September 30, 2020 and 2019 for these entities, which are accounted for using the equity method, are as follows:

LVA

(in thousands of dollars)	September 30, 2020		December 31, 2019
Summarized balance sheet information
Total assets	$	64,971	$	62,504
Mortgage loan payable, net		189,360		191,998

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands of dollars)	2020			2019			2020			2019
Summarized statement of operations information
Revenue	$	6,596		$	8,006		$	21,243		$	24,589
Property operating expenses		(1,984	)		(2,138	)		(6,568	)		(6,351	)
Interest expense		(1,944	)		(2,027	)		(5,803	)		(6,055	)
Net income		1,864			3,059			6,402			9,768
PREIT’s share of equity in income of partnership		932			1,529			3,201			4,884

FDP

(in thousands of dollars)	September 30, 2020		December 31, 2019
Summarized balance sheet information
Total assets	$	725,087	$	641,377
FDP Term Loan, net		299,575		299,091

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands of dollars)	2020			2019			2020			2019
Summarized statement of operations information
Revenue	$	4,763		$	1,271		$	15,276		$	2,667
Property operating expenses		(6,228	)		(1,901	)		(14,305	)		(3,100	)
Interest expense		(933	)		(2	)		(2,137	)		(2	)
Net loss		(9,365	)		(2,553	)		(16,304	)		(4,879	)
PREIT’s share of equity in loss of partnership		(4,690	)		(1,262	)		(8,164	)		(2,299	)