Investments in Partially Owned Entities

3 Months Ended

Mar. 31, 2022

Equity Method Investments and Joint Ventures [Abstract]

Fifth Avenue and Times Square JV

As of March 31, 2022, we own a 51.5% common interest in a joint venture ("Fifth Avenue and Times Square JV") which owns interests in properties located at 640 Fifth Avenue, 655 Fifth Avenue, 666 Fifth Avenue, 689 Fifth Avenue, 697-703 Fifth Avenue, 1535 Broadway and 1540 Broadway (collectively, the "Properties"). The remaining 48.5% common interest in the joint venture is owned by a group of institutional investors (the "Investors"). Our 51.5% common interest in the joint venture represents an effective 51.0% interest in the Properties. The 48.5% common interest in the joint venture owned by the Investors represents an effective 47.2% interest in the Properties. We provide various services to Fifth Avenue and Times Square JV in accordance with management, development, leasing and other agreements.

We also own $1.828 billion of preferred equity security interests in certain of the properties. The preferred equity has an annual coupon of 4.25% through April 2024, increasing to 4.75% for the subsequent five years and thereafter at a formulaic rate. It can be redeemed under certain conditions on a tax deferred basis.

As of March 31, 2022, the carrying amount of our investment in the joint venture was less than our share of the equity in the net assets of the joint venture by approximately $384,591,000, the basis difference primarily resulting from non-cash impairment losses recognized during 2020. Substantially all of this basis difference was allocated, based on our estimates of the fair values of Fifth Avenue and Times Square JV’s assets and liabilities, to real estate (land and buildings). We are amortizing the basis difference related to the buildings into earnings as a reduction to depreciation expense over their estimated useful lives.

6. Investments in Partially Owned Entities - continued

Alexander’s, Inc. (“Alexander’s”) (NYSE: ALX)

As of March 31, 2022, we own 1,654,068 Alexander’s common shares, or approximately 32.4% of Alexander’s common equity. We manage, develop and lease Alexander’s properties pursuant to agreements which expire in March of each year and are automatically renewable.

As of March 31, 2022, the market value ("fair value" pursuant to ASC Topic 820, Fair Value Measurements ("ASC 820")) of our investment in Alexander’s, based on Alexander’s March 31, 2022 closing share price of $256.23, was $423,822,000, or $331,043,000 in excess of the carrying amount on our consolidated balance sheets. As of March 31, 2022, the carrying amount of our investment in Alexander’s, excluding amounts owed to us, exceeded our share of the equity in the net assets of Alexander’s by approximately $30,044,000. The majority of this basis difference resulted from the excess of our purchase price for the Alexander’s common stock acquired over the book value of Alexander’s net assets. Substantially all of this basis difference was allocated, based on our estimates of the fair values of Alexander’s assets and liabilities, to real estate (land and buildings). We are amortizing the basis difference related to the buildings into earnings as additional depreciation expense over their estimated useful lives. This depreciation is not material to our share of equity in Alexander’s net income.

Below is a schedule summarizing our investments in partially owned entities.


(Amounts in thousands)	Percentage Ownership at March 31, 2022	Balance as of
		March 31, 2022		December 31, 2021
Investments:
Fifth Avenue and Times Square JV (see page 22 for details):	51.5%	$	2,773,505	$	2,770,633
Partially owned office buildings/land(1)	Various	310,580		306,989
Alexander’s	32.4%	92,779		91,405
Other investments(2)	Various	122,765		128,362
		$	3,299,629	$	3,297,389

Investments in partially owned entities included in other liabilities(3):
7 West 34th Street	53.0%	$	(61,279)	$	(60,918)
85 Tenth Avenue	49.9%	(16,033)		(18,067)
		$	(77,312)	$	(78,985)

____________________

(1)Includes interests in 280 Park Avenue, 650 Madison Avenue, 512 West 22nd Street, 61 Ninth Avenue and others.

(2)Includes interests in Independence Plaza, Rosslyn Plaza and others.

(3)Our negative basis results from distributions in excess of our investment.

6. Investments in Partially Owned Entities - continued

Below is a schedule of income from partially owned entities.


(Amounts in thousands)	Percentage Ownership at March 31, 2022	For the Three Months Ended March 31,
		2022		2021
Our share of net income:
Fifth Avenue and Times Square JV (see page 22 for details):
Equity in net income	51.5%	$	16,309	$	9,606
Return on preferred equity, net of our share of the expense		9,226		9,226

		25,535		18,832
Alexander's (see page 23 for details):
Equity in net income	32.4%	4,671		5,729

Management, leasing and development fees		1,020		575
		5,691		6,304

Partially owned office buildings(1)	Various	2,477		5,972

Other investments(2)	Various	11		(2,035)

		$	33,714	$	29,073

____________________

(1)Includes interests in 280 Park Avenue, 650 Madison Avenue, One Park Avenue (consolidated from August 5, 2021), 7 West 34th Street, 512 West 22nd Street, 61 Ninth Avenue, 85 Tenth Avenue and others.

(2)Includes interests in Independence Plaza, Rosslyn Plaza and others.