Collaborative Agreement

6 Months Ended

Jun. 30, 2019

Equity Method Investments and Joint Ventures [Abstract]

Investments in Unconsolidated Joint Ventures:

The Company has made the following recent investments and dispositions in its unconsolidated joint ventures:

On February 16, 2018, the Company's joint venture in Fashion District Philadelphia sold its ownership interest in an office building for $41,800, resulting in a gain on sale of assets of $5,545. The Company's pro rata share of the gain on the sale of assets of $2,773 was included in equity in income from unconsolidated joint ventures. The Company used its share of the proceeds to pay down its line of credit and for general corporate purposes.

On March 1, 2018, the Company formed a 25/75 joint venture with Hudson Pacific Properties, whereby the Company agreed to contribute Westside Pavilion (referred to hereafter as "One Westside"), a 680,000 square foot regional shopping center in Los Angeles, California in exchange for $142,500. From March 1, 2018 to August 31, 2018, the Company accounted for its interest in the property as a collaborative arrangement (See Note 15—Collaborative Arrangement). On August 31, 2018, the Company completed the sale of the 75% ownership interest in the property to Hudson Pacific Properties, resulting in a gain on sale of assets of $46,242. The sales price was funded by a cash payment of $36,903 and the assumption of a pro rata share of the mortgage note payable on the property of $105,597. Concurrent with the sale of the ownership interest, the joint venture defeased the loan on the property by providing a $149,175 portfolio of marketable securities as replacement collateral in lieu of the property. The Company funded its $37,294 share of the purchase price of the marketable securities portfolio with the proceeds from the sale of the ownership interest in the property. Upon completion of the sale of the ownership interest in the property, the Company has accounted for its remaining ownership interest in the property under the equity method of accounting.

On July 6, 2018, the Company’s joint venture in The Market at Estrella Falls, a 298,000 square foot community center in Goodyear, Arizona, sold the property for $49,100, resulting in a gain on sale of assets of $12,598. The Company's share of the gain of $2,996 was included in equity in income from unconsolidated joint ventures. The proceeds were used to pay off the $24,118 mortgage loan payable on the property, settle development obligations and for distributions to the partners. The Company used its share of the net proceeds for general corporate purposes.

On September 6, 2018, the Company formed a 50/50 joint venture with Simon Property Group to develop Los Angeles Premium Outlets, a premium outlet center in Carson, California that is planned to open with approximately 400,000 square feet, followed by an additional 165,000 square feet in the second phase. The joint venture expects to complete the first phase of the development in fall 2021.

Combined and condensed balance sheets and statements of operations are presented below for all unconsolidated joint ventures.

Combined and Condensed Balance Sheets of Unconsolidated Joint Ventures:



	June 30, 2019			December 31, 2018
Assets(1):
Property, net	$	9,291,345		$	9,241,003
Other assets	762,972			703,861
Total assets	$	10,054,317		$	9,944,864
Liabilities and partners' capital(1):
Mortgage and other notes payable	$	6,037,929		$	6,050,930
Other liabilities	481,598			388,509
Company's capital	1,920,631			1,913,475
Outside partners' capital	1,614,159			1,591,950
Total liabilities and partners' capital	$	10,054,317		$	9,944,864
Investments in unconsolidated joint ventures:
Company's capital	$	1,920,631		$	1,913,475
Basis adjustment(2)	(518,286		)	(535,808		)
	$	1,402,345		$	1,377,667

Assets—Investments in unconsolidated joint ventures	$	1,517,771		$	1,492,655
Liabilities—Distributions in excess of investments in unconsolidated joint ventures	(115,426		)	(114,988		)
	$	1,402,345		$	1,377,667


(1)	These amounts include the assets of $2,991,383 and $3,047,851 of Pacific Premier Retail LLC (the "PPR Portfolio") as of June 30, 2019 and December 31, 2018, respectively, and liabilities of $1,841,559 and $1,859,637 of the PPR Portfolio as of June 30, 2019 and December 31, 2018, respectively.

(2)

The Company amortizes the difference between the cost of its investments in unconsolidated joint ventures and the book value of the underlying equity into income on a straight-line basis consistent with the lives of the underlying assets. The amortization of this difference was $5,271 and $3,524 for the three months ended June 30, 2019 and 2018, respectively, and $9,810 and $7,627 for the six months ended June 30, 2019 and 2018, respectively.

Combined and Condensed Statements of Operations of Unconsolidated Joint Ventures:



	PPR Portfolio			Other Joint Ventures			Total
Three Months Ended June 30, 2019
Revenues:
Leasing revenue	$	45,346		$	172,273		$	217,619
Other	435			13,097			13,532
Total revenues	45,781			185,370			231,151
Expenses:
Shopping center and operating expenses	8,470			59,065			67,535
Leasing expenses	373			1,655			2,028
Interest expense	17,043			37,682			54,725
Depreciation and amortization	24,732			76,866			101,598
Total operating expenses	50,618			175,268			225,886
Loss on sale or write down of assets, net	(399		)	(145		)	(544		)
Net (loss) income	$	(5,236	)	$	9,957		$	4,721
Company's equity in net (loss) income	$	(531	)	$	7,788		$	7,257
Three Months Ended June 30, 2018
Revenues:
Leasing revenue	$	45,362		$	175,608		$	220,970
Other	432			11,879			12,311
Total revenues	45,794			187,487			233,281
Expenses:
Shopping center and operating expenses	9,517			60,325			69,842
Interest expense(1)	16,770			37,356			54,126
Depreciation and amortization	24,071			60,973			85,044
Total operating expenses	50,358			158,654			209,012
Gain on sale or write down of assets, net	—			559			559
Net (loss) income	$	(4,564	)	$	29,392		$	24,828
Company's equity in net (loss) income	$	(257	)	$	15,926		$	15,669



	PPR Portfolio			Other Joint Ventures			Total
Six Months Ended June 30, 2019
Revenues:
Leasing revenue	$	91,366		$	345,797		$	437,163
Other	617			25,161			25,778
Total revenues	91,983			370,958			462,941
Expenses:
Shopping center and operating expenses	18,142			118,715			136,857
Leasing expenses	840			3,362			4,202
Interest expense	33,994			74,593			108,587
Depreciation and amortization	50,246			141,333			191,579
Total operating expenses	103,222			338,003			441,225
Loss on sale or write down of assets, net	(405		)	(280		)	(685		)
Net (loss) income	$	(11,644	)	$	32,675		$	21,031
Company's equity in net (loss) income	$	(1,730	)	$	21,230		$	19,500
Six Months Ended June 30, 2018
Revenues:
Leasing revenue	$	90,782		$	356,051		$	446,833
Other	600			20,150			20,750
Total revenues	91,382			376,201			467,583
Expenses:
Shopping center and operating expenses	19,198			121,646			140,844
Interest expense(1)	33,496			70,388			103,884
Depreciation and amortization	48,555			123,385			171,940
Total operating expenses	101,249			315,419			416,668
Gain on sale or write down of assets, net	—			1,529			1,529
Net (loss) income	$	(9,867	)	$	62,311		$	52,444
Company's equity in net (loss) income	$	(873	)	$	33,414		$	32,541


(1)	Interest expense includes $7,158 and $12,116 for the three and six months ended June 30, 2018, respectively, related to mortgage notes payable to an affiliate of Northwestern Mutual Life ("NML") (See Note 18—Related Party Transactions).

Significant accounting policies used by the unconsolidated joint ventures are similar to those used by the Company.

Collaborative Arrangement:

On March 1, 2018, the Company formed a 25/75 joint venture with a third party, whereby the Company agreed to contribute One Westside, a 680,000 square foot regional shopping center in Los Angeles, California, in exchange for $142,500. The Company completed the transfer on August 31, 2018.

During the period from March 1, 2018 to August 31, 2018, the Company accounted for the operations of One Westside as a collaborative arrangement. Both partners shared operating control of the property and the Company was reimbursed by the outside partner for 75% of the carrying cost of the property, which were defined in the agreement as operating expenses in excess of revenues, debt service and capital expenditures. Accordingly, the Company reduced leasing revenue, other revenue, shopping center and operating expenses and interest expense by its partner's 75% share and recorded a receivable due from its partner, which was settled upon completion of the transfer of the property. In addition, the Company was reimbursed by its partner for its 75% share of mortgage loan principal payments and capital expenditures during the period. Since completion of the transfer, the Company has accounted for its investment in One Westside under the equity method of accounting (See Note 4—Investments in Unconsolidated Joint Ventures).