Financing Arrangement

6 Months Ended

Jun. 30, 2020

Financing Arrangement:

On September 30, 2009, the Company formed a joint venture whereby a third party acquired a 49.9% interest in Chandler Fashion Center, a 1,318,000 square foot regional shopping center in Chandler, Arizona, and Freehold Raceway Mall, a 1,673,000 square foot regional shopping center in Freehold, New Jersey (collectively referred to herein as "Chandler Freehold"). As a result of the Company having certain rights under the agreement to repurchase the assets after the seventh year of the formation of Chandler Freehold, the transaction did not qualify for sale treatment. The Company, however, is not obligated to repurchase the assets. The Company accounts for its investment in Chandler Freehold as a financing arrangement. The fair value (Level 3 measurement) of the financing arrangement obligation at June 30, 2020 and December 31, 2019 was based upon a terminal capitalization rate of 5.5% and 5.0%, respectively, a discount rate of 7.0% and 6.0%, respectively, and market rents per square foot of $35 to $115. The fair value of the financing arrangement obligation is sensitive to these significant unobservable inputs and a change in these inputs may result in a significantly higher or lower fair value measurement. Distributions to the partner, excluding distributions of excess loan proceeds, and changes in fair value of the financing arrangement obligation are recognized as interest (income) expense in the Company's consolidated statements of operations.

During the three and six months ended June 30, 2020 and 2019, the Company incurred interest income in connection with the financing arrangement as follows:


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2020		2019		2020		2019
Distributions equal to the partner's share of net (loss) income	$	(181)	$	1,982	$	1,283	$	3,879
Distributions in excess of the partner's share of net income	281		2,033		2,958		3,953
Adjustment to fair value of financing arrangement obligation	(32,907)		(17,258)		(81,291)		(31,522)
	$	(32,807)	$	(13,243)	$	(77,050)	$	(23,690)

On June 27, 2019, the Company replaced the existing mortgage note payable on Chandler Fashion Center with a new $256,000 loan. In connection with the refinancing transaction, the Company distributed $27,945 of the excess loan proceeds to its joint venture partner, which was recorded as a reduction to the financing arrangement obligation.