Investments

3 Months Ended

Mar. 31, 2022

Equity Method Investments and Joint Ventures [Abstract]

Unconsolidated Investments

As of March 31, 2022, the Company had investments in seven unconsolidated real estate entities with ownership interest percentages ranging from 20.0% to 50.0% and other unconsolidated investments including property technology investment funds. The Company accounts for its investments in unconsolidated entities under the equity method of accounting or under the measurement alternative with the carrying amount of the investment adjusted to fair value when there is an observable transaction for the same or similar investment of the same issuer indicating a change in fair value. The significant accounting policies of the Company's unconsolidated investments are consistent with those of the Company in all material respects. Certain of these investments are subject to various buy‑sell provisions or other rights which are customary in real estate joint venture agreements. The Company and its partners in these entities may initiate these provisions to either sell the Company's interest or acquire the interest from the Company's partner.

The following is a combined summary of the financial position of the Company's unconsolidated investments discussed above, accounted for using the equity method and presented on the accompanying Condensed Consolidated Balance Sheets as of the dates presented, including development joint ventures and unconsolidated communities sold during the respective periods (dollars in thousands):


	3/31/2022		12/31/2021
	(unaudited)
Assets:
Real estate, net	$	1,198,088	$	1,184,041
Other assets (1)	409,751		399,591
Total assets	$	1,607,839	$	1,583,632

Liabilities and partners' capital:
Mortgage notes payable, net (2)	$	660,210	$	645,235
Other liabilities	166,097		168,403
Partners' capital	781,532		769,994
Total liabilities and partners' capital	$	1,607,839	$	1,583,632

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(1) Consists primarily of property technology investment management funds, in-place leases and cash and cash equivalents.

(2) Other than a construction loan on the AVA Arts District development, with $27,333 currently outstanding as of March 31, 2022 and reflected in the table above, the Company has not guaranteed any other outstanding debt, nor does the Company have any obligation to fund any debt that it has not guaranteed, should the unconsolidated entity be unable to do so.

The following is a combined summary of the operating results of the entities accounted for using the equity method discussed above and presented on the accompanying Condensed Consolidated Statements of Comprehensive Income, for the periods presented (dollars in thousands):


	For the three months ended
	3/31/2022		3/31/2021
	(unaudited)
Rental and other income (1)	$	26,450	$	26,398
Operating and other expenses	(11,383)		(13,631)
Gain on sale of communities	58		—
Interest expense, net	(6,026)		(7,668)
Depreciation expense	(7,318)		(8,478)
Net income	$	1,781	$	(3,379)

Company's share of net income	$	416	$	61
Direct investment gains, amortization of excess investment and other (2)	(99)		(528)
Income from investments in unconsolidated entities	$	317	$	(467)

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(1) Includes unrealized gains on the Company's indirect investments in property technology ventures accounted for under the equity method of accounting during the three months ended March 31, 2022.

(2) Includes unrealized gains on the Company’s direct investment in equity securities of property technology investments during the three months ended March 31, 2022.

Investments in Consolidated Real Estate Entities

During the three months ended March 31, 2022, the Company acquired Avalon Flatirons, located in Lafayette, CO, which contains 207 apartment homes and 16,000 square feet of commercial space and was acquired for a purchase price of $95,000,000.

The Company accounted for this purchase as an asset acquisition and recorded the acquired assets and assumed liabilities, including identifiable intangibles, at their relative fair values based on the purchase price and acquisition costs incurred. The Company used third party pricing or internal models for the value of the land, a valuation model for the value of the building, and an internal model to determine the fair value of the remaining real estate assets and in-place leases. Given the heterogeneous nature of multifamily real estate, the fair values for the land, debt, real estate assets and in-place leases incorporated significant unobservable inputs and therefore are considered to be Level 3 prices within the fair value hierarchy.

Expensed Transaction, Development and Other Pursuit Costs

The Company capitalizes pre-development costs incurred in pursuit of new development opportunities when future development is probable ("Development Rights"). Future development of these Development Rights is dependent upon various factors, including zoning and regulatory approval, rental market conditions, construction costs and the availability of capital. Costs incurred for pursuits for which future development is not yet considered probable are expensed as incurred. In addition, if the status of a Development Right changes, making future development by the Company no longer probable, any non-recoverable capitalized pre-development costs are expensed. The Company expensed costs related to development pursuits not yet considered probable for development and the abandonment of Development Rights, as well as costs incurred in pursuing the acquisition or disposition of assets for which such acquisition and disposition activity did not occur. The amount for the three months ended March 31, 2022 was a net expense of $987,000. The amount for the three months ended March 31, 2021 was a net recovery of $170,000. These costs are included in expensed transaction, development and other pursuit costs, net of recoveries on the accompanying Condensed Consolidated Statements of Comprehensive Income. Abandoned pursuit costs can vary greatly, and the costs incurred in any given period may be significantly different in future periods.

Casualty and Impairment of Long-Lived Assets

In the Company's evaluation of its real estate portfolio for impairment, as discussed below, it considered the impact of the Pandemic and did not identify any indicators of impairment as a result.

The Company evaluates its real estate and other long-lived assets for impairment when potential indicators of impairment exist. Such assets are stated at cost, less accumulated depreciation and amortization, unless the carrying amount of the asset is not recoverable. If events or circumstances indicate that the carrying amount of a property or long-lived asset may not be recoverable, the Company assesses its recoverability by comparing the carrying amount of the property or long-lived asset to its estimated undiscounted future cash flows. If the carrying amount exceeds the aggregate undiscounted future cash flows, the

Company recognizes an impairment loss to the extent the carrying amount exceeds the estimated fair value of the property or long-lived asset. Based on periodic tests of recoverability of long-lived assets, the Company did not recognize any impairment losses for the three months ended March 31, 2022 and 2021.

The Company evaluates its for-sale condominium inventory for potential indicators of impairment, considering whether the fair value of the individual for-sale condominium units exceeds the carrying value of those units. For-sale condominium inventory is stated at cost, unless the carrying amount of the inventory is not recoverable when compared to the fair value of each unit. The Company determines the fair value of its for-sale condominium inventory as the estimated sales price less direct costs to sell. For the three months ended March 31, 2022 and 2021, the Company did not recognize any impairment losses on its for-sale condominium inventory.

The Company assesses its portfolio of land held for both development and investment for impairment if the intent of the Company changes with respect to either the development of, or the expected holding period for, the land. During the three months ended March 31, 2022 and 2021, the Company did not recognize any impairment charges on its investment in land.

The Company evaluates its unconsolidated investments for other than temporary impairment, considering both the extent and amount by which the carrying value of the investment exceeds the fair value, and the Company's intent and ability to hold the investment to recover its carrying value. The Company also evaluates its proportionate share of any impairment of assets held by unconsolidated investments. There were no other than temporary impairment losses recognized for any of the Company's investments in unconsolidated real estate entities during the three months ended March 31, 2022 and 2021.