Variable Interest Entities

6 Months Ended

Jun. 30, 2022

Variable Interest Entities [Abstract]

Other Real Estate Partnerships

The Other Real Estate Partnerships are variable interest entities ("VIEs") of the Operating Partnership and the Operating Partnership is the primary beneficiary, thus causing the Other Real Estate Partnerships to be consolidated by the Operating Partnership. In addition, the Operating Partnership is a VIE of the Company and the Company is the primary beneficiary.

The following table summarizes the assets and liabilities of the Other Real Estate Partnerships included in our consolidated balance sheets, net of intercompany amounts:


	June 30, 2022		December 31, 2021
ASSETS
Assets:
Net Investment in Real Estate	$	294,734	$	277,984


Operating Lease Right-of-Use Assets	13,044		13,087
Cash and Cash Equivalents	3,505		9,126

Deferred Rent Receivable	11,088		10,984
Prepaid Expenses and Other Assets, Net	9,944		9,480
Total Assets	$	332,315	$	320,661
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:

Accounts Payable, Accrued Expenses and Other Liabilities	$	20,105	$	9,496
Operating Lease Liabilities	10,263		10,277
Rents Received in Advance and Security Deposits	6,848		7,470
Partners' Capital	295,099		293,418
Total Liabilities and Partners' Capital	$	332,315	$	320,661

Joint Ventures

Through a wholly-owned TRS of the Operating Partnership, we own a 43% interest in the Joint Venture. Since we own our interest in the Joint Venture through a partnership with a third party and we hold the power to direct the activities that most significantly impact the economic performance of the partnership, we consolidate and reflect our partner's 6% interest in the Joint Venture within the financial statements. Additionally, we owned a 49% interest in a joint venture that sold its remaining acres of land and ceased operations during the year ended December 31, 2021 (the "Former Joint Venture" together with the Joint Venture, the "Joint Ventures"). The Joint Ventures were formed for the purpose of developing, leasing, operating and selling land located in the Phoenix, Arizona metropolitan area.

Under the operating agreements for the Joint Venture, we act as the managing member and are entitled to receive fees for providing management, leasing, development, construction supervision, disposition and asset management services. In addition, the Joint Venture's operating agreement provides us the ability to earn incentive fees based on the ultimate financial performance of the Joint Venture.

During the six months ended June 30, 2022 and 2021, we earned fees of $145 and $276, respectively, from the Joint Ventures, related to asset management and development services, of which we deferred recognition of $71 and $47, respectively, due to our economic interest in the Joint Ventures. At June 30, 2022, we had an aggregate receivable from the Joint Venture of $107.

We account for our interests in the Joint Ventures using the hypothetical liquidation at book value (“HLBV”) model. Under this method, we record our Equity in Income (Loss) of Joint Ventures based on our proportionate share of the Joint Venture's earnings based on our ownership interest, after giving effect to incentive fees in which we are entitled to receive.

We classify distributions received from equity method investments using the cumulative earnings approach. In general, distributions received are considered returns on the investment and classified as cash inflows from operating activities. If, however, the investor’s cumulative distributions received, less distributions received in prior periods determined to be returns of investment, exceeds cumulative equity in earnings recognized, the excess is considered a return of investment and is classified as cash inflows from investing activities.

Net income of the Joint Ventures for the six months ended June 30, 2022 and 2021 was $176,168 and $14,905, respectively. Included in net income during the six months ended June 30, 2022 is gain on sale of real estate of $176,281 related to the sale of 391 acres of land for which our economic share of the gain on sale was $86,378. Included in net income during the six months ended June 30, 2021 is gain on sale of real estate of $15,160 related to the sale of 138 net acres of land from the Former Joint Venture for which our economic share of the gain on sale was $7,142. However, since the Company was the purchaser of the 138 net acres, we netted our portion of the gain on sale against the basis of the land acquired.

For the six months ended June 30, 2022, we earned incentive fees of $32,276 from the Joint Venture, which are reflected in the Equity In Income of Joint Ventures line item in the consolidated statement of operations. For the six months ended June 30, 2021, we earned incentive fees of $3,024 from the Former Joint Venture, which were netted against the basis of the real estate acquired from the Former Joint Venture.