Variable Interest Entities

12 Months Ended

Dec. 31, 2022

Variable Interest Entities [Abstract]

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:


	December 31, 2022		December 31, 2021
ASSETS
Assets:
Net Investment in Real Estate	$	313,245	$	277,984


Operating Lease Right-of-Use Assets	13,000		13,087
Cash and Cash Equivalents	2,915		9,126


Deferred Rent Receivable	13,261		10,984

Prepaid Expenses and Other Assets, Net	12,919		9,480

Total Assets	$	355,340	$	320,661
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:

Accounts Payable, Accrued Expenses and Other Liabilities	$	18,148	$	9,496
Operating Lease Liabilities	10,249		10,277
Rents Received in Advance and Security Deposits	7,917		7,470

Partners' Capital	319,026		293,418
Total Liabilities and Partners' Capital	$	355,340	$	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 the partnership 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 Ventures, 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 years ended December 31, 2022 and 2021, we earned fees of $1,717 and $407, respectively, from the Joint Ventures related to asset management and development services we provided to the Joint Ventures, of which we deferred recognition of $395 and $86, respectively, due to our economic interest in the Joint Ventures. During the year ended December 31, 2022, we incurred fees of $909 related to third-party development management services associated with the Joint Venture. At December 31, 2022 and 2021, we had a receivable from the Joint Ventures of $34 and $56, respectively.

Net income of the Joint Ventures for the years ended December 31, 2022 and 2021 was $171,511 and $14,905, respectively. Included in net income during the year ended December 31, 2022 is gain on sale of real estate of $171,671 related to the sale of 391 acres of land for which our economic share of the gain on sale was $84,119. Included in net income during the year ended December 31, 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 gain on sale against the basis of the land acquired.

For the year ended December 31, 2022, we earned incentive fees of $31,308 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 year ended December 31, 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.

The Joint Venture has three buildings under development comprising an aggregate 1.8 million square feet (the "Project") at December 31, 2022. During the year ended December 31, 2022, in connection with the Project, the Joint Venture entered into a construction loan with a capacity of $149,514 with a third party lender (the "Joint Venture Loan"). As of December 31, 2022, the balance of the Joint Venture Loan is $9,037, exclusive of $1,188 of debt issuance costs. With respect to the Joint Venture Loan, we provided a completion guarantee to the lender and our third-party joint venture partner that requires the Company to timely complete construction of the Project. Total estimated investment for the Project is approximately $210,300 and the Joint Venture is using a third-party contractor to develop the buildings pursuant to a guaranteed maximum price contract. We also provided a guarantee to the lender related to typical non-recourse exceptions and an environmental indemnity. It is not possible to estimate the amount of additional costs, if any, that we may incur in connection with our completion guarantees to the third party lender and/or our joint venture partner as well as the non-recourse exception and environmental indemnity guarantees; however, we do not expect that we will be required to make any significant payments in satisfaction of these guarantees.

As part of our assessment of the appropriate accounting treatment for the Joint Ventures, we reviewed the operating agreements of each Joint Venture in order to determine our rights and the rights of our joint venture partners, including whether those rights are protective or participating. Each operating agreement contains certain protective rights, such as the requirement of both members' approval to sell, finance or refinance the property and to pay capital expenditures and operating expenditures outside of the approved budget. Also, we and our Joint Venture partners jointly (i) approve the annual budget, (ii) approve certain expenditures, (iii) review and approve the Joint Venture's tax return before filing and (iv) approve each lease at a developed property. We consider the latter rights substantive participation rights that result in shared, joint power over the activities that most significantly impact the performance of each Joint Venture. As such, we concluded to account for our investments in each Joint Venture under the equity method of accounting.