Variable Interest Entities

9 Months Ended

Sep. 30, 2023

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:


	September 30, 2023		December 31, 2022
ASSETS
Assets:
Net Investment in Real Estate	$	310,450	$	313,245


Operating Lease Right-of-Use Assets	12,933		13,000
Cash and Cash Equivalents	2,938		2,915

Deferred Rent Receivable	15,336		13,261
Prepaid Expenses and Other Assets, Net	14,284		12,919
Total Assets	$	355,941	$	355,340
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:

Accounts Payable, Accrued Expenses and Other Liabilities	$	11,601	$	18,148
Operating Lease Liabilities	10,226		10,249
Rents Received in Advance and Security Deposits	7,869		7,917
Partners' Capital	326,245		319,026
Total Liabilities and Partners' Capital	$	355,941	$	355,340

Joint Venture

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 (see Note 6). The Joint Venture was formed for the purpose of developing, leasing, operating and selling land located in the Phoenix, Arizona metropolitan area.

Under the operating agreement 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 nine months ended September 30, 2023 and 2022, we earned fees of $4,693 and $699, respectively, from the Joint Venture, related to asset management, property management and development services, of which we deferred recognition of $955 and $187, respectively, due to our economic interest in the Joint Venture. During the nine months ended September 30, 2023 and 2022, we incurred fees of $2,690 and $318, respectively, related to third-party development management services associated with the Joint Venture. At September 30, 2023 and December 31, 2022, we had a receivable from the Joint Venture of $122 and $34, respectively.

Net income of the Joint Venture for the nine months ended September 30, 2023 and 2022 was $44,334 and $176,169, respectively. Included in net income during the nine months ended September 30, 2023 was $3,283 of lease revenue as well as gain on sale of real estate of $40,283 related to the sale of approximately 31 acres of land. Our economic share of the lease revenue and gain on sale was $1,609 and $19,739, respectively. Included in net income during the nine months ended September 30, 2022 is gain on sale of real estate of $176,281 related to the sale of approximately 391 acres of land for which our economic share of the gain on sale was $86,378. For the nine months ended September 30, 2023 and 2022, we earned incentive fees of $8,903 and $32,276, respectively, from the Joint Venture, which is reflected in the Equity In Income of Joint Venture line item in the Consolidated Statements of Operations.

The Joint Venture has three buildings under development comprising an aggregate 1.8 million square feet (the "Project") at September 30, 2023. 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 September 30, 2023, the balance of the Joint Venture Loan is $79,741, excluding $845 of unamortized 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.