Investments in Unconsolidated Joint Ventures | Investments in Unconsolidated Joint Ventures We have investments in several real estate joint ventures with various partners. As of December 31, 2022, the book value of these investments was $3.2 billion, net of investments with negative book values totaling $110.2 million for which we have an implicit commitment to fund future capital needs. As of December 31, 2022, 800 Third Avenue and 21 East 66th Street are VIEs in which we are not the primary beneficiary. As of December 31, 2021, 800 Third Avenue, 21 East 66th Street, and certain properties within the Stonehenge Portfolio are VIEs in which we were not the primary beneficiary. Our net equity investment in these VIEs was $86.2 million as of December 31, 2022 and $85.6 million as of December 31, 2021. Our maximum loss is limited to the amount of our equity investment in these VIEs. See the "Principles of Consolidation" section of Note 2, "Significant Accounting Policies". All other investments below are voting interest entities. As we do not control the joint ventures listed below, we account for them under the equity method of accounting. The table below provides general information on each of our joint ventures as of December 31, 2022: Property Partner Ownership Interest (1) Economic Interest (1) Unaudited Approximate Square Feet 100 Park Avenue Prudential Real Estate Investors 49.90% 49.90% 834,000 717 Fifth Avenue Wharton Properties / Private Investor 10.92% 10.92% 119,500 800 Third Avenue Private Investors 60.52% 60.52% 526,000 919 Third Avenue New York State Teacher's Retirement System 51.00% 51.00% 1,454,000 11 West 34th Street Private Investor / Wharton Properties 30.00% 30.00% 17,150 280 Park Avenue Vornado Realty Trust 50.00% 50.00% 1,219,158 1552-1560 Broadway (2) Wharton Properties 50.00% 50.00% 57,718 10 East 53rd Street Canadian Pension Plan Investment Board 55.00% 55.00% 354,300 21 East 66th Street (3) Private Investors 32.28% 32.28% 13,069 650 Fifth Avenue (4) Wharton Properties 50.00% 50.00% 69,214 121 Greene Street (5) Wharton Properties 50.00% 50.00% 7,131 11 Madison Avenue PGIM Real Estate 60.00% 60.00% 2,314,000 One Vanderbilt Avenue National Pension Service of Korea / Hines Interest LP 71.01% 71.01% 1,657,198 Worldwide Plaza RXR Realty / New York REIT 24.95% 24.95% 2,048,725 1515 Broadway Allianz Real Estate of America 56.87% 56.87% 1,750,000 2 Herald Square Israeli Institutional Investor 51.00% 51.00% 369,000 115 Spring Street Private Investor 51.00% 51.00% 5,218 15 Beekman (6) A fund managed by Meritz Alternative Investment Management 20.00% 20.00% 221,884 85 Fifth Avenue Wells Fargo 36.27% 36.27% 12,946 One Madison Avenue (7) National Pension Service of Korea / Hines Interest LP / International Investor 25.50% 25.50% 1,048,700 220 East 42nd Street A fund managed by Meritz Alternative Investment Management 51.00% 51.00% 1,135,000 450 Park Avenue (8) Korean Institutional Investor / Israeli Institutional Investor 50.10% 25.10% 337,000 5 Times Square (9) RXR Realty led investment group 31.55% 31.55% 1,131,735 (1) Ownership interest and economic interest represent the Company's interests in the joint venture as of December 31, 2022. Changes in ownership or economic interests within the current year are disclosed in the notes below. (2) The joint venture owns a long-term leasehold interest in the retail space and certain other spaces at 1560 Broadway, which is adjacent to 1552 Broadway. (3) We hold a 32.28% interest in three retail units and one residential unit at the property and a 16.14% interest in two residential units at the property. (4) The joint venture owns a long-term leasehold interest in the retail space at 650 Fifth Avenue. (5) During the fourth quarter of 2022, the Company recorded a $6.3 million charge in connection with the pending sale of this investment for a gross consideration of approximately $14.0 million, which closed in February 2023. This charge is included in Depreciable real estate reserves and impairments in the consolidated statement of operations. (6) In 2020, the Company formed a joint venture, which then entered into a long-term sublease with the Company. (7) In 2020, the Company admitted partners to the One Madison Avenue development project, which resulted in the Company no longer retaining a controlling interest in the entity, as defined in ASC 810, and the deconsolidation of our remaining 50.5% interest. We recorded our investment at fair value, which resulted in the recognition of a fair value adjustment of $187.5 million. The fair value of our investment was determined by the terms of the joint venture agreement governing the capitalization of the project. The partners have committed aggregate equity to the project totaling no less than $501.8 million and their ownership interest in the joint venture is based on their capital contributions, up to an aggregate maximum of 49.5%. As of December 31, 2022, the total of the two partners' ownership interests based on equity contributed was 40.0%. In 2021, the Company admitted an additional partner to the development project for a committed aggregate equity investment totaling no less than $259.3 million. The partner's indirect ownership interest in the joint venture is based on it's capital contributions, up to an aggregate maximum of 25.0%. The transaction did not meet sale accounting under ASC 860 and, as a result, was treated as a secured borrowing for accounting purposes and is included in Other liabilities in our consolidated balance sheets at December 31, 2022 and 2021. (8) The 50.1% ownership interest reflected in this table is comprised of our 25.1% economic interest and a 25.0% economic interest held by a third-party. The third-party's economic interest is held within a joint venture that we consolidate and recognize in Noncontrolling interests in other partnerships on our consolidated balance sheet. An additional third-party owns the remaining 49.9% economic interest in the property. (9) In September 2022, the Company converted its mezzanine loan position secured by the equity interest in 5 Times Square to an equity interest in a joint venture partnership with the existing equity holders. See Note 5, " Debt and Preferred Equity Investments." Disposition of Joint Venture Interests or Properties The following table summarizes the investments in unconsolidated joint ventures sold during the years ended December 31, 2022, 2021, and 2020: Property Ownership Interest Sold Disposition Date Gross Asset Valuation (Loss) Gain on Sale (in millions) (1) (2) Stonehenge Portfolio Various April 2022 $ 1.0 $ — 400 East 57th Street (3) 41.00% September 2021 133.5 (1.0) 605 West 42nd Street - Sky 20.00% June 2021 858.1 8.9 55 West 46th Street - Tower 46 25.00% March 2021 275.0 (15.2) 885 Third Avenue (4) N/A January 2021 N/A N/A 333 East 22nd Street 33.33% December 2020 1.6 3.0 (1) Represents the Company's share of the gain or loss (2) For the year ended December 31, 2021, the (losses) gains on sale are net of $1.4 million of employee compensation accrued in connection with the realization of the investment dispositions. There were no amounts accrued for employee compensation in the years ended December 31, 2022 and 2020. Additionally, amounts do not include adjustments for expenses recorded in subsequent periods. (3) In connection with our agreement to sell the property in April 2021, we recorded a charge of $5.7 million, which is included in Depreciable real estate reserves and impairments in the consolidated statements of operations. (4) In January 2021, pursuant to the partnership documents, certain participating rights of the common member expired. As a result, it was determined that we are the primary beneficiary of the VIE and the investment was consolidated in our financial statements. See Note 3, "Property Acquisitions." Joint Venture Mortgages and Other Loans Payable We generally finance our joint ventures with non-recourse debt. In certain cases we may provide guarantees or master leases, which terminate upon the satisfaction of specified circumstances or repayment of the underlying loans. The mortgage notes and other loans payable collateralized by the respective joint venture properties and assignment of leases as of December 31, 2022 and 2021, respectively, are as follows (dollars in thousands): Property Economic Interest (1) Current Maturity Date Final Maturity Date (2) Interest Rate (3) December 31, 2022 December 31, 2021 Fixed Rate Debt: 717 Fifth Avenue 10.92 % July 2022 (4) July 2022 (4) 5.02% $ 655,328 $ 655,328 650 Fifth Avenue 50.00 % April 2023 April 2023 5.45% 65,000 — 21 East 66th Street 32.28 % April 2023 April 2028 3.60% 12,000 12,000 919 Third Avenue 51.00 % June 2023 June 2023 5.12% 500,000 500,000 220 East 42nd Street 51.00 % June 2023 June 2025 5.75% 510,000 — 280 Park Avenue 50.00 % September 2023 September 2024 5.81% 1,200,000 — 5 Times Square 31.55 % September 2024 September 2026 7.00% 400,000 — 10 East 53rd Street 55.00 % February 2025 February 2025 5.35% 220,000 — 1515 Broadway 56.87 % March 2025 March 2025 3.93% 782,321 801,845 450 Park Avenue 25.10 % June 2025 June 2027 6.10% 267,000 — 11 Madison Avenue 60.00 % September 2025 September 2025 3.84% 1,400,000 1,400,000 One Madison Avenue (5) 25.50 % November 2025 November 2026 3.94% 467,008 — 800 Third Avenue 60.52 % February 2026 February 2026 3.48% 177,000 177,000 Worldwide Plaza 24.95 % November 2027 November 2027 3.98% 1,200,000 1,200,000 One Vanderbilt Avenue 71.01 % July 2031 July 2031 2.95% 3,000,000 3,000,000 650 Fifth Avenue — 275,000 Stonehenge Portfolio — 195,493 Total fixed rate debt $ 10,855,657 $ 8,216,666 Floating Rate Debt: 1552 Broadway 50.00 % December 2022 (6) December 2022 (6) L+ 2.65% $ 193,132 $ 193,132 11 West 34th Street 30.00 % January 2023 (7) January 2023 (7) L+ 1.45% 23,000 23,000 650 Fifth Avenue 50.00 % April 2023 April 2023 S+ 2.50% 210,000 — 121 Greene Street 50.00 % May 2023 May 2023 S+ 2.10% 12,550 13,228 115 Spring Street 51.00 % September 2023 September 2023 L+ 3.40% 65,550 65,550 2 Herald Square 51.00 % November 2023 November 2023 S+ 2.06% 182,500 200,989 100 Park Avenue 49.90 % December 2023 December 2025 L+ 2.25% 360,000 360,000 15 Beekman (8) 20.00 % January 2024 July 2025 L+ 1.50% 86,738 43,566 5 Times Square 31.55 % September 2024 September 2026 S+ 5.77% 495,924 — 21 East 66th Street 32.28 % June 2033 June 2033 T+ 2.75% 586 632 220 East 42nd Street — 510,000 280 Park Avenue — 1,200,000 10 East 53rd Street — 220,000 One Madison Avenue — 169,629 Total floating rate debt $ 1,629,980 $ 2,999,726 Total joint venture mortgages and other loans payable $ 12,485,637 $ 11,216,392 Deferred financing costs, net (136,683) (130,516) Total joint venture mortgages and other loans payable, net $ 12,348,954 $ 11,085,876 (1) Economic interest represents the Company's interests in the joint venture as of December 31, 2022. Changes in ownership or economic interests, if any, within the current year are disclosed in the notes to the investment in unconsolidated joint ventures table above. (2) Reflects exercise of all available options. The ability to exercise extension options may be subject to certain conditions, including meeting tests based on the operating performance of the property. (3) Interest rates as of December 31, 2022, taking into account interest rate hedges in effect during the period. Floating rate debt is presented with the stated spread over the 30-day LIBOR ("L"), Term SOFR ("S") or 1-year Treasury ("T"). (4) This loan matured in July 2022. The Company is in discussions with the lender on a resolution. (5) The loan is a $1.25 billion construction facility with an initial term of five years with one, one year extension option. Advances under the loan are subject to costs incurred. In conjunction with the loan, we provided partial guarantees for interest and principal payments, the amounts of which are based on certain construction milestones and operating metrics. (6) In January 2023, the maturity date of the loan was extended by one month. (7) This loan matured in February 2023. The Company is in discussions with the lender on a resolution. (8) This loan is a $125.0 million construction facility. Advances under the loan are subject to costs incurred. We are entitled to receive fees for providing management, leasing, construction supervision and asset management services to certain of our joint ventures. We earned $24.0 million, $19.6 million and $15.8 million from these services, net of our ownership share of the joint ventures, for the years ended December 31, 2022, 2021, and 2020, respectively. In addition, we have the ability to earn incentive fees based on the ultimate financial performance of certain of the joint venture properties. The combined balance sheets for the unconsolidated joint ventures, as of December 31, 2022 and 2021, are as follows (in thousands): December 31, 2022 December 31, 2021 Assets (1) Commercial real estate property, net $ 15,989,642 $ 14,763,874 Cash and restricted cash 709,299 768,510 Tenant and other receivables, related party receivables, and deferred rents receivable 601,552 533,455 Other assets 2,551,426 1,776,030 Total assets $ 19,851,919 $ 17,841,869 Liabilities and equity (1) Mortgages and other loans payable, net $ 12,348,954 $ 11,085,876 Deferred revenue/gain 1,077,901 1,158,242 Lease liabilities 1,000,356 980,595 Other liabilities 456,537 352,499 Equity 4,968,171 4,264,657 Total liabilities and equity $ 19,851,919 $ 17,841,869 Company's investments in unconsolidated joint ventures $ 3,190,137 $ 2,997,934 (1) As of December 31, 2022, $547.6 million of net unamortized basis differences between the amount at which our investments are carried and our share of equity in net assets of the underlying property will be amortized through equity in net income (loss) from unconsolidated joint ventures over the remaining life of the underlying items having given rise to the differences. The combined statements of operations for the unconsolidated joint ventures, from acquisition date through the years ended December 31, 2022, 2021, and 2020 are as follows (unaudited, in thousands): Year Ended December 31, 2022 2021 2020 Total revenues $ 1,339,364 $ 1,228,364 $ 1,133,217 Operating expenses 240,002 203,332 180,201 Real estate taxes 252,806 225,104 220,633 Operating lease rent 26,152 22,576 24,134 Interest expense, net of interest income 431,865 342,910 325,500 Amortization of deferred financing costs 27,754 31,423 20,427 Depreciation and amortization 465,100 484,130 407,834 Total expenses $ 1,443,679 $ 1,309,475 $ 1,178,729 Loss on early extinguishment of debt (467) (2,017) (194) Net loss before (loss) gain on sale $ (104,782) $ (83,128) $ (45,706) Company's equity in net loss from unconsolidated joint ventures $ (57,958) $ (55,402) $ (25,195) |