Accounting Policies | 3 Months Ended |
Mar. 31, 2015 |
Accounting Policies [Abstract] | |
Accounting Policies | Accounting Policies |
Basis of Presentation |
The interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and should be read in conjunction with the consolidated financial statements and related notes included in the Company’s annual report on Form 10-K for the year ended December 31, 2014, as amended on Form 10-K/A’s on March 19, 2015 and May 4, 2015. The results of interim periods are not necessarily indicative of results for the full year or any subsequent period. In management’s opinion, all adjustments (consisting solely of normal recurring matters) necessary for a fair statement of financial position, results of operations and cash flows at the dates and for the periods presented have been included. |
Use of Estimates |
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires the Company to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying consolidated financial statements and related notes. Some of the critical estimates include, but are not limited to, determination of the primary beneficiary of variable interest entities (“VIEs”), estimates of useful lives for long-lived assets, reserves for collection on accounts and notes receivable and other investments, the fair value estimate of redeemable noncontrolling interest, impairment of real estate and other-than-temporary impairments on equity method investments. As a result of the nature of estimates, actual results could differ. |
Reclassifications |
During the three months ended June 30, 2014, the Company established several new financial statement line items within the Revenue and Expense sections of the Consolidated Statement of Operations to provide the financial statement user additional details of the components of total revenues and total expenses. Accordingly, comparable amounts for the three months ended March 31, 2014 have been reclassified. |
Planned REIT Conversion |
On January 13, 2015, the Company announced its Board of Directors approved a plan to pursue conversion to Real Estate Investment Trust (“REIT”) status. The Company expects to elect REIT status for its taxable year beginning January 1, 2016, subject to business conditions, the completion of related preparatory work and obtaining necessary third-party consents. |
Variable Interest Entities |
As of March 31, 2015, the Company determined it was the primary beneficiary of 24 VIEs representing 21 consolidated properties. The creditors of the consolidated VIEs do not have recourse to the Company’s general credit. As of March 31, 2015, the Company determined it was not the primary beneficiary of 66 VIEs and accounts for these interests as equity method investments. The maximum exposure to loss of these unconsolidated VIEs is limited to $325,000,000, the Company’s investment balances as of March 31, 2015. |
New Accounting Guidance |
The following accounting pronouncements were adopted during the three months ended March 31, 2015: |
In January 2015, the FASB issued an amendment to the accounting guidance to eliminate the concept of extraordinary items from GAAP. The presentation and disclosure guidance for items that are unusual in nature or occur infrequently has been retained and expanded to include items that are both unusual in nature and infrequently occurring. This guidance was early adopted effective January 1, 2015 and did not have a material impact on the Company’s consolidated financial statements. |
The following new accounting pronouncements will be adopted on their respective effective dates: |
In May 2014, the FASB issued an amendment to the accounting guidance for revenue from contracts with customers. The core principle of this guidance is an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance defines steps an entity should apply to achieve the core principle. This guidance is effective for annual reporting periods beginning after December 15, 2016 and interim reporting periods within that annual period and allows for both retrospective and modified retrospective methods of adoption. Early adoption is not permitted. The Company is currently in the process of determining the method of adoption and evaluating the impact of adopting this guidance on the Company’s consolidated financial statements. |
In August 2014, the FASB issued an amendment to the accounting guidance on disclosure of uncertainties about an entity’s ability to continue as a going concern. This guidance requires management to assess the Company’s ability to continue as a going concern and to provide disclosures under certain circumstances. This guidance is effective for annual reporting periods ending after December 15, 2016 and interim reporting periods thereafter. Early adoption is permitted. The Company does not expect the adoption of this guidance to have a material impact on the Company’s consolidated financial statements. |
In February 2015, the FASB issued an amendment to the consolidation accounting guidance. This guidance changes the required analysis to determine whether certain types of legal entities should be consolidated. The amendment modifies the evaluation of whether limited partnerships and similar legal entities are VIEs or voting interest entities, eliminates the presumption that a general partner should consolidate a limited partnership and may affect the consolidation analysis of entities involved in VIEs, particularly those having fee arrangements and related party relationships. This guidance is effective for fiscal years, and for interim reporting periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The Company is currently in the process of evaluating the impact of adopting this guidance on its consolidated financial statements. |
In April 2015, the FASB issued an Accounting Standards Update to simplify the presentation of debt issuance costs. This guidance requires that third-party debt issuance costs be presented in the balance sheet as a direct deduction from the carrying value of the debt. This guidance is effective for fiscal years, and for interim reporting periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The Company is currently in the process of evaluating the impact of adopting this guidance on its consolidated financial statements. |
Related Party Transactions |
The Company and certain of its affiliates entered into a Master Contribution and Sale Agreement (the “Master Contribution Agreement”) with Bruce C. Ratner (“Mr. Ratner”), an Executive Vice President and Director, and certain entities and individuals affiliated with Mr. Ratner (the “BCR Entities”) in August 2006 to purchase their interests in a total of 30 retail, office and residential operating properties and service companies in the Greater New York City metropolitan area. Pursuant to the Master Contribution Agreement, certain projects under development would remain owned jointly until each individual project was completed and achieved “stabilization.” Upon stabilization, each project would be valued and the Company, in its discretion, would choose among various ownership options for the project. |
Pursuant to the terms of the Master Contribution Agreement, in January 2014, the Company caused certain of its affiliates to acquire the BCR Entities’ interests in 8 Spruce Street, an apartment community in Manhattan, New York, DKLB BKLN, an apartment community in Brooklyn, New York, and East River Plaza, a specialty retail center in Manhattan, New York, for $14,286,000. Prior to the transaction, the Company accounted for the three projects using the equity method of accounting and subsequently accounts for the projects as equity method investments as the partners continue to have joint control. |
As a result of the March 2014 disposal of Quartermaster Plaza, a specialty retail center in Philadelphia, Pennsylvania, the Company accrued $1,646,000 during the six months ended June 30, 2014, related to a tax indemnity payment due to the BCR Entities, all of which was paid as of March 31, 2015. |
Accumulated Other Comprehensive Loss |
The following table summarizes the components of accumulated other comprehensive income (loss) (“accumulated OCI”): |
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| March 31, 2015 | December 31, 2014 | | | |
| (in thousands) | | | |
Unrealized losses on foreign currency translation | $ | 215 | | $ | 137 | | | | |
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Unrealized losses on interest rate contracts (1) | 93,595 | | 96,084 | | | | |
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| 93,810 | | 96,221 | | | | |
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Income tax benefit | (36,347 | ) | (37,281 | ) | | | |
Noncontrolling interest | (91 | ) | (94 | ) | | | |
Accumulated Other Comprehensive Loss | $ | 57,372 | | $ | 58,846 | | | | |
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-1 | Included in the amounts as of March 31, 2015 and December 31, 2014 are $70,015 and $73,536, respectively, of unrealized loss on an interest rate swap associated with New York Times office building on its nonrecourse mortgage debt with a notional amount of $640,000. This swap effectively fixes the mortgage at an all-in lender interest rate of 6.40% and expires in September 2017. | | | | | | | | |
The following table summarizes the changes, net of tax and noncontrolling interest, of accumulated OCI by component: |
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| Foreign Currency Translation | Interest Rate Contracts | Total |
| (in thousands) |
Three Months Ended March 31, 2015 | | | |
Balance, January 1, 2015 | $ | (84 | ) | $ | (58,762 | ) | $ | (58,846 | ) |
Loss recognized in accumulated OCI | (48 | ) | (4,574 | ) | (4,622 | ) |
Loss reclassified from accumulated OCI | — | | 6,096 | | 6,096 | |
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Total other comprehensive income | (48 | ) | 1,522 | | 1,474 | |
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Balance, March 31, 2015 | $ | (132 | ) | $ | (57,240 | ) | $ | (57,372 | ) |
Three Months Ended March 31, 2014 | | | |
Balance, January 1, 2014 | $ | (116 | ) | $ | (76,466 | ) | $ | (76,582 | ) |
Loss recognized in accumulated OCI | — | | (2,611 | ) | (2,611 | ) |
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Loss reclassified from accumulated OCI | — | | 8,631 | | 8,631 | |
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Total other comprehensive income | — | | 6,020 | | 6,020 | |
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Balance, March 31, 2014 | $ | (116 | ) | $ | (70,446 | ) | $ | (70,562 | ) |
The following table summarizes losses reclassified from accumulated OCI and their location on the Consolidated Statements of Operations: |
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Accumulated OCI Components | Loss Reclassified from Accumulated OCI | | Location on Consolidated Statements of Operations | | | | |
| (in thousands) | | | | | | |
Three Months Ended March 31, 2015 | | | | | | | |
Interest rate contracts | $ | 8,971 | | | Interest expense | | | | |
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Interest rate contracts | 991 | | | Earnings from unconsolidated entities, gross of tax | | | | |
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| 9,962 | | | Total before income tax and noncontrolling interest | | | | |
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| (3,862 | ) | | Income tax benefit | | | | |
| (4 | ) | | Noncontrolling interest | | | | |
| $ | 6,096 | | | Loss reclassified from accumulated OCI | | | | |
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Three Months Ended March 31, 2014 | | | | | | | |
Interest rate contracts | $ | 9,437 | | | Interest expense | | | | |
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Interest rate contracts | 3,666 | | | Discontinued operations | | | | |
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Interest rate contracts | 1,000 | | | Earnings from unconsolidated entities, gross of tax | | | | |
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| 14,103 | | | Total before income tax and noncontrolling interest | | | | |
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| (5,468 | ) | | Income tax benefit | | | | |
| (4 | ) | | Noncontrolling interest | | | | |
| $ | 8,631 | | | Loss reclassified from accumulated OCI | | | | |
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Supplemental Non-Cash Disclosures |
The following table represents a summary of non-cash transactions including, but not limited to, dispositions of operating properties whereby the nonrecourse mortgage debt is assumed by the buyer, acquisition of rental properties, exchanges of senior notes for Class A common stock, change in construction payables and other capital expenditures, change in the fair market value of redeemable noncontrolling interest and capitalization of stock-based compensation granted to employees directly involved with the development and construction of real estate. |
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| Three Months Ended March 31, | | | |
| 2015 | 2014 | | | |
| (in thousands) | | | |
Investing Activities | | | | | |
Increase in projects under construction and development | $ | (12,577 | ) | $ | (9,345 | ) | | | |
(Increase) decrease in completed rental properties | (33,486 | ) | 53,285 | | | | |
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Increase in restricted cash | — | | (387 | ) | | | |
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Increase in investments in and advances to affiliates | (12,921 | ) | (9,158 | ) | | | |
Total effect on investing activities | $ | (58,984 | ) | $ | 34,395 | | | | |
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Financing Activities | | | | | |
Increase (decrease) in nonrecourse mortgage debt and notes payable | 36,276 | | (33,812 | ) | | | |
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Decrease in convertible senior debt | (286,196 | ) | — | | | | |
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Increase in Class A common stock | 4,548 | | — | | | | |
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Increase (decrease) in additional paid-in capital | 285,391 | | (26,473 | ) | | | |
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Increase in treasury stock | (6,503 | ) | — | | | | |
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Increase in redeemable noncontrolling interest | — | | 28,390 | | | | |
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(Decrease) increase in noncontrolling interest | (532 | ) | 4 | | | | |
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Total effect on financing activities | $ | 32,984 | | $ | (31,891 | ) | | | |
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