| Shareholders' Equity, Noncontrolling Interests and Other Comprehensive Loss | 10. Shareholders’ Equity, Noncontrolling Interests and Other Comprehensive Loss Common Shares and Units In January 2024, the Company completed an underwritten offering of 6,900,000 Common Shares (inclusive of the underwriters’ option to purchase 900,000 additional shares) for net proceeds of $ 113.0 million. In addition to the ATM Program activity discussed below, the Company completed the following transactions in its Common Shares during the nine months ended September 30, 2024: • The Company withheld 3,410 shares of its restricted Common Shares (“Restricted Shares”) to pay the employees’ statutory minimum income taxes due on the value of the portion of their Restricted Shares that vested. • The Company recognized Common Share and Common OP Unit-based compensation expense totaling $ 7.0 million in connection with Restricted Shares and Common OP Units (“Restricted Units”) ( Note 13 ). In October 2024, the Company completed an underwritten offering of 5,750,000 Common Shares (inclusive of the underwriters’ option to purchase 750,000 additional shares) for net proceeds of $ 131.8 million, which the Company physically settled ( Note 16 ). ATM Program The Com pany has an at-the-market equity issuance program (“ATM Program”) that provides the Company with an efficient vehicle for raising public equity capital to fund its needs. The Company entered into its current $ 250.0 million ATM Program, which includes an optional “forward sale” component, in the first quarter of 2022. As of September 30, 2024 , 11,517,093 shares have been issued under the ATM Program and $ 2.7 million remains available for future share issuance. The Company did no t sell or issue any Common Shares on a forward basis under its ATM program for the nine months ended September 30, 2024 or 2023. During the three and nine months ended September 30, 2024 , the Company sold 8,533,962 and 10,273,250 of Common Shares under its ATM Program generating $ 187.0 million and $ 216.9 million of net proceeds, respectively. No such sales were made during the nine months ended September 30, 2023. Share Repurchase Program During 2018, the Company’s board of trustees (the “Board”) approved a new share repurchase program, which authorizes management, at its discretion, to repurchase up to $ 200.0 million of its outstanding Common Shares. The program does not obligate the Company to repurchase any specific number of Common Shares and may be discontinued or extended at any time. The Company did no t repurchase any shares during the nine months ended September 30, 2024 or 2023 . Under the share repurchase program $ 122.5 million remains available as of September 30, 2024. Dividends and Distributions During the three months ended September 30, 2024 and 2023 , the Company declared distributions on Common Shares/OP Units of $ 0.19 per Common Share/OP Unit and $ 0.18 per Common Share/OP Unit, respectively. During the nine months ended September 30, 2024 and 2023 , the Company declared distributions on Common Shares/OP Units of $ 0.55 per Common Share/OP Unit and $ 0.54 per Common Share/Unit in the aggregate, respectively. Noncontrolling Interests The following tables summarize the change in the noncontrolling interests for the three and nine months ended September 30, 2024 and 2023 (dollars in thousands, except per unit data):
Noncontrolling (a) Noncontrolling (b) Total Redeemable Noncontrolling Interests (c)
Balance as of July 1, 2024 $ 85,683 $ 371,538 $ 457,221 $ 40,874
Distributions declared of $ 0.19 per Common OP Unit and distributions on Preferred OP Units ( 1,273 ) — ( 1,273 )
Net income (loss) for the three months ended September 30, 2024 474 5,038 5,512 ( 1,672 )
Conversion of 31,847 Common OP Units and 18,266 Series C Preferred Units to Common Shares by limited partners of the Operating Partnership ( 1,546 ) — ( 1,546 ) —
Other comprehensive income - unrealized gain on valuation of swap agreements ( 1,400 ) ( 4,831 ) ( 6,231 ) —
Reclassification of realized interest expense on swap agreements ( 32 ) ( 2,409 ) ( 2,441 ) —
City Point Loan accrued interest — — — ( 4,165 )
Noncontrolling interest contributions — 2,409 2,409 —
Noncontrolling interest distributions — ( 7,591 ) ( 7,591 ) —
Employee Long-term Incentive Plan Unit Awards 2,494 — 2,494 —
Reallocation of noncontrolling interests (d) ( 354 ) — ( 354 ) —
Balance as of September 30, 2024 $ 84,046 $ 364,154 $ 448,200 $ 35,037
Balance as of July 1, 2023 $ 103,813 $ 348,624 $ 452,437 $ 59,833
Distributions declared of $ 0.18 per Common OP Unit and distributions on Preferred OP Units ( 1,338 ) — ( 1,338 ) —
Net income (loss) for the three months ended September 30, 2023 79 ( 12,426 ) ( 12,347 ) ( 2,495 )
Conversion of 10,828 Common OP Units to Common Shares by limited partners of the Operating Partnership ( 182 ) — ( 182 ) —
Other comprehensive income - unrealized gain on valuation of swap agreements 950 4,212 5,162 —
Reclassification of realized interest expense on swap agreements ( 56 ) ( 3,526 ) ( 3,582 ) —
City Point Loan accrued interest — — — ( 2,332 )
Capital call receivable — ( 16,300 ) ( 16,300 ) —
Noncontrolling interest contributions — 16,600 16,600 315
Noncontrolling interest distributions — ( 1,754 ) ( 1,754 ) ( 37 )
Employee Long-term Incentive Plan Unit Awards 2,353 — 2,353 —
Reallocation of noncontrolling interests (d) ( 2,039 ) — ( 2,039 ) —
Balance as of September 30, 2023 $ 103,580 $ 335,430 $ 439,010 $ 55,284
Noncontrolling (a) Noncontrolling (b) Total Redeemable Noncontrolling Interests (c)
Balance at January 1, 2024 $ 99,718 $ 346,582 $ 446,300 $ 50,339
Distributions declared of $ 0.55 per Common OP Unit and distributions on Preferred OP Units ( 3,954 ) — ( 3,954 ) —
Net income (loss) for the nine months ended September 30, 2024 979 ( 608 ) 371 ( 6,518 )
Conversion of 1,082,296 Common OP Units and 59,865 Series C Preferred Units to Common Shares by limited partners of the Operating Partnership ( 20,888 ) — ( 20,888 ) —
Other comprehensive income - unrealized gain on valuation of swap agreements ( 455 ) 2,815 2,360 —
Reclassification of realized interest expense on swap agreements ( 136 ) ( 9,743 ) ( 9,879 ) —
City Point Loan accrued interest — — — ( 8,778 )
Noncontrolling interest contributions — 46,118 46,118 —
Noncontrolling interest distributions — ( 21,010 ) ( 21,010 ) ( 6 )
Employee Long-term Incentive Plan Unit Awards 9,026 — 9,026 —
Reallocation of noncontrolling interests (d) ( 244 ) — ( 244 ) —
Balance at September 30, 2024 $ 84,046 $ 364,154 $ 448,200 $ 35,037
Balance at January 1, 2023 $ 99,554 $ 389,810 $ 489,364 $ 67,664
Distributions declared of $ 0.54 per Common OP Unit and distributions on Preferred OP Units ( 4,022 ) — ( 4,022 ) —
Net income (loss) for the nine months ended September 30, 2023 1,693 ( 8,756 ) ( 7,063 ) ( 5,661 )
Conversion of 102,261 Common OP Units to Common Shares by limited partners of the Operating Partnership ( 1,715 ) — ( 1,715 ) —
Other comprehensive income - unrealized gain on valuation of swap agreements 1,205 10,732 11,937 —
Reclassification of realized interest expense on swap agreements ( 155 ) ( 9,784 ) ( 9,939 ) —
City Point Loan — — — ( 796 )
City Point Loan accrued interest — — — ( 6,995 )
Capital call receivable — ( 16,300 ) ( 16,300 ) —
Noncontrolling interest contributions — 47,842 47,842 1,110
Noncontrolling interest distributions — ( 78,114 ) ( 78,114 ) ( 38 )
Employee Long-term Incentive Plan Unit Awards 8,719 — 8,719 —
Reallocation of noncontrolling interests (d) ( 1,699 ) — ( 1,699 ) —
Balance at September 30, 2023 $ 103,580 $ 335,430 $ 439,010 $ 55,284
(a) Noncontrolling interests in the Operating Partnership are comprised of (i) the limited partners’ 2,054,386 and 2,864,074 Common OP Units as of September 30, 2024 and 2023, respectively; (ii) 188 Series A Preferred OP Units as of both September 30, 2024 and 2023; (iii) 66,519 and 126,384 Series C Preferred OP Units as of September 30, 2024 and 2023, respectively; and (iv) 4,670,297 and 4,287,550 LTIP units as of September 30, 2024 and 2023, respectively, as discussed in the Amended and Restated 2020 Plan ( Note 13 ). Distributions decl ared for Preferred OP Units are reflected in net income (loss) in the table above. (b) Noncontrolling interests in partially-owned affiliates comprise third-party interests in Funds II, III, IV and V, an d seven ot her subsidiaries. (c) Redeemable noncontrolling interests comprise third-party interests that have been granted put rights, as further described below. (d) Adjustment reflects the difference between the fair value of the consideration received or paid and the book value of the Common Shares, Common OP Units, Preferred OP Units, and LTIP Units involving changes in ownership. Redeemable Noncontrolling Interests Williamsburg Portfolio In connection with the Williamsburg Portfolio acquisition in February 2022, the venture partner has a one-time right to put its 50.01 % interest in the property to the Company for redemption at fair value at a future date (“Williamsburg NCI”). As it was unlikely as of the acquisition date that the venture partner would receive any consideration on redemption due to the Company’s preferential returns, the initial fair value of the Williamsburg NCI was determined to be zero . As of September 30, 2024, the Company determined there was no change in the fair value of the Williamsburg NCI. City Point Loan In August 2022, the Company provided a loan to other Fund II investors in City Point to fund the investors’ pro rata contribution necessary to complete the refinancing of the City Point debt, of which $ 65.9 million was funded at closing (“City Point Loan”). The City Point Loan is collateralized by the investors’ equity in City Point (“City Point NCI”) . The City Point Loan, net of a $ 0.8 million allowance for credit loss as of September 30, 2024, is presented as a reduction of the City Point NCI balance. In connection with the City Point Loan, each partner has a one-time right to put its City Point NCI to the Company for redemption in exchange for the settlement of its proportion of the City Point Loan amount. As of September 30, 2024, the Company determined that the carrying value of the City Point NCI exceeded the maximum redemption value and no adjustment was required. 8833 Beverly Boulevard In July 2023, the Company entered into a limited partnership agreement to own and operate the 8833 Beverly Boulevard property. Following the formation of the partnership, the Company retained a 97.0 % controlling interest. At a future point in time, either party may elect a buy-out right, where either the Company may purchase the venture partner’s interest, or the venture partner may sell its 3.0 % interest in the partnership (the “8833 Beverly NCI”) to the Company for fair value. As a result of these redemption rights, the 8833 Beverly NCI was initially recorded at fair value. As of September 30, 2024, the redemption value of the 8833 Beverly NCI was $ 0.1 million. As of September 30, 2024, the Company determined that the carrying value exceeded the maximum redemption value and no adjustment was required. Preferred OP Units During 2016, the Operating Partnership issued 442,478 Common OP Units and 141,593 Series C Preferred OP Units to a third party to acquire Gotham Plaza ( Note 4 ). The Series C Preferred OP Units have a value of $ 100.00 per unit and are entitled to a preferred quarterly distribution of $ 0.9375 per unit and are convertible into Common OP Units at a rate based on the share price at the time of conversion. If the share price is below $28.80 on the conversion date, each Series C Preferred OP Unit will be convertible into 3.4722 Common OP Units. If the share price is between $ 28.80 and $ 35.20 on the conversion date, each Series C Preferred OP Unit will be convertible into a number of Common OP Units equal to $100.00 divided by the closing share price. If the share price is above $35.20 on the conversion date, each Series C Preferred OP Unit will be convertible into 2.8409 Common OP Units. The Series C Preferred OP Units have a mandatory conversion date of December 31, 2025, at which time all units that have not been converted will automatically be converted into Common OP Units based on the same calculations. Through September 30, 2024 , 75,074 Series C Preferred OP Units were converted into 260,475 Common OP Units and then into Common Shares. In 1999, the Operating Partnership issued 1,580 Series A Preferred OP Units in connection with the acquisition of a property, which have a stated value of $ 1,000 per unit, and are entitled to a preferred quarterly distribution of the greater of (i) $ 22.50 ( 9 % annually) per Series A Preferred OP Unit or (ii) the quarterly distribution attributable to a Series A Preferred OP Unit if such unit was converted into a Common OP Unit. Through September 30, 2024 , 1,392 Series A Preferred OP Units were converted into 185,600 Common OP Units and then into Common Shares. The 188 remaining Series A Preferred OP Units are currently convertible into Common OP Units based on the stated value divided by $ 7.50 . Either the Company or the holders can currently call for the conversion of the Series A Preferred OP Units at the lesser of $7.50 or the market price of the Common Shares as of the conversion date. |
