Exhibit 99.1

 

GGP INC.

 

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

		June 30, 2018			December 31, 2017
		(Dollars in thousands, except share and per share amounts)
Assets:
Investment in real estate:
Land		$	3,887,771		$	4,013,874
Buildings and equipment		17,086,107			16,957,720
Less accumulated depreciation		(3,389,587		)	(3,188,481		)
Construction in progress		484,835			473,118
Net property and equipment		18,069,126			18,256,231
Investment in Unconsolidated Real Estate Affiliates		3,360,839			3,377,112
Net investment in real estate		21,429,965			21,633,343
Cash and cash equivalents		194,675			164,604
Accounts receivable, net		311,660			334,081
Notes receivable		351,422			417,558
Deferred expenses, net		281,570			284,512
Prepaid expenses and other assets		442,574			515,856
Assets held for disposition		120,732			—
Total assets		$	23,132,598		$	23,349,954
Liabilities:
Mortgages, notes and loans payable		$	12,847,635		$	12,832,459
Investment in Unconsolidated Real Estate Affiliates		22,400			21,393
Accounts payable and accrued expenses		878,526			919,432
Dividend payable		217,480			219,508
Deferred tax liabilities		2,245			2,428
Junior subordinated notes		206,200			206,200
Liabilities held for disposition		100,711			—
Total liabilities		14,275,197			14,201,420
Redeemable noncontrolling interests:
Preferred		52,256			52,256
Common		171,083			195,870
Total redeemable noncontrolling interests		223,339			248,126
Commitments and Contingencies		—			—
Equity:
Common stock:
11,000,000,000 shares authorized, $0.01 par value, 1,041,821,913 issued, 958,391,012 outstanding as of June 30, 2018, and 1,040,382,900 issued, 956,982,536 outstanding as of December 31, 2017		10,144			10,130
Preferred Stock:
500,000,000 shares authorized, $0.01 par value, 10,000,000 shares issued and outstanding as of June 30, 2018 and December 31, 2017		242,042			242,042
Additional paid-in capital		11,880,450			11,845,532
Retained earnings (accumulated deficit)		(2,396,371		)	(2,107,498		)
Accumulated other comprehensive loss		(82,229		)	(71,906		)
Common stock in treasury, at cost, 55,969,390 shares as of June 30, 2018 and December 31, 2017		(1,122,640		)	(1,122,640		)
Total stockholders’ equity		8,531,396			8,795,660
Noncontrolling interests in consolidated real estate affiliates		48,340			55,379
Noncontrolling interests related to long-term incentive plan common units		54,326			49,369
Total equity		8,634,062			8,900,408
Total liabilities, redeemable noncontrolling interests and equity		$	23,132,598		$	23,349,954

 

The accompanying notes are an integral part of these consolidated financial statements.

 

1

 

GGP INC.

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

 

		Three Months Ended June 30,						Six Months Ended June 30,
		2018			2017			2018			2017
		(Dollars in thousands, except per share amounts)
Revenues:
Minimum rents		$	379,312		$	349,205		$	747,835		$	698,218
Tenant recoveries		156,155			161,926			313,157			324,982
Overage rents		3,927			3,280			10,171			9,217
Management fees and other corporate revenues		26,030			20,847			51,795			48,990
Other		17,720			20,538			34,351			40,722
Total revenues		583,144			555,796			1,157,309			1,122,129
Expenses:
Real estate taxes		62,604			59,042			122,337			116,536
Property maintenance costs		10,976			10,724			25,690			25,699
Marketing		1,744			1,296			3,160			3,441
Other property operating costs		71,752			69,590			143,504			138,893
Provision for doubtful accounts		2,234			3,166			5,662			6,617
Property management and other costs		36,595			39,025			76,169			80,139
General and administrative		12,041			15,862			24,288			30,546
Provision for impairment		—			—			38,379			—
Depreciation and amortization		173,642			174,298			359,035			344,596
Total expenses		371,588			373,003			798,224			746,467
Operating income		211,556			182,793			359,085			375,662
Interest and dividend income		9,518			17,452			18,667			35,388
Interest expense		(140,562		)	(134,209		)	(278,488		)	(266,532		)
Loss on foreign currency		—			(3,877		)	—			(694		)
Gain on extinguishment of debt		—			55,112			—			55,112
Gain (loss) from changes in control of investment properties and other, net		—			(15,841		)	12,664			(15,841		)
Income before income taxes, equity in income of Unconsolidated Real Estate Affiliates and allocation to noncontrolling interests		80,512			101,430			111,928			183,095
Benefit from (provision for) income taxes		22			(3,844		)	302			(8,354		)
Equity in income of Unconsolidated Real Estate Affiliates		15,030			30,732			38,869			63,946
Unconsolidated Real Estate Affiliates - gain on investment, net		—			—			10,361			—
Net income		95,564			128,318			161,460			238,687
Allocation to noncontrolling interests		(1,949		)	(2,455		)	(3,809		)	(5,665		)
Net income attributable to GGP Inc.		93,615			125,863			157,651			233,022
Preferred Stock dividends		(3,984		)	(3,984		)	(7,968		)	(7,968		)
Net income attributable to common stockholders		$	89,631		$	121,879		$	149,683		$	225,054
Earnings Per Share:
Basic		$	0.09		$	0.14		$	0.16		$	0.25
Diluted		$	0.09		$	0.13		$	0.16		$	0.24
Dividends declared per share		$	0.22		$	0.22		$	0.44		$	0.44
Comprehensive Income, Net:
Net income		$	95,564		$	128,318		$	161,460		$	238,687
Other comprehensive income (loss)
Foreign currency translation		(10,038		)	(4,030		)	(10,417		)	(1,463		)
Net unrealized gains (losses) on other financial instruments		(43		)	(3		)	8			10
Other comprehensive income (loss)		(10,081		)	(4,033		)	(10,409		)	(1,453		)
Comprehensive income		85,483			124,285			151,051			237,234
Comprehensive income allocated to noncontrolling interests		(1,865		)	(2,135		)	(3,723		)	(5,350		)
Comprehensive income attributable to GGP Inc.		83,618			122,150			147,328			231,884
Preferred Stock dividends		(3,984		)	(3,984		)	(7,968		)	(7,968		)
Comprehensive income, net, attributable to common stockholders		$	79,634		$	118,166		$	139,360		$	223,916

 

The accompanying notes are an integral part of these consolidated financial statements.

 

2

 

GGP INC.

 

CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)

 

		Common Stock			Preferred Stock			Additional Paid-In Capital			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Income (Loss)			Common Stock in Treasury			Noncontrolling Interests in Consolidated Real Estate Affiliates and Long Term Incentive Plan Common Units			Total Equity
		(Dollars in thousands, except for per share and share amounts)
Balance at January 1, 2017		$	9,407		$	242,042		$	11,419,939		$	(1,827,866	)	$	(70,456	)	$	(1,137,960	)	$	65,623		$	8,700,729
Net income											233,022									1,399			234,421
Distributions to noncontrolling interests in consolidated Real Estate Affiliates																				(3,569		)	(3,569		)
Acquisition/disposition of partner’s noncontrolling interests in consolidated Real Estate Affiliates																				(11,943		)	(11,943		)
Contributions from noncontrolling interest in consolidated Real Estate Affiliates								—												15,258			15,258
Long Term Incentive Plan Common Unit grants, net (528,617 LTIP Units)								795			(743		)							10,707			10,759
Restricted stock grants, net (738,687 common shares)		8			—			4,883															4,891
Employee stock purchase program (103,177 common shares)		1						2,547															2,548
Stock options exercised (406,383 common shares)		4						13,837															13,841
Cancellation of repurchased common shares (3,993,237 common shares)		(40		)				(52,054		)	(40,258		)				92,352						—
Treasury stock purchase (3,365,976 common shares)																	(77,032		)				(77,032		)
Cash dividends reinvested (DRIP) in stock   (28,693 common shares)		—			—			696			—												696
Other comprehensive loss														(1,137		)							(1,137		)
Cash distributions declared ($0.44 per share)											(388,280		)										(388,280		)
Cash distributions on Preferred Stock											(7,968		)										(7,968		)
Fair value adjustment for noncontrolling interest in Operating Partnership								10,346															10,346
Balance at June 30, 2017		$	9,380		$	242,042		$	11,400,989		$	(2,032,093	)	$	(71,593	)	$	(1,122,640	)	$	77,475		$	8,503,560

 

3

 

GGP INC.

 

CONSOLIDATED STATEMENTS OF EQUITY (Continued)

(UNAUDITED)

 

		Common Stock			Preferred Stock			Additional Paid-In Capital			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Income (Loss)			Common Stock in Treasury			Noncontrolling Interests in Consolidated Real Estate Affiliates and Long Term Incentive Plan Common Units			Total Equity
		(Dollars in thousands, except for per share and share amounts)
Balance at January 1, 2018		$	10,130		$	242,042		$	11,845,532		$	(2,107,498	)	$	(71,906	)	$	(1,122,640	)	$	104,748		$	8,900,408
Cumulative effect of accounting changes (Note 2)											(16,864		)										(16,864		)
Net income											157,651									1,170			158,821
Distributions to noncontrolling interests in consolidated Real Estate Affiliates																				(2,888		)	(2,888		)
Acquisition/disposition of partner’s noncontrolling interests in consolidated Real Estate Affiliates																				(4,998		)	(4,998		)
Long Term Incentive Plan Common Unit forfeitures (238,655 LTIP Units)																				4,634			4,634
Restricted stock grants, net (1,000,143 common shares)		10						4,997															5,007
Employee stock purchase program (80,522 common shares)		1						1,797															1,798
Stock options exercised (249,508 common shares)		2						4,116															4,118
OP Unit Conversion to Common Stock (67,064 common shares)		1						1,368															1,369
Cash dividends reinvested (DRIP) in stock (11,239 common shares)								245			(245		)										—
Other comprehensive loss														(10,323		)							(10,323		)
Cash distributions declared ($0.44 per share)											(421,447		)										(421,447		)
Cash distributions on Preferred Stock											(7,968		)										(7,968		)
Fair value adjustment for noncontrolling interest in Operating Partnership								22,395															22,395
Balance at June 30, 2018		$	10,144		$	242,042		$	11,880,450		$	(2,396,371	)	$	(82,229	)	$	(1,122,640	)	$	102,666		$	8,634,062

 

The accompanying notes are an integral part of these consolidated financial statements.

 

4

 

GGP INC.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

		Six Months Ended June 30,
		2018			2017
		(Dollars in thousands)
Cash Flows provided by Operating Activities:
Net income		$	161,460		$	238,687
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in income of Unconsolidated Real Estate Affiliates		(38,869		)	(63,946		)
Distributions received from Unconsolidated Real Estate Affiliates		46,256			52,876
Provision for doubtful accounts		5,662			6,617
Depreciation and amortization		359,035			344,596
Amortization/write-off of deferred finance costs		5,544			5,972
Accretion/write-off of debt market rate adjustments		(2,230		)	(2,181		)
Amortization of intangibles other than in-place leases		7,150			18,857
Straight-line rent amortization		(594		)	(493		)
Deferred income taxes		(1,692		)	4,817
Gain on dispositions, net		—			(2,515		)
Unconsolidated Real Estate Affiliates - gain on investment, net		(10,361		)	—
Gain (loss) from changes in control of investment properties and other, net		(12,664		)	15,841
Provision for impairment		38,379			—
Gain on extinguishment of debt		—			(55,112		)
Loss on foreign currency		—			694
Net changes:
Accounts and notes receivable, net		5,963			(259		)
Prepaid expenses and other assets		32,811			(38,556		)
Deferred expenses, net		(21,577		)	(22,010		)
Accounts payable and accrued expenses		(50,045		)	(45,441		)
Other, net		13,803			24,008
Net cash provided by operating activities		538,031			482,452
Cash Flows (used in) provided by Investing Activities:
Acquisition of real estate and property additions		—			(49,062		)
Development of real estate and property improvements		(361,966		)	(269,820		)
Loans to joint venture partners		(5,772		)	(47,205		)
Proceeds from repayment of loans to joint venture partners		80,000			47,076
Proceeds from sales of investment properties and Unconsolidated Real Estate Affiliates		60,960			39,622
Contributions to Unconsolidated Real Estate Affiliates		(82,637		)	(44,755		)
Distributions received from Unconsolidated Real Estate Affiliates in excess of income		124,792			62,792
Net cash (used in) provided by investing activities		(184,623		)	(261,352		)
Cash Flows used in Financing Activities:
Proceeds from refinancing/issuance of mortgages, notes and loans payable		790,000			575,000
Principal payments on mortgages, notes and loans payable		(677,926		)	(368,669		)
Deferred finance costs		(213		)	(965		)
Treasury stock purchases		—			(77,032		)
Cash contributions from noncontrolling interests in consolidated real estate affiliates		—			15,258
Cash distributions to noncontrolling interests in consolidated real estate affiliates		(2,888		)	(3,569		)
Cash distributions paid to common stockholders		(421,374		)	(618,830		)
Cash distributions reinvested (DRIP) in common stock		245			696
Cash distributions paid to preferred stockholders		(7,968		)	(7,968		)
Cash distributions and redemptions paid to unit holders		(6,361		)	(10,515		)
Other, net		5,705			9,799
Net cash used in financing activities		(320,780		)	(486,795		)
Effect of foreign exchange rates on cash and cash equivalents		—			(694		)
Net change in cash, cash equivalents and restricted cash		32,628			(266,389		)
Cash, cash equivalents and restricted cash at beginning of period		231,939			531,705
Cash, cash equivalents and restricted cash at end of period		$	264,567		$	265,316

 

5

 

		Six Months Ended June 30,
		2018			2017
		(Dollars in thousands)
Supplemental Disclosure of Cash Flow Information:
Interest paid		$	284,668		$	273,321
Interest capitalized		9,385			3,457
Income taxes paid		2,358			6,362
Accrued capital expenditures included in accounts payable and accrued expenses		243,924			105,416

 

The accompanying notes are an integral part of these consolidated financial statements.

 

6

 

GGP INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

 

NOTE 1        ORGANIZATION

 

Readers of this Quarterly Report should refer to the Company’s (as defined below) audited consolidated financial statements for the year ended December 31, 2017 which are included in the Company’s Annual Report on Form 10-K (our “Annual Report”) for the fiscal year ended December 31, 2017 (Commission File No. 1-34948), as certain footnote disclosures which would substantially duplicate those contained in our Annual Report have been omitted from this Quarterly Report. In the opinion of management, all adjustments necessary for a fair presentation (which include only normal recurring adjustments) have been included in this Quarterly Report. Unless context otherwise requires, capitalized terms used, but not defined in this Quarterly Report, have the same meanings as in our Annual Report.

 

General

 

GGP Inc. (“GGP” or the “Company”), a Delaware corporation, was organized in July 2010 and is a self-administered and self-managed real estate investment trust, referred to as a “REIT”. In these notes, the terms “we”, “us” and “our” refer to GGP and its subsidiaries.

 

GGP, through its subsidiaries and affiliates, is an owner and operator of retail properties. As of June 30, 2018, we are the owner, either entirely or with joint venture partners, of 125 retail properties.

 

Substantially all of our business is conducted through GGP Operating Partnership, LP (“GGPOP”), GGP Nimbus, LP (“GGPN”) and GGP Limited Partnership (“GGPLP”, and together with GGPN and GGPOP, the “Operating Partnerships”), subsidiaries of GGP. The Operating Partnerships own an interest in the properties that are part of the consolidated financial statements of GGP. As of June 30, 2018, GGP held approximately a 99% common equity ownership (without giving effect to the potential conversion of the Preferred Units and LTIP Units, each as defined below) of GGPLP and GGPN, while the remaining 1% was held by limited partners and certain previous contributors of properties to GGPOP.

 

GGPOP is the general partner of, and owns a 1.5% equity interest in GGPN and GGPLP. GGPOP has common units of limited partnership (“Common Units”), which are redeemable for cash or, at our option, shares of GGP common stock. It also has preferred units of limited partnership interest (“Preferred Units”), of which, certain Preferred Units can be converted into Common Units and then redeemed for cash or, at our option, shares of GGP common stock (Note 8). GGPOP also has full value long term incentive plan units and appreciation only long term incentive plan units (collectively “LTIP Units”), which are redeemable for cash or, at our option, shares of GGP common stock (Note 10).

 

In addition to holding ownership interests in various joint ventures, the Operating Partnerships generally conduct their operations through General Growth Management, Inc. (“GGMI”), General Growth Services, Inc. (“GGSI”) and GGPLP REIT Services, LLC (“GGPRS”). GGMI and GGSI are taxable REIT subsidiaries (“TRS”s), which provide management, leasing, tenant coordination, business development, marketing, strategic partnership and other services for a majority of our Unconsolidated Real Estate Affiliates (defined below) and for substantially all of our Consolidated Properties, as defined below. GGSI also serves as a contractor to GGMI for these services. GGPRS generally provides financial, accounting, tax, legal, development, and other services to our Consolidated Properties.

 

We refer to our ownership interests in properties in which we own a majority or controlling interest and are consolidated under accounting principles generally accepted in the United States of America (“GAAP”) as the “Consolidated Properties.” We also own interests in certain properties through joint venture entities in which we own a noncontrolling interest (“Unconsolidated Real Estate Affiliates”) and we refer to those properties as the “Unconsolidated Properties”.

 

As previously announced, we had reached an agreement with Brookfield Property Partners L.P. (“BPY”), pursuant to which, among other things, BPY will acquire all of our outstanding shares of common stock, other than those that BPY and its affiliates already own. The transactions provide for distribution and consideration per GGP share of up to $23.50 in cash or a choice of either one BPY limited partnership unit or one newly created BPY U.S. REIT share of Brookfield Property REIT Inc. (“BPR”), the successor to GGP, subject to proration in each case, based on aggregate cash amount of $9.25 billion. The BPR shares were structured with the intention of providing an economic return equivalent to BPY units, including identical distributions. BPR shareholders will have the right to exchange each BPR share for one BPY unit or the cash equivalent of one BPY unit at the election of BPY. On

 

7

---

 

July 26, 2018, the company held a special meeting of its common stockholders. At the special meeting, holders of record of GGP common stock on June 22, 2018, the record date for the special meeting, voted upon and approved the transactions. The completion of the transactions remains subject to certain customary closing conditions. The company expects that the transactions will be completed by the end of August this year.

 

NOTE 2        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Principles of Consolidation and Basis of Presentation

 

The accompanying consolidated financial statements include the accounts of GGP, our subsidiaries and joint ventures in which we have a controlling interest. For consolidated joint ventures, the noncontrolling partner’s share of the assets, liabilities and operations of the joint ventures (generally computed as the joint venture partner’s ownership percentage) is included in noncontrolling interests in consolidated real estate affiliates as permanent equity of the Company. Intercompany balances and transactions have been eliminated. Noncontrolling interests are included on our Consolidated Balance Sheets related to the Common, Preferred, and LTIP Units of GGPOP and are presented either as redeemable noncontrolling interests or as noncontrolling interests in our permanent equity. Each of the Operating Partnerships and our consolidated joint ventures are variable interest entities as the limited partners do not have substantive kick-out rights or substantive participating rights. However, as the Company holds a majority voting interest in the Operating Partnerships and our consolidated joint ventures, it qualifies for the exemption from providing certain of the disclosure requirements associated with variable interest entities.

 

We operate in a single reportable segment, which includes the operation, development and management of retail and other rental properties. Our portfolio is targeted to a range of market sizes and consumer tastes. Each of our operating properties is considered a separate operating segment, as each property earns revenues and incurs expenses, individual operating results are reviewed and discrete financial information is available. The Company’s chief operating decision maker is comprised of a team of several members of executive management who use Company NOI in assessing segment operating performance. We do not distinguish or group our consolidated operations based on geography, size or type for purposes of making property operating decisions. Our operating properties have similar economic characteristics and provide similar products and services to our tenants. There are no individual operating segments that are greater than 10% of combined revenue, Company NOI or combined assets. Company NOI excludes certain non-cash and non-comparable items such as straight-line rent, depreciation expense and intangible asset and liability amortization, which are a result of our emergence from bankruptcy, acquisition accounting and other capital contribution or restructuring events. Further, all material operations are within the United States and no customer or tenant comprises more than 10% of consolidated revenues. As a result, the Company’s operating properties are aggregated into a single reportable segment.

 

Properties

 

Real estate assets are stated at cost less any provisions for impairments. Expenditures for significant betterments and improvements are capitalized. Maintenance and repairs are charged to expense when incurred. Construction and improvement costs incurred in connection with the development of new properties or the redevelopment of existing properties are capitalized. Real estate taxes, interest costs, and internal costs associated with leasing and development overhead incurred during construction periods are capitalized. Capitalization is based on qualified expenditures and interest rates. Capitalized real estate taxes, interest costs, and internal costs associated with leasing and development overhead are amortized over lives which are consistent with the related assets.

 

Pre-development costs, which generally include legal and professional fees and other third-party costs directly related to the construction assets, are capitalized as part of the property being developed. In the event a development is no longer deemed to be probable of occurring, the capitalized costs are expensed (see also our impairment policies in this note below).

 

We periodically review the estimated useful lives of our properties, and may adjust them as necessary. The estimated useful lives of our properties range from 10-45 years.

 

Depreciation or amortization expense is computed using the straight-line method based upon the following estimated useful lives:

 

		Years
Buildings and improvements		10 - 45
Equipment and fixtures		3 - 20
Tenant improvements		Shorter of useful life or applicable lease term

 

8

 

GGP INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

 

Reclassifications

 

In November 2016, the FASB issued ASU 2016-18 which requires that a statement of cash flows explain the change during the reporting period in the total of cash, cash equivalents and restricted cash or restricted cash equivalents. The Company adopted this guidance on December 31, 2017, which changes our statements of cash flows and related disclosures for all periods presented. The following is a summary of our cash, cash equivalents and restricted cash total as presented in our statements of cash flows for the six months ended June 30, 2018 and 2017:

 

		Six Months Ended June 30,
		2018			2017
Cash and cash equivalents		$	194,675		$	227,626
Restricted cash		69,892			37,690
Total cash, cash equivalents and restricted cash shown in the statement of cash flows		$	264,567		$	265,316

 

For the six months ended June 30, 2017 the changes in restricted cash related to cash flows provided by operating activities of $16.0 million, restricted cash related to cash flows used in investing activities of $0.4 million and restricted cash related to cash flows used in financing activities of $2.8 million were reclassified.

 

Acquisitions of Operating Properties (Note 3)

 

Acquisitions of properties are typically accounted for as acquisitions of assets rather than acquisitions of a business. Accordingly, the results of operations of acquired properties have been included in the results of operations from the respective dates of acquisition and acquisition costs are capitalized. Estimates of future cash flows and other valuation techniques are used to allocate the purchase price of acquired property between land, buildings and improvements, equipment, assumed debt liabilities and identifiable intangible assets and liabilities such as amounts related to in-place tenant leases, acquired above and below-market tenant and ground leases, and tenant relationships.

 

Identifiable intangible assets and liabilities are calculated for above-market and below-market tenant and ground leases where we are either the lessor or the lessee. The difference between the contractual rental rates and our estimate of market rental rates is measured over a period equal to the remaining non-cancelable term of the leases, including significantly below-market renewal options for which exercise of the renewal option appears to be reasonably assured. The remaining term of leases with renewal options at terms significantly below market reflect the assumed exercise of such below-market renewal options and assume the amortization period would coincide with the extended lease term.

 

The gross asset balances of the in-place value of tenant leases are included in buildings and equipment in our Consolidated Balance Sheets.

 

		Gross Asset			Accumulated Amortization			Net Carrying Amount
As of June 30, 2018
Tenant leases:
In-place value		$	285,145		$	(145,194	)	$	139,951
As of December 31, 2017
Tenant leases:
In-place value		$	347,232		$	(181,088	)	$	166,144

 

The above-market tenant leases and below-market ground leases are included in prepaid expenses and other assets (Note 13); the below-market tenant leases, above-market ground leases and above-market headquarters office lease are included in accounts payable and accrued expenses (Note 14) in our Consolidated Balance Sheets.

 

9

 

GGP INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

 

Amortization/accretion of all intangibles, including the intangibles in Note 13 and Note 14, had the following effects on our income from continuing operations:

 

		Three Months Ended June 30,						Six Months Ended June 30,
		2018			2017			2018			2017
Amortization/accretion effect on continuing operations		$	(14,826	)	$	(16,399	)	$	(30,866	)	$	(41,318	)

 

Future amortization/accretion of all intangibles, including the intangibles in Note 13 and Note 14, is estimated to decrease results from continuing operations as follows:

 

Year		Amount
2018 Remaining		$	20,497
2019		28,966
2020		19,567
2021		13,908
2022		12,579

 

Investments in Unconsolidated Real Estate Affiliates (Note 5)

 

We account for investments in joint ventures where we own a non-controlling joint interest using either the equity method or the cost method. If we have significant influence but not control over the investment, we utilize the equity method. If we have neither control nor significant influence, we utilize the cost method. Under the equity method, the cost of our investment is adjusted for our share of the earnings of such Unconsolidated Real Estate Affiliates from the date of acquisition, increased by our contributions and reduced by distributions received. Under the cost method, the cost of our investment is not adjusted for our share of the earnings of such Unconsolidated Real Estate Affiliates from the date of acquisition and distributions are treated as earnings when received.

 

To determine the method of accounting for partially owned joint ventures, we evaluate the characteristics of associated entities and determine whether an entity is a variable interest entity (“VIE”). A limited partnership or other similar entity is considered a VIE unless a simple majority of limited partners (excluding limited partners that are under common control with the general partner) have substantive kick-out rights or participating rights. Accounting guidance amended the following: (i) modified the evaluation of whether limited partnerships and similar legal entities are VIEs or voting interest entities, (ii) eliminated the presumption that a general partner should consolidate a limited partnership, (iii) affected the consolidation analysis of reporting entities that are involved with VIEs, and (iv) provided a scope exception for certain entities. If an entity is determined to be a VIE, we determine which party is the primary beneficiary by analyzing whether we have both the power to direct the entity’s significant economic activities and the obligation to absorb potentially significant losses or receive potentially significant benefits. Significant judgments and assumptions inherent in this analysis include the nature of the entity’s operations, future cash flow projections, the entity’s financing and capital structure, and contractual relationship and terms.

 

Primary risks associated with our VIEs include the potential of funding the entities’ debt obligations or making additional contributions to fund the entities’ operations.

 

Generally, the operating agreements with respect to our Unconsolidated Real Estate Affiliates provide that assets, liabilities and funding obligations are shared in accordance with our ownership percentages. Therefore, we generally also share in the profit and losses, cash flows and other matters relating to our Unconsolidated Real Estate Affiliates in accordance with our respective ownership percentages. Except for Retained Debt (as described in Note 5), differences between the carrying amount of our investment in the Unconsolidated Real Estate Affiliates and our share of the underlying equity of our Unconsolidated Real Estate Affiliates are typically amortized over lives ranging from 5 to 45 years. When cumulative distributions exceed our investment in the joint venture, the investment is reported as a liability in our consolidated financial statements. The liability is limited to our maximum potential obligation to fund contractual obligations, including recourse related to certain debt obligations.

 

Partially owned, joint ventures over which we have controlling financial interest are consolidated in our consolidated financial statements. In determining if we have a controlling financial interest, we consider factors such as ownership interest, authority to

 

10

 

GGP INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

 

make decisions, kick-out rights and substantive participating rights. Partially owned joint ventures where we do not have a controlling financial interest, but have the ability to exercise significant influence, are accounted for using the equity method.

 

To the extent that we contribute assets to a joint venture accounted for using the equity method, our investment in the joint venture is recorded at the fair value of the consideration of the assets that were contributed to the joint venture. We will recognize gains and losses on the contribution of our real estate to joint ventures, relating to our entire investment in the property, to the extent the buyer is independent of the Company, the collection of the sales price is reasonably assured, and we will not be required to support the operations of the property or its related obligations to an extent greater than our proportionate interest.

 

The combined summarized financial information of unconsolidated joint ventures is disclosed in Note 5 to the Consolidated Financial Statements.

 

We continually analyze and assess reconsideration events, including changes in the factors mentioned above, to determine if the consolidation treatment remains appropriate. Decisions regarding consolidation of partially owned entities frequently require significant judgment by our management.

 

Revenue Recognition and Related Matters

 

Minimum rents are recognized on a straight-line basis over the terms of the related operating leases, including the effect of any free rent periods. Minimum rents also include lease termination income collected from tenants to allow for the tenant to vacate their space prior to their scheduled termination dates, as well as accretion related to above-market and below-market tenant leases on acquired properties and properties that were recorded at fair value at the emergence from bankruptcy.

 

Overage rent is paid by a tenant when the tenant’s sales exceed an agreed upon minimum amount and is recognized on an accrual basis once tenant sales exceed contractual tenant lease thresholds and is calculated by multiplying the sales in excess of the minimum amount by a percentage defined in the lease.

 

Tenant recoveries are established in the leases or computed based upon a formula related to real estate taxes, insurance and other property operating expenses and are generally recognized as revenues in the period the related costs are incurred.

 

Accounting for real estate sales distinguishes between sales to a customer or non-customer for purposes of revenue recognition. Once we, as the seller, determine that we have a contract, we will identify each distinct non-financial asset promised to the counter-party and whether the counter-party obtains control and transfers risks and rewards of ownership of each non-financial asset to determine if we should derecognize the asset.

 

We provide an allowance for doubtful accounts against the portion of accounts receivable including straight-line rents, which is estimated to be uncollectible. Such allowances are reviewed each period based upon our recovery experience and the specific facts of each outstanding amount.

 

Management Fees and Other Corporate Revenues

 

Management fees and other corporate revenues primarily represent management and leasing fees, development fees, financing fees and fees for other ancillary services performed for the benefit of certain of the Unconsolidated Real Estate Affiliates. Management fees are reported at 100% of the revenue earned from the joint venture in management fees and other corporate revenues on our Consolidated Statements of Comprehensive Income. Our share of the management fee expense incurred by the Unconsolidated Real Estate Affiliates is reported within equity in income of Unconsolidated Real Estate Affiliates on our Consolidated Statements of Comprehensive Income and in property management and other costs in the Condensed Combined Statements of Income in Note 5. The following table summarizes the management fees from affiliates and our share of the management fee expense:

 

11

 

GGP INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

 

		Three Months Ended June 30,						Six Months Ended June 30,
		2018			2017			2018			2017
Management fees from affiliates		$	26,030		$	20,847		$	51,795		$	48,990
Management fee expense		(10,287		)	(8,443		)	(20,779		)	(17,246		)
Net management fees from affiliates		$	15,743		$	12,404		$	31,016		$	31,744

 

Based upon the new revenue recognition guidance, we determined that typical management fees including property and asset management, construction and development management services, leasing services, property acquisition and disposition services and financing services, needed to be evaluated for each separate performance obligation included in the contract in order to determine timing of revenue recognition. Revenues from contracts within the scope of the new revenue recognition guidance were $50.6 million for the six months ended June 30, 2018. Management determined that property and asset management and construction and development management services each represent a series of stand-ready performance obligations satisfied over time with each day of service being a distinct performance obligation. For property and asset management services, we are compensated for our services through a monthly management fee earned based on a specified percentage of the monthly rental income or rental receipts generated from the property under management. For construction and development services, we are compensated for planning, administering and monitoring the design and construction of projects at our joint venture properties typically based on a percentage of project costs, hourly rate of development staff or a fixed fee. Revenues from such contracts were $43.7 million for the six months ended June 30, 2018 and are recognized over the life of the applicable contract.

 

Conversely, leasing services, property acquisition and disposition services and financing services are each considered to be a single performance obligation, satisfied as of a point in time. Our fee is paid upon the occurrence of certain contractual event(s) that may be contingent and pattern of revenue recognition may differ from the timing of payment. For these services, the obligation is the execution of the lease, closing of the sale or acquisition, or closing of the financing or refinancing. As such, revenues are recognized at the point in time when the respective obligation has been satisfied. Revenues from such contracts were $6.9 million for the six months ended June 30, 2018.

 

Impairment

 

Operating properties

 

We regularly review our consolidated properties for potential impairment indicators whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment indicators are assessed separately for each property and include, but are not limited to, significant decreases in real estate property net operating income, significant decreases in occupancy percentage, debt maturities, changes in management’s intent with respect to the properties and prevailing market conditions.

 

If an indicator of potential impairment exists, the property is tested for recoverability by comparing its carrying amount to the estimated future undiscounted cash flows. Although the carrying amount may exceed the estimated fair value of certain properties, a real estate asset is only considered to be impaired when its carrying amount cannot be recovered through estimated future undiscounted cash flows. To the extent an impairment provision is determined to be necessary, the excess of the carrying amount of the property over its estimated fair value is expensed to operations. In addition, the impairment provision is allocated proportionately to adjust the carrying amount of the asset group. The adjusted carrying amount, which represents the new cost basis of the property, is depreciated over the remaining useful life of the property.

 

Although we may market a property for sale, there can be no assurance that the transaction will be complete until the sale is finalized. However, GAAP requires us to utilize the Company’s expected holding period of our properties when assessing recoverability. If we cannot recover the carrying value of these properties within the planned holding period, we will estimate the fair values of the assets and record impairment charges for properties when the estimated fair value is less than their carrying value.

 

Impairment indicators for pre-development costs, which are typically costs incurred during the beginning stages of a potential development and construction in progress, are assessed by project and include, but are not limited to, significant changes in the Company’s plans with respect to the project, significant changes in projected completion dates, tenant demand, anticipated revenues or cash flows, development costs, market factors and sustainability of development projects.

 

12

 

GGP INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

 

Impairment charges are recorded in the Consolidated Statements of Comprehensive Income when the carrying value of a property is not recoverable and it exceeds the estimated fair value of the property, which can occur in accounting periods preceding disposition and/or in the period of disposition.

 

During the six months ended June 30, 2018, we recorded a $38.4 million impairment charge on our Consolidated Statements of Comprehensive Income related to one operating property that has non-recourse debt maturing during 2019 that exceeds the fair value of the operating property. No provisions for impairment were recognized for the three months ended June 30, 2018.

 

No provisions for impairment were recognized for the three and six months ended June 30, 2017.

 

Changes in economic and operating conditions that occur subsequent to our review of recoverability of our properties could impact the assumptions used in that assessment and could result in future impairment if assumptions regarding those properties differ from actual results.

 

Investment in Unconsolidated Real Estate Affiliates

 

A series of operating losses of an investee or other factors may indicate that an other-than-temporary decline in value of our investment in an Unconsolidated Real Estate Affiliate has occurred. The investment in each of the Unconsolidated Real Estate Affiliates is evaluated for valuation declines below the carrying amount. Accordingly, in addition to the property-specific impairment analysis that we performed for such joint ventures (as part of our operating property impairment process described above), we also considered whether there were other-than-temporary declines with respect to the carrying values of our Unconsolidated Real Estate Affiliates.

 

No impairments related to our investments in Unconsolidated Real Estate Affiliates were recognized for the three and six months ended June 30, 2018 and 2017.

 

Changes in economic and operating conditions that occur subsequent to our review of recoverability of our investments in Unconsolidated Real Estate Affiliates could impact the assumptions used in that assessment and could result in future impairment if assumptions regarding those investments differ from actual results.

 

Notes Receivable

 

Notes receivable are evaluated for impairment at least quarterly. Impairment occurs when it is deemed probable that we will not be able to collect all amounts due according to the contractual terms of the loan. If a loan is considered to be impaired, we record an allowance through the provision for loan losses to reduce the carrying value of the loan to the present value of expected future cash flows discounted at the loan’s contractual effective rate or the fair value of the collateral, if repayment is expected solely from the collateral.

 

No impairments related to our notes receivable were recognized for the three and six months ended June 30, 2018 and 2017.

 

Held for Disposition

 

As of June 30, 2018, a non-refundable deposit of significance was received from the buyer for one property, making the sale probable. Therefore, the property was considered held for disposition as of June 30, 2018. Total assets held for disposition were $120.7 million, which included $119.4 million of net investment in real estate, and total liabilities held for disposition were $100.7 million, which included $100.0 million of mortgages, notes and loans payable. The property was subsequently sold on July 13, 2018 (Note 17).

 

Fair Value Measurements (Note 4)

 

The accounting principles for fair value measurements establish a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:

 

·                        Level 1 - defined as observable inputs such as quoted prices for identical assets or liabilities in active markets;

 

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GGP INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

 

·                        Level 2 - defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and

·                        Level 3 - defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

 

Note 4 includes a discussion of properties measured at fair value on a non-recurring basis using Level 2 and Level 3 inputs and the fair value of debt, which is estimated on a recurring basis using Level 2 and Level 3 inputs. Note 8 includes a discussion of certain redeemable noncontrolling interests that are measured at fair value using Level 1 inputs.

 

Concentrations of Credit Risk

 

Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and cash equivalents. We are exposed to credit risk with respect to cash held at various financial institutions and access to our credit facility. Our credit risk exposure with regard to our cash and the $1.5 billion, including the uncommitted accordion feature, available under our credit facility is spread among a diversified group of investment grade financial institutions. We had $260.0 million outstanding and no amount outstanding under our credit facility as of June 30, 2018 and December 31, 2017, respectively.

 

Recently Issued Accounting Pronouncements

 

Based upon the new revenue recognition guidance, revenue recognized for the three and six months ended June 30, 2018 is not significantly different as compared to what would have been recognized in the same period under guidance that was in effect before the change. Effective January 1, 2018, companies are required to apply a five-step model in accounting for revenue. The core principle of the revenue model is that a company recognizes 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. Lease contracts are excluded from this revenue recognition criteria; however, the sale of real estate is required to follow the new model. Expanded quantitative and qualitative disclosures regarding revenue recognition are required for contracts that are subject to this pronouncement. The new standard can be adopted either retrospectively to each prior reporting period presented or on a modified retrospective approach as a cumulative effect adjustment as of the date of adoption. The Company adopted the model effective January 1, 2018 using the modified retrospective approach for implementation. We elected to use the practical expedient to apply the model only to contracts not yet completed as of the date of adoption. The adoption resulted in a cumulative-effect adjustment to increase equity as of January 1, 2018 of approximately $1.90 million related to changes in the revenue recognition pattern of lease commissions earned by the Company from our joint ventures and the sale of condos in our Unconsolidated Real Estate Affiliates (Note 5).

 

In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02 which will require organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. Under ASU 2016-02, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. Lessor accounting remains substantially similar to current GAAP. However, leasing costs that are currently eligible to be capitalized as initial direct costs are limited by ASU 2016-02. In addition, disclosures of leasing activities are to be expanded to include qualitative along with specific quantitative information. For public entities, ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. ASU 2016-02 mandates a modified retrospective transition method. The Company expects to adopt this guidance on January 1, 2019 and will continue to evaluate the potential impact of this pronouncement on its consolidated financial statements until the guidance becomes effective.

 

In June 2016, the FASB issued ASU 2016-13 which changes the model for the measurement of credit losses on financial instruments. Specifically, the amendments in the ASU replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The amendments in this ASU will be effective for the Company January 1, 2020 with early adoption permitted on January 1, 2019. The Company is evaluating the potential impact of this pronouncement on its consolidated financial statements.

 

In October 2016, the FASB issued ASU 2016-16 which changed the current income tax accounting for intra-entity asset sales to be only for inventory. The Company adopted this standard effective January 1, 2018. For those companies that did not recognize the income tax impact of a sale other than inventory before the adoption date, the new ASU was applied on a modified retrospective

 

14

 

GGP INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

 

basis, with a cumulative-effect adjustment directly to retained earnings as of January 1, 2018. This resulted in a cumulative-effect adjustment to decrease retained earnings by the unamortized balance of the $18.8 million prepaid asset established in December 2016.

 

In November 2016, the FASB issued ASU 2016-18 which requires that a statement of cash flows explain the change during the reporting period in the total of cash, cash equivalents and restricted cash or restricted cash equivalents. This standard is effective for public entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Company adopted this guidance on December 31, 2017, which changes our statements of cash flows and related disclosures for all periods presented.

 

In February 2017, the FASB issued ASU 2017-05 which clarifies the accounting for the derecognition of nonfinancial assets by eliminating the exception in current GAAP for transfers of investments in real estate entities (including equity method investments). The amendments in this update provide guidance on the accounting of partial sales of nonfinancial assets and contributions of nonfinancial assets to a joint venture or other noncontrolling investee. Once this guidance is adopted, an entity would use the guidance in the new revenue recognition standard (discussed above) to determine whether it is transferring multiple, distinct assets and would recognize a gain or loss for each distinct asset transferred. When an entity transfers nonfinancial assets included in a subsidiary and retains or receives an equity interest, it first determines whether it has retained a controlling financial interest in the subsidiary. If so, the entity does not derecognize the assets and accounts for the sale of noncontrolling interest in the subsidiary under the consolidation guidance covering decreases in ownership which would result in recognizing a gain or loss. If an entity retains or receives a noncontrolling interest in the entity that owns the asset post-sale, that noncontrolling interest is considered noncash consideration and is included in the transaction price at its fair value. The retained noncontrolling interest is included at its fair value and results in an entity recognizing 100% of the gain on sale of the asset. The Company adopted this standard as of January 1, 2018 using the modified retrospective approach for implementation. We elected to use the practical expedient to apply the standard only to contracts not yet completed as of the date of adoption. The adoption will result in higher gains on future sales of partial real estate interests due to recognizing 100% of the gain on the sale of the partial interest and recording the retained noncontrolling interest at fair value. As of the adoption date, January 1, 2018, there was no cumulative-effect adjustment recorded to retained earnings.

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. For example, estimates and assumptions have been made with respect to allocating the purchase price of real estate acquisitions, the useful lives of assets, capitalization of development and leasing costs, provision for income taxes, recoverable amounts of receivables and deferred taxes, provision for loan loss, initial valuations and related amortization periods of deferred costs and intangibles, particularly with respect to acquisitions, impairment of long-lived assets, litigation related accruals and disclosures and fair value of debt. Actual results could differ from these and other estimates.

 

NOTE 3        ACQUISITIONS, SALES AND JOINT VENTURE ACTIVITY

 

On January 29, 2018, we completed the sale of a 49.49% joint venture interest in the Sears Box at Oakbrook Center for a sales price of $44.7 million, which resulted in a gain of $12.7 million recognized in gain from changes in control of investment properties and other for the six months ended June 30, 2018.

 

On September 15, 2016, joint ventures we formed with Simon Property Group and Authentic Brands Group LLC (“ABG”) acquired Aeropostale, Inc. (“Aeropostale”) for $80.0 million in total cash which included cash for working capital requirements of the retail business. The intellectual property and brand related assets were assigned to the Aero IpCo, LLC venture (“IPCO”) and the assets and liabilities necessary to run the stores were assigned to the Aero OpCo, LLC venture (“OPCO”). In connection with the transaction, our total investment was $20.4 million of cash contributed to the ventures for an effective ownership of approximately 26% in the two joint ventures. Aeropostale is a tenant at certain properties for which we receive rental income included in minimum rents on the Consolidated Statements of Operations and Comprehensive Income.

 

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GGP INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

 

On December 29, 2017, we sold approximately 54% of our interest in IPCO to ABG for a sales price of $16.6 million, which resulted in a gain of $12.0 million recognized in Unconsolidated Real Estate Affiliates - gain on investment on our Consolidated Statements of Comprehensive Income for the year ended December 31, 2017. On March 30, 2018, ABG exercised their call right to purchase our remaining 46% interest in IPCO for a sales price of $13.9 million, which resulted in a gain of $10.4 million recognized in Unconsolidated Real Estate Affiliates - gain on investment on our Consolidated Statements of Comprehensive Income for the six months ended June 30, 2018. In addition, we invested $30.5 million in ABG units on December 29, 2017. The investment is considered a cost method investment and is included in investment in Unconsolidated Real Estate Affiliates on the Consolidated Balance Sheets.

 

On June 30, 2017, we conveyed Lakeside Mall to the lender in full satisfaction of $144.5 million in outstanding debt. This transaction resulted in a $55.1 million gain on extinguishment of debt for the three and six months ended June 30, 2017.

 

On June 9, 2017, we closed on the acquisition of our joint venture partner’s 50% interest in Neshaminy Mall located in Bensalem, Pennsylvania for a gross purchase price of $65.0 million. Post acquisition, we own 100% of the mall. Prior to the acquisition of the remaining interest, the carrying value for our investment was $55.2 million. As a result of this acquisition, the implied fair value of our previous investment in Neshaminy Mall is $33.7 million, resulting in a loss of $21.5 million, recognized in loss from changes in control of investment properties and other for the three and six months ended June 30, 2017.

 

On May 12, 2017, we closed on the sale of Red Cliffs Mall in St. George, Utah for $39.1 million. The transaction netted proceeds of approximately $36.3 million and resulted in a gain on sale of $5.6 million recognized in gain from changes in control of investment properties and other for the three and six months ended June 30, 2017.

 

NOTE 4        FAIR VALUE

 

Nonrecurring Fair Value Measurements

 

We estimate fair value relating to impairment assessments based upon discounted cash flow and direct capitalization models that include all projected cash inflows and outflows over a specific holding period, or the negotiated sales price, if applicable. Such projected cash flows are comprised of contractual rental revenues and forecasted rental revenues and expenses based upon market conditions and expectations for growth. Capitalization rates and discount rates utilized in these models are based on a reasonable range of current market rates for each property analyzed. Based upon these inputs, we determined that our valuations of properties using a discounted cash flow or a direct capitalization model were classified within Level 3 of the fair value hierarchy. For our properties for which the estimated fair value was based on negotiated sales prices, we determined that our valuation was classified within Level 2 of the fair value hierarchy.

 

The following table summarizes certain of our assets that are measured at fair value on a nonrecurring basis as a result of impairment charges recorded during the six months ended June 30, 2018. No impairment charges were recognized during the six months ended June 30, 2017.

 

		Total Fair Value Measurement			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Provisions for Impairment
Six Months Ended June 30, 2018
Investments in real estate (1)		$	71,181		$	—		$	—		$	71,181		$	38,379

 

---

(1)          Refer to Note 2 for more information regarding impairment. Investments in real estate includes consolidated properties and Unconsolidated Real Estate Affiliates.

 

Unobservable Quantitative Input		Rate
Discount rates		9.75	%
Terminal capitalization rates		10.25	%

 

16