14. Noncontrolling Interests:
Noncontrolling interests represent the portion of equity that the Company does not own in those entities it consolidates as a result of having a controlling interest or determined that the Company was the primary beneficiary of a VIE in accordance with the provisions of the FASB’s Consolidation guidance.
The Company accounts and reports for noncontrolling interests in accordance with the Consolidation guidance and the Distinguishing Liabilities from Equity guidance issued by the FASB. The Company identifies its noncontrolling interests separately within the equity section on the Company’s Consolidated Balance Sheets. Units that are determined to be mandatorily redeemable are classified as Redeemable noncontrolling interests and presented in the mezzanine section between Total liabilities and Stockholder’s equity on the Company’s Consolidated Balance Sheets. The amounts of consolidated net income attributable to the Company and to the noncontrolling interests are presented separately on the Company’s Consolidated Statements of Income.
The Company owns seven shopping center properties located throughout Puerto Rico. These properties were acquired partially through the issuance of $158.6 million of non-convertible units and $45.8 million of convertible units. Noncontrolling interests related to these acquisitions totaled $233.0 million of units, including premiums of $13.5 million and a fair market value adjustment of $15.1 million (collectively, the "Units"). The Company is restricted from disposing of these assets, other than through a tax free transaction until November 2015. The Units and related annual cash distribution rates consisted of the following:
|
Type |
Number of Units Issued |
Par Value Per Unit |
Return Per Annum |
||||||||||
|
Preferred A Units (1) |
81,800,000 | $ | 1.00 | 7.0% | |||||||||
|
Class A Preferred Units (1) |
2,000 | $ | 10,000 | LIBOR | plus | 2.0% | |||||||
|
Class B-1 Preferred Units (2) |
2,627 | $ | 10,000 | 7.0% | |||||||||
|
Class B-2 Preferred Units (1) |
5,673 | $ | 10,000 | 7.0% | |||||||||
|
Class C DownReit Units (2) |
640,001 | $ | 30.52 |
Equal to the Company’s common stock dividend |
|||||||||
|
(1) |
These units are redeemable for cash by the holder or callable by the Company and are included in Redeemable noncontrolling interests on the Company’s Consolidated Balance Sheets. |
|
(2) |
These units are redeemable for cash by the holder or at the Company’s option, shares of the Company’s common stock, based upon the conversion calculation as defined in the agreement. These units are included in Noncontrolling interests on the Company’s Consolidated Balance Sheets. |
The following Units have been redeemed for cash as of December 31, 2013:
|
Type |
Units Redeemed |
Par Value Redeemed (in millions) |
||||||
|
Preferred A Units |
2,200,000 | $ | 2.2 | |||||
|
Class A Preferred Units |
2,000 | $ | 20.0 | |||||
|
Class B-1 Preferred Units |
2,438 | $ | 24.4 | |||||
|
Class B-2 Preferred Units |
5,576 | $ | 55.8 | |||||
|
Class C DownReit Units |
61,804 | $ | 1.9 | |||||
Noncontrolling interest relating to the remaining units was $111.4 million and $110.8 million as of December 31, 2013 and 2012, respectively.
The Company owns two shopping center properties located in Bay Shore, NY and Centereach, NY. Included in Noncontrolling interests was $41.6 million, including a discount of $0.3 million and a fair market value adjustment of $3.8 million, in redeemable units, issued by the Company in connection with the acquisition of these properties. These units and related annual cash distribution rates consist of the following:
|
Type |
Number of Units Issued |
Par Value Per Unit |
Return Per Annum |
|||||||||
|
Class A Units (1) |
13,963 | $ | 1,000 | 5.0% | ||||||||
|
Class B Units (2) |
647,758 | $ | 37.24 |
Equal to the Company’s common stock dividend |
||||||||
|
(1) |
These units are redeemable for cash by the holder or callable by the Company any time after April 3, 2016 and are included in Redeemable noncontrolling interests on the Company’s Consolidated Balance Sheets. |
|
(2) |
These units are redeemable for cash by the holder or at the Company’s option, shares of the Company’s common stock at a ratio of 1:1 and are callable by the Company any time after April 3, 2026. These units are included in Noncontrolling interests on the Company’s Consolidated Balance Sheets. |
During 2012, all 13,963 Class A Units were redeemed by the holder in cash. Additionally, during 2007, 30,000 units, or $1.1 million par value, of the Class B Units were redeemed by the holder in cash at the option of the Company. As of December 31, 2013 and 2012, noncontrolling interest relating to the units was $26.4 million.
Noncontrolling interests also includes 138,015 convertible units issued during 2006, by the Company, which were valued at $5.3 million, including a fair market value adjustment of $0.3 million, related to an interest acquired in an office building located in Albany, NY. These units are redeemable at the option of the holder after one year for cash or at the option of the Company for the Company’s common stock at a ratio of 1:1. The holder is entitled to a distribution equal to the dividend rate of the Company’s common stock. The Company is restricted from disposing of these assets, other than through a tax free transaction, until January 2017.
The following table presents the change in the redemption value of the Redeemable noncontrolling interests for the years ended December 31, 2013 and 2012 (in thousands):
|
2013 |
2012 |
|||||||
|
Balance at January 1, |
$ | 81,076 | $ | 95,074 | ||||
|
Issuance of redeemable units (1) |
5,223 | - | ||||||
|
Unit redemptions |
- | (13,998 | ) | |||||
|
Fair market value adjustment, net |
(225 | ) | - | |||||
|
Other |
79 | - | ||||||
|
Balance at December 31, |
$ | 86,153 | $ | 81,076 | ||||
|
(1) |
During the year ended December 31, 2013, the Company issued 5,223 units at $5.2 million of redeemable units, which are redeemable at the option of the holder after one year and earn a yield of 6% per annum. |