5. JOINT VENTURES AND PARTNERSHIPS

UDR has entered into joint ventures and partnerships with unrelated third parties to own, operate, acquire, renovate, develop, redevelop, dispose of, and manage real estate assets that are either consolidated and included in Real estate owned on the Consolidated Balance Sheets or are accounted for under the equity method of accounting, and are included in Investment in and advances to unconsolidated joint ventures, net, on the Consolidated Balance Sheets. The Company consolidates the entities that we control as well as any variable interest entity where we are the primary beneficiary. Under the VIE model, the Company consolidates an entity when it has control to direct the activities of the VIE and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. Under the voting model, the Company consolidates an entity when it controls the entity through ownership of a majority voting interest.

UDR’s joint ventures and partnerships are funded with a combination of debt and equity. Our losses are typically limited to our investment and except as noted below, the Company does not guarantee any debt, capital payout or other obligations associated with our joint ventures and partnerships.

Consolidated joint venture

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The Company previously held a preferred equity investment in a joint venture that owned a 173 apartment home community located in Oakland, California. In 2023, the joint venture was deemed to be a VIE and the Company concluded that it was the primary beneficiary of the VIE, and therefore began consolidating the joint venture. In January 2024, the Company took title to the developer’s equity interest in the joint venture resulting in it being a wholly-owned community. (See Note 3, Real Estate Owned for more information).

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Unconsolidated joint ventures and partnerships

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The Company recognizes earnings or losses from our investments in unconsolidated joint ventures and partnerships consisting of our proportionate share of the net earnings or losses of the joint ventures and partnerships. In addition, we may earn fees for providing management services for the communities held by the unconsolidated joint ventures and partnerships.

The following table summarizes the Company’s investment in and advances to unconsolidated joint ventures and partnerships, net, which are accounted for under the equity method of accounting as of June 30, 2024 and December 31, 2023 (dollars in thousands):

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In July 2024, the Company received a $17.2 million partial paydown on one of its operating preferred equity investments. In conjunction with the paydown, the Company’s remaining $50.0 million preferred equity investment will earn a preferred return of 11.0% per annum.

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In July 2024, the Company entered into three joint venture agreements and was under contract to enter into a fourth joint venture agreement with an unaffiliated joint venture partner to operate four operating communities with a total of 818 apartment homes located in Portland, Oregon. The Company’s combined preferred equity investment of $35.0 million earns, or with respect to the fourth joint venture will earn if funded, a preferred return of 10.75% per annum. The unaffiliated joint venture partner is or will be the managing member of the joint ventures. The Company has concluded that it does not control the joint ventures and will account for its investments under the equity method of accounting.

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As of June 30, 2024 and December 31, 2023, the Company had deferred fees of $7.3 million and $7.6 million, respectively, which will be recognized through earnings over the weighted average life of the related properties, upon the disposition of the properties to a third party, or upon completion of certain development obligations.

The Company recognized management fees of $2.0 million and $1.4 million for the three months ended June 30, 2024 and 2023, respectively, and $4.0 million and $2.7 million for the six months ended June 30, 2024 and 2023, respectively, for management of the communities held by the joint ventures and partnerships. The management fees are included in Joint venture management and other fees on the Consolidated Statements of Operations.

The Company may, in the future, make additional capital contributions to certain of our joint ventures and partnerships should additional capital contributions be necessary to fund acquisitions or operations.

We consider various factors to determine if a decrease in the value of our Investment in and advances to unconsolidated joint ventures, net is other-than-temporary. These factors include, but are not limited to, age of the venture, our intent and ability to retain our investment in the entity, the financial condition and long-term prospects of the entity, and the relationships with the other joint venture partners and its lenders. Based on the significance of the unobservable inputs, we classify these fair value measurements within Level 3 of the valuation hierarchy. The Company did not incur any other-than-temporary impairments in the value of its investments in unconsolidated joint ventures during the three and six months ended June 30, 2024 and 2023.

Combined summary balance sheets relating to the unconsolidated joint ventures and partnerships (not just our proportionate share) are presented below as of June 30, 2024 and December 31, 2023 (dollars in thousands):

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Combined summary financial information relating to the unconsolidated joint ventures’ and partnerships’ operations (not just our proportionate share) is presented below for the three and six months ended June 30, 2024 and 2023 (dollars in thousands):

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