Exhibit 99.1

UDR LIGHTHOUSE DOWNREIT L.P.

Financial Statements as of December 31, 2018  (unaudited) and 2017  (unaudited) and

for the years ended December 31, 2018  (unaudited), 2017 (unaudited), and 2016 (audited)

and Independent Auditors’ Report

 

 

 

UDR LIGHTHOUSE DOWNREIT L.P.

 

 

Report of Independent Auditors

 

The Partners
UDR Lighthouse DownREIT L.P.

 

We have audited the accompanying combined statements of operations, comprehensive income/(loss) and changes in capital and cash flows of UDR Lighthouse DownREIT L.P. for the year ended December 31, 2016.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in conformity with U.S. generally accepted accounting principles; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.

Auditor’s Responsibility 

Our responsibility is to express an opinion on these financial statements based on our audit.  We conducted our audit in accordance with auditing standards generally accepted in the United States.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

   

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.  The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.  In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.  Accordingly, we express no such opinion.  An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

   

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the combined results of operations and cash flows of UDR Lighthouse DownREIT L.P. for the year ended December 31, 2016 in conformity with U.S. generally accepted accounting principles.

Report on summarized comparative information

We have not audited, reviewed or compiled the summarized combined comparative information presented herein as of December 31, 2018, December 31, 2017 or for the years then ended and, accordingly, we express no opinion on it. 

 

 

/s/ Ernst & Young LLP

Denver, Colorado
February 21, 2017

UDR LIGHTHOUSE DOWNREIT L.P.

COMBINED BALANCE SHEETS

(In thousands, except for unit data)

 

 

See accompanying notes to the combined financial statements.

UDR LIGHTHOUSE DOWNREIT L.P.

COMBINED STATEMENTS OF OPERATIONS

(In thousands, except per unit data)

 

See accompanying notes to the combined financial statements.

 

UDR LIGHTHOUSE DOWNREIT L.P.

COMBINED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

(In thousands)

 

UDR LIGHTHOUSE DOWNREIT L.P.

COMBINED STATEMENTS OF CHANGES IN CAPITAL

(In thousands)

 

See accompanying notes to the combined financial statements.

UDR LIGHTHOUSE DOWNREIT L.P.

COMBINED STATEMENTS OF CASH FLOWS

(In thousands)

 

See accompanying notes to the combined financial statements.

 

 

1. CONSOLIDATION AND BASIS OF PRESENTATION

Basis of Presentation

UDR Lighthouse DownREIT L.P. (the “DownREIT Partnership," "we" or "our"), a Delaware limited partnership, was formed on October 5, 2015 to own, acquire, renovate, redevelop, manage and dispose of multifamily apartment communities. The DownREIT Partnership is a subsidiary of UDR, Inc. (“UDR” or the “General Partner”), a self-administered real estate investment trust, or REIT. At December 31, 2018, the DownREIT Partnership’s apartment portfolio consisted of 12 communities located in four markets consisting of 5,657 apartment homes.

Interests in the DownREIT Partnership are represented by units of limited partnership interest (“DownREIT Units”). The DownREIT Partnership’s net income (or individual items thereof) is allocated to the partners in accordance with the terms of the Agreement of Limited Partnership of UDR Lighthouse DownREIT L.P. (the “DownREIT Partnership Agreement”), which is generally first based on their respective distributions made during the year and secondly, 99% to UDR and 1% to the outside partners. Distributions are made in accordance with the terms of the DownREIT Partnership Agreement first on a per unit basis that is generally equal to the dividend per share on UDR’s common stock, which is publicly traded on the New York Stock Exchange (“NYSE”) under the ticker symbol “UDR,” and secondly, 99% to UDR and 1% to the outside partners.

UDR is the sole general partner and a limited partner of the DownREIT Partnership. As the sole general partner of the DownREIT Partnership, UDR has full, complete and exclusive discretion to manage and control the business of the DownREIT Partnership and to make all decisions affecting the business and assets of the DownREIT Partnership, subject to certain limitations. United Dominion Realty, L.P., a Delaware limited partnership (the “Operating Partnership”), a subsidiary of UDR, is also a limited partner in the DownREIT Partnership. UDR and the Operating Partnership received their limited partnership interests in exchange for their contribution of the properties to the DownREIT Partnership. As of December 31, 2018, UDR and the Operating Partnership owned approximately 11.6% and 41.6%, respectively, of the DownREIT Units.

The Operating Partnership accounts for its ownership interest in the DownREIT Partnership as an equity method investment.

These financial statements are being presented pursuant to Rule 3-09 of Regulation S-X as the DownREIT Partnership was a significant subsidiary of the Operating Partnership for the year ended December 31, 2016. The DownREIT Partnership was not a significant subsidiary of the Operating Partnership for the year ended December 31, 2018 and 2017.

As of December 31, 2018, there were 32,367,380 DownREIT Units outstanding, of which 17,203,489, or 53.2%, were owned by UDR and affiliated entities, of which 13,470,651, or 41.6%, were held by the Operating Partnership, and 15,163,891,  or 46.8%, were owned by non-affiliated limited partners. See Note 8, Capital Structure.

The DownREIT Partnership evaluated subsequent events through the date its financial statements were issued. No recognized or non-recognized subsequent events were noted.

2. SIGNIFICANT ACCOUNT POLICIES

Recent Accounting Pronouncements

In August 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-12, Derivatives and Hedging, Targeted Improvements to Accounting for Hedging Activities. The ASU aims to better align a company’s financial reporting for hedging activities with the economic objectives of those activities. The updated standard would have been effective for the DownREIT Partnership on January 1, 2019 and must be applied using a modified retrospective approach; however, early adoption of the ASU was permitted. The DownREIT Partnership early adopted the guidance on January 1, 2018; however, the updated standard did not have a material impact on the combined financial statements. Related disclosures were updated pursuant to the requirements of the ASU.

In January 2017, the FASB issued ASU 2017‑01, Business Combinations (Topic 805), Clarifying the Definition of a Business. The ASU changed the definition of a business to assist entities with evaluating whether a set of transferred assets is a business. As a result, the accounting for acquisitions of real estate could be impacted. The updated standard was effective for the DownREIT Partnership on January 1, 2018. The ASU was applied prospectively to any transactions occurring after adoption. The DownREIT Partnership expects that the updated standard will result in fewer acquisitions of real estate meeting the definition of a business and fewer acquisition-related costs being expensed in the period incurred.

In November 2016, the FASB issued ASU 2016‑18, Statement of Cash Flows (Topic 230), Restricted Cash. The ASU addressed the presentation of restricted cash and restricted cash equivalents in the statement of cash flows. The updated standard was effective for the DownREIT Partnership on January 1, 2018 and was applied retrospectively to all periods presented. The updated standard did not have a material impact on the combined financial statements. Related disclosures were updated pursuant to the requirements of the ASU.

As a result of the adoption of ASU 2016-18, for the years ended December 31, 2018, 2017 and 2016, the following line items in the following amounts were reclassified on the Combined Statements of Cash Flows (in thousands):

 

In June 2016, the FASB issued ASU 2016‑13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. The standard requires entities to estimate a lifetime expected credit loss for most financial assets, including trade and other receivables, held-to-maturity debt securities, loans and other financial instruments, and to present the net amount of the financial instrument expected to be collected. The updated standard will be effective for the DownREIT Partnership on January 1, 2020; however, early adoption of the ASU is permitted on January 1, 2019. In November 2016, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, which amends the transition requirements and scope of ASU 2016-13 and clarifies that receivables arising from operating leases are not within the scope of the credit losses standard, but rather, should be accounted for in accordance with the leases standard. The DownREIT Partnership is currently evaluating the effect that the updated standard will have on the combined financial statements and related disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases. The standard amends the existing lease accounting guidance and requires lessees to recognize a lease liability and a right-of-use asset for all leases on their balance sheets. Lessees of operating leases will continue to recognize lease expense in a manner similar to current accounting. For lessors, accounting for leases under the new guidance is substantially the same as in prior periods, but eliminates current real estate-specific provisions and changes the treatment of initial direct costs. The standard became effective for the DownREIT Partnership on January 1, 2019. The updated standard did not have a material impact on the combined financial statements.

 

In July 2018, the FASB issued ASU No. 2018-11, Leases – Targeted Improvements, which provides entities with relief from the costs of implementing certain aspects of ASU No. 2016-02, Leases. The ASU provides a practical expedient which allows lessors to not separate lease and non-lease components in a contract and allocate the consideration in the contract to the separate components if both (i) the timing and pattern of revenue recognition for the non-lease component and the related lease component are the same and (ii) the combined single lease component would be classified as an operating lease. The DownREIT Partnership intends to elect the practical expedient to account for lease and non-lease components as a single component in lease contracts where we are the lessor. The ASU also provides a transition option that permits entities to not recast the comparative periods presented when transitioning to the standard. The DownREIT Partnership also intends to elect the transition option. 

 

In May 2014, the FASB issued ASU No. 2014‑09, Revenue from Contracts with Customers.  ASU No. 2014-09 amended the FASB Accounting Standards Codification (“ASC”) by creating ASC Topic 606, Revenue from Contracts with Customers.  The standard provides companies with a single model for use in accounting for revenue arising from contracts with customers and will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective, including industry-specific revenue guidance. The standard specifically excludes lease contracts. The ASU allows for the use of either the full or modified retrospective transition method. ASC Topic 606 was effective for the DownREIT Partnership on January 1, 2018, at which time the DownREIT Partnership adopted it using the modified retrospective approach. However, as the majority of the DownREIT Partnership’s revenue is from rental income related to leases, the ASU did not have a material impact on the combined financial statements. Related disclosures have been provided and/or updated pursuant to the requirements of the ASU.

Real Estate

Real estate assets held for investment are carried at historical cost and consist of land, buildings and improvements, furniture, fixtures and equipment and other costs incurred during their development, acquisition and redevelopment.

Expenditures for ordinary repair and maintenance costs are charged to expense as incurred. Expenditures for improvements, renovations, and replacements related to the acquisition and/or improvement of real estate assets are capitalized and depreciated over their estimated useful lives if the expenditures qualify as a betterment or the life of the related asset will be substantially extended beyond the original life expectancy.

The DownREIT Partnership purchases real estate investment properties and records the tangible and identifiable intangible assets and liabilities acquired based on their estimated fair value. The primary, although not only, identifiable intangible asset associated with our portfolio is the value of existing lease agreements. When recording the acquisition of a community, we first assign fair value to the estimated intangible value of the existing lease agreements and then to the estimated value of the land, building and fixtures assuming the community is vacant. The DownREIT Partnership estimates the intangible value of the lease agreements by determining the lost revenue associated with a hypothetical lease-up. Depreciation on the building is based on the expected useful life of the asset and the in-place leases are amortized over their remaining average contractual life. Property acquisition costs are capitalized as incurred if the acquisition does not meet the definition of a business.

Quarterly or when changes in circumstances warrant, the DownREIT Partnership will assess our real estate properties for indicators of impairment. In determining whether the DownREIT Partnership has indicators of impairment in our real estate assets, we assess whether the long-lived asset’s carrying value exceeds the community’s undiscounted future cash flows, which is representative of projected net operating income (“NOI”) plus the residual value of the community. Our future cash flow estimates are based upon historical results adjusted to reflect our best estimate of future market and operating conditions and our estimated holding periods. If such indicators of impairment are present and the carrying value exceeds the undiscounted cash flows of the community, an impairment loss is recognized equal to the excess of the carrying amount of the asset over its estimated fair value. Our estimates of fair market value represent our best estimate based primarily upon unobservable inputs related to rental rates, operating costs, growth rates, discount rates and capitalization rates, industry trends and reference to market rates and transactions.

For long-lived assets to be disposed of, impairment losses are recognized when the fair value of the asset less estimated cost to sell is less than the carrying value of the asset. Properties classified as real estate held for disposition generally represent properties that are actively marketed or contracted for sale with the closing expected to occur within the next twelve months. Real estate held for disposition is carried at the lower of cost, net of accumulated depreciation, or fair value, less the cost to sell, determined on an asset-by-asset basis. Expenditures for ordinary repair and maintenance costs on held for disposition properties are charged to expense as incurred. Expenditures for improvements, renovations, and replacements related to held for disposition properties are capitalized at cost. Depreciation is not recorded on real estate held for disposition.

Depreciation is computed on a straight-line basis over the estimated useful lives of the related assets which are 35 to 55 years for buildings, 10 to 35 years for major improvements, and 3 to 10 years for furniture, fixtures, equipment, and other assets.

Predevelopment, development, and redevelopment projects and related costs are capitalized and reported on the Combined Balance Sheets as Total real estate owned, net of accumulated depreciation. The DownREIT Partnership capitalizes costs directly related to the predevelopment, development, and redevelopment of a capital project, which include, but are not limited to, interest, real estate taxes, insurance, and allocated development and redevelopment overhead related to support costs for personnel working on the capital projects. We use our professional judgment in determining whether such costs meet the criteria for capitalization or must be expensed as incurred. These costs are capitalized only during the period in which activities necessary to ready an asset for its intended use are in progress and such costs are incremental and identifiable to a specific activity to get the asset ready for its intended use. These costs, excluding the direct costs of redevelopment and capitalized interest, for the years ended December 31, 2018,  2017 and 2016 were $0.3 million  (unaudited),  $0.4 million  (unaudited), and $0.3 million  (audited), respectively. During the years ended December 31, 2018,  2017, and 2016, total interest capitalized was less than $0.1 million  (unaudited),  less than $0.1 million (unaudited), and $0.1 million  (audited), respectively. As each home in a capital project is completed and becomes available for lease-up, the DownREIT Partnership ceases capitalization on the related portion and depreciation commences over the estimated useful life.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand, demand deposits with financial institutions and short-term, highly liquid investments. We consider all highly liquid investments with maturities of three months or less when purchased to be cash equivalents. The majority of the DownREIT Partnership’s cash and cash equivalents are held at major commercial banks.

Restricted Cash

Restricted cash consists of escrow deposits held by lenders for real estate taxes, insurance and replacement reserves, and security deposits.

Revenue

 

On January 1, 2018, the DownREIT Partnership adopted ASC Topic 606, Revenue from Contracts with Customers, utilizing the modified retrospective method, under which only contracts entered into after the effective date or not complete as of the effective date are subject to the new standard and an adjustment to the opening balance of retained earnings is made to recognize any required adjustments. As a result of the adoption, the DownREIT Partnership did not make an adjustment to retained earnings because no open contracts required different treatment under the new standard.

 

Revenue is measured based on consideration specified in contracts with customers. The DownREIT Partnership recognizes revenue when it satisfies a performance obligation by providing the services specified in a contract to the customer.

 

The following is a description of the principal streams from which the DownREIT Partnership generates its revenue:

 

Lease Revenue

 

Lease revenue related to leases is recognized on an accrual basis when due from residents or tenants in accordance with ASC 840, Leases. Rental payments are generally due on a monthly basis and recognized on a straight-line basis over the reasonably assured lease term. In addition, in circumstances where a lease incentive is provided to tenants, the incentive is recognized as a reduction of lease revenue on a straight-line basis over the reasonably assured lease term.

 

Reimbursements Revenue

 

Reimbursements revenue includes all pass-through revenue from retail and residential leases and common area maintenance reimbursements from retail leases. Reimbursements revenue is recognized on a gross basis as earned as the DownREIT Partnership has determined it is the principal provider of the services.

 

Other Revenue

 

Other revenue is generated by services provided by the DownREIT Partnership to its retail and residential tenants and other unrelated third parties. These fees are generally recognized as earned.

 

Real Estate Sales Gain Recognition 

 

For sale transactions resulting in a transfer of a controlling financial interest of a property, the DownREIT Partnership generally derecognizes the related assets and liabilities from its Combined Balance Sheets and records the gain or loss in the period in which the transfer of control occurs. If control of the property has not transferred to the counterparty, the criteria for derecognition are not met and the DownREIT Partnership will continue to recognize the related assets and liabilities on its Combined Balance Sheets.

 

Sale transactions to entities in which the DownREIT Partnership sells a controlling financial interest in a property but retains a noncontrolling interest are accounted for as partial sales. Partial sales resulting in a change in control are accounted for at fair value and a full gain or loss is recognized. Therefore, the DownREIT Partnership will record a gain or loss on the partial interest sold, and the initial measurement of our retained interest will be accounted for at fair value. 

 

Sales of real estate to joint ventures or other noncontrolled investees are also accounted for at fair value and the DownREIT Partnership will record a full gain or loss in the period the property is contributed.

 

Disaggregation of Revenue

 

Rental income, as disclosed on the Combined Statements of Operations, is disaggregated by principal revenue stream and by reportable segment in the following tables (dollars in thousands).  Joint venture management and other fees are not included in the tables as they are not allocable to a specific reportable segment or segments.

 

 

Derivative Financial Instruments

The General Partner utilizes derivative financial instruments to manage interest rate risk and generally designates these financial instruments as cash flow hedges. Derivative financial instruments associated with the DownREIT Partnership’s allocation of the General Partner’s debt are recorded on our Combined Balance Sheets as either an asset or liability and measured quarterly at their fair value. The changes in fair value for the General Partner’s cash flow hedges allocated to the DownREIT Partnership that are deemed effective are reflected in other comprehensive income/(loss) and for non-designated derivative financial instruments in earnings. The ineffective component of cash flow hedges, if any, is recorded in earnings.

Income Taxes

The taxable income or loss of the DownREIT Partnership is reported on the tax returns of the partners. Accordingly, no provision has been made in the accompanying financial statements for federal or state income taxes on income that is passed through to the partners. However, any state or local revenue, excise or franchise taxes that result from the operating activities of the DownREIT Partnership are recorded at the entity level. The DownREIT Partnership’s tax returns are subject to examination by federal and state taxing authorities. Net income for financial reporting purposes differs from the net income for income tax reporting purposes primarily due to temporary differences, principally real estate depreciation and the tax deferral of certain gains on property sales. The differences in depreciation result from differences in the book and tax basis of certain real estate assets and the differences in the methods of depreciation and lives of the real estate assets.

The DownREIT Partnership evaluates the accounting and disclosure of tax positions taken or expected to be taken in the course of preparing the DownREIT Partnership’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Management of the DownREIT Partnership is required to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions, which include federal and certain states. The DownREIT Partnership has no examinations in progress and none are expected at this time.

Management of the DownREIT Partnership has reviewed all open tax years (2015 through 2017) of tax jurisdictions and concluded there is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken in future tax returns.

As of December 31, 2017, management of the DownREIT Partnership had completed its review of the effects of the Tax Cuts and Jobs Act and had determined that the impact was not material.

Allocation of General and Administrative Expenses

The DownREIT Partnership is charged directly for general and administrative expenses it incurs. The DownREIT Partnership is also charged with other general and administrative expenses that have been allocated by the General Partner to each of its subsidiaries, including the DownREIT Partnership, based on reasonably anticipated benefits to the parties. (See Note 5, Related Party Transactions.)

Advertising Costs

All advertising costs are expensed as incurred and reported on the Combined Statements of Operations within the line item Property operating and maintenance. During the years ended December 31, 2018,  2017, and 2016, total advertising expense was $1.0 million  (unaudited),  $1.1 million  (unaudited), and $1.3 million  (audited), respectively.

Comprehensive Income/(Loss)

Comprehensive income/(loss), which is defined as the change in capital during each period from transactions and other events and circumstances from nonowner sources, including all changes in capital during a period except for those resulting from investments by or distributions to partners, is displayed in the accompanying Combined Statements of Comprehensive Income/(Loss). For the years ended December 31, 2018,  2017, and 2016, the DownREIT Partnership’s other comprehensive income/(loss) consisted of the gain/(loss) (effective portion) on derivative instruments that are designated as and qualify as cash flow hedges and (gain)/loss reclassified from other comprehensive income/(loss) into earnings. The (gain)/loss reclassified from other comprehensive income/(loss) is included in Interest expense on the Combined Statements of Operations. See Note 7, Derivatives and Hedging Activity, for further discussion.

Use of Estimates

The preparation of these financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent

liabilities at the dates of the financial statements and the amounts of revenues and expenses during the reporting periods. Actual amounts realized or paid could differ from those estimates.

Market Concentration Risk

The DownREIT Partnership is subject to increased exposure from economic and other competitive factors specific to those markets where it holds a significant percentage of the carrying value of its real estate portfolio at December 31, 2018, the DownREIT Partnership held greater than 10% of the carrying value of its real estate portfolio in the Metropolitan D.C., Boston, Massachusetts and Dallas, Texas markets.

3. REAL ESTATE OWNED

Real estate assets owned by the DownREIT Partnership consist of income producing operating properties. At December 31, 2018, the DownREIT Partnership owned and combined 12 operating communities in two states plus the District of Columbia totaling 5,657 apartment homes. The following table summarizes the carrying amounts for our real estate owned (at cost) as of December 31, 2018 and 2017 (dollars in thousands):

 

During the years ended December 31, 2018 and 2017, the DownREIT Partnership did not have any acquisitions.

In December 2018, the DownREIT Partnership sold an operating community in Fairfax, Virginia with a total of 604 apartment homes for gross proceeds of $150.7 million, resulting in a gain of $24.1 million. 

4. DEBT, NET

Our secured debt instruments generally feature either monthly interest and principal or monthly interest-only payments with balloon payments due at maturity. For purposes of classification in the following table, variable rate debt with a derivative financial instrument designated as a cash flow hedge is deemed as fixed rate debt due to the DownREIT Partnership having effectively established the fixed interest rate for the underlying debt instrument. Secured debt consists of the following as of December 31, 2018 and 2017  (dollars in thousands):

 

As of December 31, 2018, a commitment of $90.0 million of the General Partner’s secured credit facility with Fannie Mae was allocated to the DownREIT Partnership based on the ownership of the assets securing the debt. The entire commitment was outstanding at December 31, 2018.  The Fannie Mae credit facility allocated to the DownREIT Partnership matures in July 2020  and bears interest at a  fixed rate of 3.95%. The following information relates to the credit facilities owed by the DownREIT Partnership (dollars in thousands):

 

Upon the contribution of communities to the DownREIT Partnership, contributed secured debt was recorded at its estimated fair value and the difference between the fair value and par is amortized to interest expense over the life of the underlying debt instrument. As of December 31, 2018 and 2017, the DownREIT Partnership had $2.6 million  (unaudited) and $6.4 million (unaudited), respectively, of unamortized fair value adjustments associated with the fixed rate debt instruments on the DownREIT Partnership’s properties.

Fixed Rate Debt

During the year ended December 31, 2018, $50.1 million of fixed rate mortgage notes payable owed by the DownREIT Partnership were prepaid with proceeds from the General Partner’s issuance of senior unsecured medium-term notes and the DownREIT Partnership entered into an $80.0 million fixed rate mortgage note payable.

 

At December 31, 2018, the General Partner had borrowings against its fixed rate facilities of $90.0 million, all of which was owed by the DownREIT Partnership based on the ownership of the assets securing the debt. As of December 31, 2018, the fixed rate Fannie Mae credit facilities allocated to the DownREIT Partnership had a fixed interest rate of 3.95%.

Variable Rate Debt

During the year ended December 31, 2018, $29.0 million of funds borrowed under the Fannie Mae credit facilities and owed by the DownREIT Partnership were prepaid with proceeds from the General Partner’s issuance of senior unsecured medium-term notes.  

 

The aggregate maturities of the DownREIT Partnership’s secured debt due during each of the next ten calendar years subsequent to December 31, 2018 are as follows (dollars in thousands, unaudited):

5. RELATED PARTY TRANSACTIONS

Advances (To)/From the General Partner

The DownREIT Partnership participates in the General Partner’s central cash management program, wherein all the DownREIT Partnership’s cash receipts are remitted to the General Partner and all cash disbursements are funded by the General Partner. In addition, other miscellaneous costs such as administrative expenses are incurred by the General Partner on behalf of the DownREIT Partnership. Prior to December 2018, the net Advances (to)/from the General Partner were reflected as increases/(decreases) of capital on the Combined Balance Sheets.

 

In December 2018, the DownREIT Partnership converted the balance of Advances(to)/from the General Partner into a revolving note payable with the General Partner. (See “Notes Receivable to the General Partner” section below for further detail).

 

As a result of these various transactions between the DownREIT Partnership and the General Partner, the DownREIT Partnership had net Advances (to)/from the General Partner of zero and $57.4 million as of December 31, 2018 and 2017, respectively.

 

Notes Receivable from the General Partner

On October 6, 2015, the DownREIT Partnership entered into a note receivable with the General Partner with an aggregate commitment of $126.5 million. As of December 31, 2018 and 2017, the note had a balance of $126.5 million. Interest is incurred at a rate of 3.75% per annum and is paid monthly. The note matures on October 6, 2025.