Nonconsolidated Variable Interest Entities
|9 Months Ended|
Sep. 30, 2019
|Equity Method Investments and Joint Ventures [Abstract]|
|Nonconsolidated Variable Interest Entities||
Note 8 – Nonconsolidated Variable Interest Entities
As of September 30, 2019 and December 31, 2018, the Company owned interests in the following companies, which directly or indirectly operate a restaurant:
Bagatelle Investors is a holding company that has an interest in Bagatelle NY. Both entities were formed in 2011. In the second quarter of 2019, Bagatelle NY notified the Company that it had no intent to renew its sublease with the Company for the restaurant space. As a result, the Company determined that it no longer had the ability to exercise significant influence over its investees, Bagatelle Investors and Bagatelle NY. On June 30, 2019, the Company recorded its retained interests in Bagatelle Investors and Bagatelle NY as cost method investments, with the initial basis being the previous carrying amounts of the investments. Prior to June 30, 2019, the Company had accounted for its investments in these entities under the equity method of accounting based on management’s assessment that it was not the primary beneficiary of these entities because it did not have the power to direct their day to day activities. The Company has provided no additional types of support to these entities other than what is contractually required.
The carrying values of these investments were as follows (in thousands):
There was no equity in income of investee companies for the three and nine months ended September 30, 2019 and for the three months ended September 30, 2018. For the nine months ended September 30, 2018, the equity in income of investee companies for the equity method investments discussed above was approximately $0.1 million.
Additionally, the Company has a management agreement with Bagatelle NY. Under this agreement, the Company recorded less than $0.1 million of management fee revenue in each of the three months ended September 30, 2019 and 2018, respectively, and $0.3 million and $0.2 million for the nine months ended September 30, 2019 and 2018, respectively. The Company also receives rental income from Bagatelle NY for restaurant space that it subleases to Bagatelle NY. Rental income of approximately $0.1 million was recorded from this entity for each of the three months ended September 30, 2019 and 2018, respectively, and $0.4 million was recorded from this entity for the each of the nine months ended September 30, 2019 and 2018, respectively.
Net receivables from the Bagatelle Investors and Bagatelle NY included in due from related parties, net were approximately $0.3 million and $0.1 million as of September 30, 2019 and December 31, 2018, respectively. These receivables, combined with the Company’s equity in each of these investments, represent the Company’s maximum exposure to loss.
In the first quarter of 2018, the Company sold its 10% interest in a cost method investment, One 29 Park, LLC, for $0.6 million, resulting in a gain of $0.2 million. The gain is included as a component of other income, net on the consolidated statements of operations and comprehensive income (loss) for the nine months ended September 30, 2018. The investment was accounted for under the cost method of accounting. The Company had also entered into a management agreement with One 29 Park, LLC, under which the Company recorded management fee revenue of $0.1 million and $0.3 million for the three and nine months ended September 30, 2018. The management agreement with One 29 Park, LLC terminated on September 30, 2018.
The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef