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Investments in Unconsolidated Joint Ventures | 9 Months Ended
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Sep. 30, 2023
Investments In Unconsolidated Joint Ventures [Abstract] |
Investments In Unconsolidated Joint Ventures | 5. Investments in Unconsolidated Joint Ventures The investments in unconsolidated joint ventures consist of the following at September 30, 2023 and December 31, 2022:
|  |  |  |  |  | Carrying Value of Investment (1)
Entity |  | Properties |  | Nominal % Ownership |  | September 30, 2023 |  | December 31, 2022
|  |  |  |  |  | (in thousands)
Square 407 Limited Partnership |  | Market Square North |  | 50.00 | % |  | $ | (6,020) |  |  | $ | (6,198) |
BP/CRF Metropolitan Square LLC |  | Metropolitan Square |  | 20.00 | % | (2) | — |  |  | (37,629) |
901 New York, LLC |  | 901 New York Avenue |  | 25.00 | % | (3) | (11,944) |  |  | (12,493) |
WP Project Developer LLC |  | Wisconsin Place Land and Infrastructure |  | 33.33 | % | (4) | 30,890 |  |  | 31,971 |
500 North Capitol Venture LLC |  | 500 North Capitol Street, NW |  | 30.00 | % |  | (9,815) |  |  | (9,185) |
501 K Street LLC |  | 1001 6th Street |  | 50.00 | % |  | 44,506 |  |  | 42,922 |
Podium Developer LLC |  | The Hub on Causeway - Podium |  | 50.00 | % |  | 46,811 |  |  | 46,839 |
Residential Tower Developer LLC |  | Hub50House |  | 50.00 | % |  | 45,413 |  |  | 45,414 |
Hotel Tower Developer LLC |  | The Hub on Causeway - Hotel Air Rights |  | 50.00 | % |  | 12,033 |  |  | 12,366 |
Office Tower Developer LLC |  | 100 Causeway Street |  | 50.00 | % |  | 58,174 |  |  | 59,716 |
1265 Main Office JV LLC |  | 1265 Main Street |  | 50.00 | % |  | 3,564 |  |  | 3,465 |
BNY Tower Holdings LLC |  | Dock 72 |  | 50.00 | % | (5) | (12,195) |  |  | (19,921) |
CA-Colorado Center, LLC |  | Colorado Center |  | 50.00 | % |  | 237,286 |  |  | 233,862 |
7750 Wisconsin Avenue LLC |  | 7750 Wisconsin Avenue |  | 50.00 | % |  | 50,442 |  |  | 52,152 |
BP-M 3HB Venture LLC |  | 3 Hudson Boulevard |  | 25.00 | % |  | 115,142 |  |  | 116,397 |
SMBP Venture LP |  | Santa Monica Business Park |  | 55.00 | % |  | 158,561 |  |  | 164,735 |
Platform 16 Holdings LP |  | Platform 16 |  | 55.00 | % | (6)(7) | 35,719 |  |  | 158,109 |
Gateway Portfolio Holdings LLC |  | Gateway Commons |  | 50.00 | % |  | 362,995 |  |  | 324,038 |
Rosecrans-Sepulveda Partners 4, LLC |  | Beach Cities Media Campus |  | 50.00 | % |  | 27,021 |  |  | 27,000 |
Safeco Plaza REIT LLC |  | Safeco Plaza |  | 33.67 | % | (7)(8) | 42,330 |  |  | 69,785 |
360 PAS Holdco LLC |  | 360 Park Avenue South |  | 42.21 | % | (7)(9) | 59,979 |  |  | 114,992 |
PR II/BXP Reston Gateway LLC |  | Skymark - Reston Next Residential |  | 20.00 | % |  | 14,551 |  |  | 11,351 |
751 Gateway Holdings LLC |  | 751 Gateway |  | 49.00 | % |  | 90,733 |  |  | 80,714 |
200 Fifth Avenue JV LLC |  | 200 Fifth Avenue |  | 26.69 | % | (7) | 83,244 |  |  | 120,083 |
ABXP Worldgate Investments LLC |  | 13100 and 13150 Worldgate Drive |  | 50.00 | % |  | 17,428 |  |  | N/A
|  |  |  |  |  | $ | 1,496,848 |  |  | $ | 1,630,485 |
_______________ (1)Investments with deficit balances aggregating approximately $40.0 million and $85.4 million at September 30, 2023 and December 31, 2022, respectively, are included within Other Liabilities in the Company’s Consolidated Balance Sheets. (2)This entity is a VIE as of September 30, 2023 (See Note 2). During the three months ended September 30, 2023, the Company completed a restructuring of its ownership in Metropolitan Square, as described below in this Note 5 and Note 14. (3)The Company’s economic ownership has increased based on the achievement of certain return thresholds. At September 30, 2023 and December 31, 2022, the Company’s economic ownership was approximately 50%. (4)The Company’s wholly-owned subsidiary that owns Wisconsin Place Office also owns a 33.33% interest in the joint venture entity that owns the land, parking garage and infrastructure of the project. (5)This property includes net equity balances from the amenity joint venture. (6)At December 31, 2022, this entity was a VIE. (7)During the three months ended September 30, 2023, the Company recognized an other-than-temporary impairment loss on its investment. (8)The Company’s ownership includes (1) a 33.0% direct interest in the joint venture, and (2) an additional 1% interest in each of the two entities through which each partner owns its interest in the joint venture. (9)The Company’s ownership includes (1) a 35.79% direct interest in the joint venture, (2) an additional 5.837% indirect ownership in the joint venture, and (3) an additional 1% interest in each of the two entities through which each partner owns its interest in the joint venture. The Company’s partners will fund required capital until their aggregate investment is approximately 58% of all capital contributions; thereafter, the partners will fund required capital according to their percentage interests. Certain of the Company’s unconsolidated joint venture agreements include provisions whereby, at certain specified times, each partner has the right to initiate a purchase or sale of its interest in the joint ventures. Under certain of the Company’s joint venture agreements, if certain return thresholds are achieved, the partners or the Company will be entitled to an additional promoted interest or payments. The combined summarized balance sheets of the Company’s unconsolidated joint ventures are as follows:
| September 30, 2023 |  | December 31, 2022
| (in thousands)
ASSETS |  |  |
Real estate and development in process, net (1) | $ | 6,852,171 |  |  | $ | 6,537,554 |
Other assets | 812,748 |  |  | 756,786 |
Total assets | $ | 7,664,919 |  |  | $ | 7,294,340 |
LIABILITIES AND MEMBERS’/PARTNERS’ EQUITY |  |  |
Mortgage and notes payable, net | $ | 4,048,987 |  |  | $ | 4,022,746 |
Other liabilities (2) | 782,238 |  |  | 716,271 |
Members’/Partners’ equity | 2,833,694 |  |  | 2,555,323 |
Total liabilities and members’/partners’ equity | $ | 7,664,919 |  |  | $ | 7,294,340 |
Company’s share of equity | $ | 1,331,257 |  |  | $ | 1,238,929 |
Basis differentials (3) | 165,591 |  |  | 391,556 |
Carrying value of the Company’s investments in unconsolidated joint ventures (4) | $ | 1,496,848 |  |  | $ | 1,630,485 |
_______________ (1)At September 30, 2023 and December 31, 2022, this amount included right of use assets - finance leases totaling approximately $248.9 million. At September 30, 2023 and December 31, 2022, this amount included right of use assets - operating leases totaling approximately $20.3 million and $21.2 million, respectively. (2)At September 30, 2023 and December 31, 2022, this amount included lease liabilities - finance leases totaling approximately $378.4 million and $382.2 million, respectively. At September 30, 2023 and December 31, 2022, this amount included lease liabilities - operating leases totaling approximately $30.5 million. (3)This amount represents the aggregate difference between the Company’s historical cost basis and the basis reflected at the joint venture level, which is typically amortized over the life of the related assets and liabilities. Basis differentials result from impairments of investments, acquisitions through joint ventures with no change in control and upon the transfer of assets that were previously owned by the Company into a joint venture. During the three months ended September 30, 2023, the Company recognized an other-than-temporary impairment loss on its investments in Platform 16, 360 Park Avenue South, 200 Fifth Avenue and Safeco Plaza of approximately $155.2 million, $54.0 million, $33.4 million and $29.9 million, respectively, as well as a $35.8 million gain on investment related to Metropolitan Square, as described below in this Note 5. In addition, certain acquisition, transaction and other costs may not be reflected in the net assets at the joint venture level. The majority of the Company’s basis differences are as follows:
| September 30, 2023 |  | December 31, 2022
Property | (in thousands)
Colorado Center | $ | 299,637 |  |  | $ | 301,820 |
200 Fifth Avenue | 60,874 |  |  | 94,497 |
Gateway Commons | 48,199 |  |  | 47,808 |
Metropolitan Square | 37,053 |  |  | 1,320 |
Safeco Plaza | (29,962) |  |  | (15) |
360 Park Avenue South | (47,147) |  |  | 3,798 |
Dock 72 | (96,366) |  |  | (98,980) |
Platform 16 | (143,803) |  |  | 7,108 |
These basis differentials (excluding land) will be amortized over the remaining lives of the related assets and liabilities. (4)Investments with deficit balances aggregating approximately $40.0 million and $85.4 million at September 30, 2023 and December 31, 2022, respectively, are reflected within Other Liabilities in the Company’s Consolidated Balance Sheets. The combined summarized statements of operations of the Company’s unconsolidated joint ventures are as follows:
| Three months ended September 30, |  | Nine months ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022 |  |
| (in thousands)
Total revenue (1) | $ | 153,551 |  |  | $ | 127,996 |  |  | $ | 469,745 |  |  | $ | 373,358 |  |  |
Expenses |  |  |  |  |  |  |  |  |
Operating | 65,119 |  |  | 52,886 |  |  | 183,348 |  |  | 143,880 |  |  |
Transaction costs | 78 |  |  | (65) |  |  | 179 |  |  | 746 |  |  |
Depreciation and amortization | 49,840 |  |  | 44,132 |  |  | 151,051 |  |  | 132,089 |  |  |
Total expenses | 115,037 |  |  | 96,953 |  |  | 334,578 |  |  | 276,715 |  |  |
Other income (expense) |  |  |  |  |  |  |  |  |
Loss from early extinguishment of debt | — |  |  | — |  |  | (3) |  |  | (1,327) |  |  |
Interest expense | (60,737) |  |  | (40,678) |  |  | (176,786) |  |  | (103,270) |  |  |
Unrealized gain on derivative instruments | 10,242 |  |  | — |  |  | 14,089 |  |  | — |  |  |
Net loss | $ | (11,981) |  |  | $ | (9,635) |  |  | $ | (27,533) |  |  | $ | (7,954) |  |  |
Company’s share of net income (loss) | $ | (4,476) |  |  | $ | (2,251) |  |  | $ | (10,739) |  |  | $ | 2,225 |  |  |
Gain on investment (2) | 35,756 |  |  | — |  |  | 35,756 |  |  | — |  |  |
Impairment losses on investments (3) | (272,603) |  |  | — |  |  | (272,603) |  |  | — |  |  |
Basis differential (4) | (6,233) |  |  | (1,273) |  |  | (14,207) |  |  | (3,614) |  |  |
Loss from unconsolidated joint ventures | $ | (247,556) |  |  | $ | (3,524) |  |  | $ | (261,793) |  |  | $ | (1,389) |  |  |
_______________ (1)Includes straight-line rent adjustments of approximately $7.7 million and $9.6 million for the three months ended September 30, 2023 and 2022, respectively, and approximately $20.9 million and $54.9 million for the nine months ended September 30, 2023 and 2022, respectively. (2)During the three months ended September 30, 2023, the Company completed a restructuring of its ownership in Metropolitan Square, as described below in this Note 5. (3)During the three months ended September 30, 2023, the Company recognized an other-than-temporary impairment loss on its investments in Platform 16, 360 Park Avenue South, 200 Fifth Avenue and Safeco Plaza of approximately $155.2 million, $54.0 million, $33.4 million and $29.9 million respectively, as described below in this Note 5. (4)Includes straight-line rent adjustments of approximately $0.4 million and $0.1 million for the three months ended September 30, 2023 and 2022, respectively, and approximately $1.1 million and $0.3 million for the nine months ended September 30, 2023 and 2022, respectively. Also includes net above-/below-market rent adjustments of approximately $0.2 million and $0.1 million for the three months ended September 30, 2023 and 2022, respectively, and approximately $0.6 million and $0.3 million for the nine months ended September 30, 2023 and 2022. On January 31, 2023, the Company acquired a 50% interest in a joint venture that owns 13100 and 13150 Worldgate Drive located in Herndon, Virginia for a gross purchase price of approximately $17.0 million. The acquisition was completed with available cash. 13100 and 13150 Worldgate Drive consists of two vacant office buildings aggregating approximately 350,000 rentable square feet and a 1,200-space structured parking deck situated on a 10-acre site. The joint venture intends to redevelop the property for residential use. There can be no assurance that the joint venture will commence the development as currently contemplated or at all. On April 21, 2023, a joint venture in which the Company owns a 50% interest exercised an option to extend the maturity date of the construction loan collateralized by its 7750 Wisconsin Avenue property. Prior to the extension, the loan had a total commitment amount of approximately $252.6 million, bore interest at a variable rate equal to London interbank offered rate (“LIBOR”) plus 1.25% per annum and was scheduled to mature on April 26, 2023, with two, one-year extension options, subject to certain conditions. The extended loan continued to bear interest at LIBOR plus 1.25% per annum through June 1, 2023 after which, the interest rate was converted to a variable rate equal to Term Secured Overnight Finance Rate (“SOFR”) plus 1.35% per annum. The extended loan now matures on April 26, 2024, with a one-year extension option, subject to certain conditions. 7750 Wisconsin Avenue is a premier workplace with approximately 734,000 net rentable square feet located in Bethesda, Maryland. On June 5, 2023, a joint venture in which the Company owns a 30% interest repaid the existing construction loan collateralized by its 500 North Capitol Street, NW property and obtained new mortgage loans with related parties. At the time of the pay off, the outstanding balance of the loan totaled approximately $105.0 million and the loan was scheduled to mature on June 6, 2023. The new mortgage loans have an aggregate principal balance of $105.0 million, bear interest at a weighted average fixed rate of 6.83% per annum and mature on June 5, 2026. The Company’s portion of the mortgage loans, $10.5 million, has been reflected as a Related Party Note Receivable on the Company’s Consolidated Balance Sheets. 500 North Capitol Street, NW is an approximately 231,000 net rentable square foot premier workplace in Washington, DC. On June 28, 2023, a joint venture in which the Company owns a 25% interest exercised an option to extend by 30 days the maturity date of the loan collateralized by its 3 Hudson Boulevard property. At the time of the extension, the outstanding balance of the loan totaled $80.0 million, bore interest at a variable rate equal to LIBOR plus 3.50% per annum and was scheduled to mature on July 13, 2023, with two extension options (30 days and 180 days, respectively), subject to certain conditions. Following the extension, the modified loan was scheduled to mature on August 13, 2023, with one 180-day extension option, subject to certain conditions. The extended loan continued to bear interest at a variable rate equal to LIBOR plus 3.50% per annum for the period from June 28, 2023 through July 6, 2023. For the period commencing on July 7, 2023 through the maturity date, the modified loan bore interest at a variable rate equal to Term SOFR plus approximately 3.61% per annum. On August 11, 2023, the joint venture exercised its second extension option of 180-days. The extended loan now matures on February 9, 2024. As of September 30, 2023, the loan had approximately $25.6 million of accrued interest due at the maturity date. 3 Hudson Boulevard consists of land and improvements held for future development located in New York, New York. On July 28, 2023, a joint venture in which the Company has a 50% interest modified and exercised an option to extend by one year the maturity date of its loan collateralized by 100 Causeway Street. At the time of the modification and extension, the loan had an outstanding balance totaling approximately $340.6 million, bore interest at Term SOFR plus 1.60% per annum, and was scheduled to mature on September 5, 2023. Following the modification and extension, the loan had an outstanding balance of $336.6 million, which included an approximately $4.0 million principal repayment, bears interest at Term SOFR plus 1.48% per annum, and matures on September 5, 2024, with an additional one-year extension option, subject to certain conditions. 100 Causeway Street is an approximately 634,000 square foot premier workplace located in Boston, Massachusetts and is approximately 95% leased. On September 1, 2023, a joint venture in which the Company has a 49% interest completed and fully placed in-service 751 Gateway, an approximately 231,000 square foot laboratory/life sciences project in South San Francisco, California. The property is 100% leased. On September 6, 2023, a joint venture in which the Company has a 50% interest modified the loan collateralized by its Hub on Causeway - Podium property. At the time of the modification, the loan had an outstanding balance of approximately $174.3 million, bore interest at Term SOFR plus 2.35% per annum, and was scheduled to mature on September 6, 2023. Following the modification, the modified loan had an outstanding balance of $154.3 million, which included an approximately $20.0 million principal repayment, bears interest at Daily SOFR plus 2.50% per annum, and matures on September 8, 2025, with a one-year extension option, subject to certain conditions. On September 8, 2023, the joint venture entered into interest rate swap contracts with notional amounts aggregating approximately $154.3 million through September 2, 2025, resulting in a fixed interest rate of approximately 7.35% per annum through the expiration of the interest rate swap contracts. The Hub on Causeway - Podium is an approximately 383,000 square foot premier workplace located in Boston, Massachusetts and is approximately 94% leased. On September 13, 2023, a joint venture in which the Company owned a 20% equity interest completed the first step of a two-step restructuring of its ownership in Metropolitan Square. The two-step restructuring will result in (i) an affiliate of the existing mezzanine lender purchasing the property and becoming the new property owner and the Company no longer having an equity interest in the property and (ii) the Company becoming a co-lender of up to $20.0 million under a new $100.0 million mezzanine loan (“New Mezz Loan”). Prior to the restructuring, the property was encumbered by an aggregate of $420.0 million of debt, consisting of a senior loan with an outstanding principal balance of $305.0 million (“Senior Loan”) and the existing $115.0 million mezzanine loan (“Existing Mezz Loan”). Step one of the restructuring was completed on September 13, 2023, and resulted in, among other things, (i) the cessation of the Company’s obligation to fund future investments through its then 20% equity interest, which caused the Company to recognize a gain on investment of approximately $35.8 million related to its deficit investment balance, which was primarily due to excess distributions, and (ii) the removal of the property from the Company’s in-service portfolio. Metropolitan Square is a 657,000 net rentable square foot premier workplace located at 655 15th Street, NW in the heart of downtown Washington, DC. See Note 14 for a description of step two of the restructuring. Impairments The Company’s investments in unconsolidated joint ventures are reviewed for indicators of impairment on a quarterly basis and the Company records impairment charges when events or circumstances indicate that a decline in the fair values below the carrying amounts has occurred and such decline is other-than-temporary. During the three months ended September 30, 2023, the Company continued to evaluate declining market conditions and underlying key assumptions of certain investments in unconsolidated joint ventures, including the receipt and consideration of certain third-party joint venture property appraisals. Such evaluation of key impairment indicators resulted in the Company determining that the decline in value, for certain joint venture properties, was other-than-temporary and therefore the Company recorded impairment charges during the three months ended September 30, 2023, as described below. During the three months ended June 30, 2023, a joint venture in which the Company has a 55% interest elected to pause vertical construction on Platform 16 in San Jose, California. Platform 16 was planned to be constructed in phases to best accommodate market demand. The first phase of the development project included the construction of an approximately 390,000 net rentable square foot premier workplace building and below-grade parking garage. The joint venture intends to complete the construction of the below-grade parking garage and building foundation elements over the next several months to facilitate a restart of construction in the future as demand improves. Upon electing to pause vertical construction, the Company performed an analysis to determine if there was an other-than temporary impairment. Based on the market rent assumptions and new expected timeline for completion of the project, as of June 30, 2023, the Company concluded there was not an other-than temporary impairment present. During the three months ended September 30, 2023, the real estate and leasing conditions in the San Jose, California market continued to deteriorate and the Company further extended its construction pause assumption. These conditions, combined with a decrease in market rent assumptions, resulted in the Company recognizing a non-cash impairment charge totaling approximately $155.2 million, which represented the decline in the fair value below the carrying value of the Company’s investment in the unconsolidated joint venture that owns Platform 16. The Company determined that its investment was categorized within Level 3 of the fair value hierarchy, as it utilized significant unobservable inputs in its assessment, including an exit capitalization rate of 6.0%, and a discount rate of 12.0%. During the three months ended September 30, 2023, the Company recognized a non-cash impairment charge totaling approximately $54.0 million, which represented the decline in the fair value below the carrying value of the Company’s investment in the unconsolidated joint venture that owns 360 Park Avenue South. The Company assessed the impairment and concluded that it was other than temporary. The Company determined that its investment was categorized within Level 3 of the fair value hierarchy, as it utilized significant unobservable inputs in its assessment, including an exit capitalization rate of 5.5% and leasing the currently available space over a longer period of time ending in 2026. 360 Park Avenue South is currently under redevelopment to be a premier workplace with approximately 450,000 net rentable square feet located in New York City, New York. During the three months ended September 30, 2023, the Company recognized a non-cash impairment charge totaling approximately $33.4 million, which represented the decline in the fair value below the carrying value of the Company’s investment in the unconsolidated joint venture that owns 200 Fifth Avenue. The Company assessed the impairment and concluded that it was other than temporary. The Company determined that its investment was categorized within Level 3 of the fair value hierarchy, as it utilized significant unobservable inputs in its assessment, including an exit capitalization rate of 5.0% and a discount rate of 8.0%. 200 Fifth Avenue is a premier workplace with approximately 855,000 net rentable square feet located in New York City, New York. During the three months ended September 30, 2023, the Company recognized a non-cash impairment charge totaling approximately $29.9 million, which represented the decline in the fair value below the carrying value of the Company’s investment in the unconsolidated joint venture that owns Safeco Plaza. The Company assessed the impairment and concluded that it was other than temporary. The Company determined that its investment was categorized within Level 3 of the fair value hierarchy, as it utilized significant unobservable inputs in its assessment, including an exit capitalization rate of 5.5%, a discount rate of 8.0% and a major lobby and repositioning renovation. Safeco Plaza is a premier workplace with approximately 779,000 net rentable square feet located in Seattle, Washington.

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- Definition Investments In Unconsolidated Joint Ventures [Abstract] + References No definition available. + Details
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- Definition 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. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 323 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 3 -Subparagraph (a)(3) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481687/323-10-50-3 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 323 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 3 -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481687/323-10-50-3 Reference 3: http://www.xbrl.org/2003/role/recommendedDisclosureRef -Topic 323 -SubTopic 740 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481543/323-740-50-2 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Name Accounting Standards Codification -Topic 323 -Publisher FASB -URI https://asc.fasb.org//323/tableOfContent + Details
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