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Investment in Unconsolidated Real Estate Ventures | 6 Months Ended
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Jun. 30, 2019
Equity Method Investments And Joint Ventures [Abstract] |
INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES | 4. INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES As of June 30, 2019, the Company held ownership interests in ten unconsolidated Real Estate Ventures with an aggregate investment balance of $128.2 million. The Company formed or acquired interests in these Real Estate Ventures with unaffiliated third parties to develop or manage office, residential and/or mixed-use properties or to acquire land in anticipation of possible development of office, residential and/or mixed-use properties. As of June 30, 2019, six real estate ventures owned properties that contain an aggregate of approximately 5.8 million net rentable square feet of office space; two real estate ventures owned 1.4 acres of land held for development; one real estate venture owned 1.3 acres of land in active development; and one real estate venture owned a residential tower that contains 321 apartment units. The Company accounts for its unconsolidated interests in the Real Estate Ventures using the equity method. The Company’s unconsolidated interests range from 15% to 70%, subject to specified priority allocations of distributable cash in certain of the Real Estate Ventures. The Company earned management fees from its Real Estate Ventures of $1.1 million and $2.2 million for the three and six months ended June 30, 2019, respectively, and $1.3 million and $2.6 million for the three and six months ended June 30, 2018, respectively. The Company earned leasing commission income from its Real Estate Ventures of $0.3 million and $0.5 million for the three and six months ended June 30, 2019, respectively, and $1.5 million and $2.9 million for the three and six months ended June 30, 2018, respectively. The Company had outstanding accounts receivable balances from its Real Estate Ventures of $0.4 million and $0.8 million as of June 30, 2019 and December 31, 2018, respectively. The amounts reflected in the following tables (except for the Company’s share of equity and income) are based on the financial information of the individual Real Estate Ventures. The Company does not record operating losses of a real estate venture in excess of its investment balance unless the Company is liable for the obligations of the real estate venture or is otherwise obligated to provide financial support to the real estate venture. The following is a summary of the financial position of the Real Estate Ventures in which the Company held interests as of June 30, 2019 and December 31, 2018 (in thousands):
| June 30, 2019 |  |  | December 31, 2018 |
Net property | $ | 844,659 |  |  | $ | 835,983 |
Other assets (a) |  | 362,149 |  |  |  | 159,499 |
Other liabilities (a) |  | 287,685 |  |  |  | 85,681 |
Debt, net (b) |  | 593,543 |  |  |  | 365,707 |
Equity (c) |  | 325,580 |  |  |  | 544,094 |
(a) | The increase in ‘Other assets’ and ‘Other liabilities’ for the period ended June 30, 2019 compared to the period ended December 31, 2018 is due to the recording of the right of use asset and lease liability of $197.1 million and $249.3 million, respectively, for the MAP Venture ground lease upon adoption of Topic 842, which was adopted by the venture on January 1, 2019.
(b) | This amount increased as a result of third-party debt financing received by Herndon Innovation Center Venture, an unconsolidated real estate venture on March 29, 2019 and April 1, 2019. See “Herndon Innovation Center Metro Portfolio Venture” section below for further information.
(c) | This amount includes the effect of the basis difference between the Company's historical cost basis and the basis recorded at the real estate venture level, which is typically amortized over the life of the related assets and liabilities. Basis differentials occur from the impairment of investments, purchases of third party interests in existing real estate ventures and upon the transfer of assets that were previously owned by the Company into a real estate venture. In addition, certain acquisition, transaction and other costs may not be reflected in the net assets at the real estate venture level.
The following is a summary of results of operations of the Real Estate Ventures in which the Company held interests during the three- and six-month periods ended June 30, 2019 and 2018, respectively (in thousands):
| Three Months Ended June 30, 2019 |
| evo at Cira Centre South (a) |  |  | MAP Venture |  |  | Other |  |  | Total |
Revenue | $ | - |  |  | $ | 17,796 |  |  | $ | 15,567 |  |  | $ | 33,363 |
Operating expenses |  | - |  |  |  | (11,611 | ) |  |  | (5,757 | ) |  |  | (17,368 | )
Interest expense, net |  | - |  |  |  | (2,532 | ) |  |  | (3,788 | ) |  |  | (6,320 | )
Depreciation and amortization |  | - |  |  |  | (6,550 | ) |  |  | (6,922 | ) |  |  | (13,472 | )
Net loss | $ | - |  |  | $ | (2,897 | ) |  | $ | (900 | ) |  | $ | (3,797 | )
Ownership interest % |  | 50 | % |  |  | 50 | % |  | (b) |  |  | (b) |
Company's share of net loss | $ | - |  |  | $ | (1,449 | ) |  | $ | (59 | ) |  | $ | (1,508 | )
Basis adjustments and other |  | - |  |  |  | 15 |  |  |  | 2 |  |  |  | 17 |
Equity in loss of Real Estate Ventures | $ | - |  |  | $ | (1,434 | ) |  | $ | (57 | ) |  | $ | (1,491 | )
| Three Months Ended June 30, 2018 |
| evo at Cira Centre South (a) |  |  | MAP Venture |  |  | Other |  |  | Total |
Revenue | $ | - |  |  | $ | 16,653 |  |  | $ | 24,448 |  |  | $ | 41,101 |
Operating expenses |  | - |  |  |  | (9,821 | ) |  |  | (10,268 | ) |  |  | (20,089 | )
Interest expense, net |  | - |  |  |  | (3,741 | ) |  |  | (14,411 | ) |  |  | (18,152 | )
Depreciation and amortization |  | - |  |  |  | (4,741 | ) |  |  | (9,051 | ) |  |  | (13,792 | )
Net loss | $ | - |  |  | $ | (1,650 | ) |  | $ | (9,282 | ) |  | $ | (10,932 | )
Ownership interest % |  | 50 | % |  |  | 50 | % |  | (b) |  |  | (b) |
Company's share of net income (loss) | $ | - |  |  | $ | (825 | ) |  | $ | 348 |  |  | $ | (477 | )
Basis adjustments and other |  | - |  |  |  | (31 | ) |  |  | 150 |  |  |  | 119 |
Equity in income (loss) of Real Estate Ventures | $ | - |  |  | $ | (856 | ) |  | $ | 498 |  |  | $ | (358 | )
| Six Months Ended June 30, 2019 |
| evo at Cira Centre South (a) |  |  | MAP Venture |  |  | Other |  |  | Total |
Revenue | $ | - |  |  | $ | 36,084 |  |  | $ | 32,338 |  |  | $ | 68,422 |
Operating expenses |  | - |  |  |  | (23,766 | ) |  |  | (12,320 | ) |  |  | (36,086 | )
Interest expense, net |  | - |  |  |  | (5,068 | ) |  |  | (5,172 | ) |  |  | (10,240 | )
Depreciation and amortization |  | - |  |  |  | (12,899 | ) |  |  | (14,285 | ) |  |  | (27,184 | )
Net income (loss) | $ | - |  |  | $ | (5,649 | ) |  | $ | 561 |  |  | $ | (5,088 | )
Ownership interest % |  | 50 | % |  |  | 50 | % |  | (b) |  |  | (b) |
Company's share of net income (loss) | $ | - |  |  | $ | (2,825 | ) |  | $ | 5 |  |  | $ | (2,820 | )
Basis adjustments and other |  | - |  |  |  | (41 | ) |  |  | 12 |  |  |  | (29 | )
Equity in income (loss) of Real Estate Ventures | $ | - |  |  | $ | (2,866 | ) |  | $ | 17 |  |  | $ | (2,849 | )
| Six Months Ended June 30, 2018 |
| evo at Cira Centre South (a) |  |  | MAP Venture |  |  | Other |  |  | Total |
Revenue | $ | 995 |  |  | $ | 33,733 |  |  | $ | 49,194 |  |  | $ | 83,922 |
Operating expenses |  | (250 | ) |  |  | (20,128 | ) |  |  | (20,479 | ) |  |  | (40,857 | )
Interest expense, net |  | (388 | ) |  |  | (7,532 | ) |  |  | (8,158 | ) |  |  | (16,078 | )
Depreciation and amortization |  | (376 | ) |  |  | (9,442 | ) |  |  | (18,358 | ) |  |  | (28,176 | )
Loss on early extinguishment of debt |  | (718 | ) |  |  | - |  |  |  | - |  |  |  | (718 | )
Net income (loss) | $ | (737 | ) |  | $ | (3,369 | ) |  | $ | 2,199 |  |  | $ | (1,907 | )
Ownership interest % |  | 50 | % |  |  | 50 | % |  | (b) |  |  | (b) |
Company's share of net income (loss) | $ | (369 | ) |  | $ | (1,685 | ) |  | $ | 871 |  |  | $ | (1,183 | )
Basis adjustments and other |  | 11 |  |  |  | (24 | ) |  |  | 13 |  |  |  | - |
Equity in income (loss) of Real Estate Ventures | $ | (358 | ) |  | $ | (1,709 | ) |  | $ | 884 |  |  | $ | (1,183 | )
(a) | The Company sold its 50% ownership interest in evo at Cira Centre South Venture during the first quarter of 2018.
(b) | The Company’s unconsolidated ownership interests ranged from 15% to 70% during the three and six months ended June 30, 2019 and 25% to 70% during the three and six months ended June 30, 2018, subject to specified priority allocations of distributable cash in certain of the Real Estate Ventures.
MAP Venture MAP Ground Lease Venture LLC (the “MAP Venture”), an unconsolidated real estate venture in which the Company holds a 50% ownership interest, is the lessee under a 99-year ground lease of land parcels underlying 58 office properties owned by the MAP Venture. Upon adoption of Topic 842, Leases on January 1, 2019, the MAP Venture determined that the carrying amount of the right of use asset was greater than the fair value of the underlying right of use asset. The fair value of the underlying right of use asset was determined using the purchase price paid by a third-party to acquire the ground lease. As a result, the venture recorded a $9.2 million cumulative effect of accounting change adjustment simultaneously with the recording of the right of use asset to reduce the value of the right of use asset to its estimated fair value. The Company recorded its $4.6 million proportionate share of the cumulative effect of accounting change adjustment through "Cumulative earnings” on its consolidated balance sheets. Herndon Innovation Center Metro Portfolio Venture, LLC On March 29, 2019, Herndon Innovation Center Metro Portfolio Venture, LLC (“Herndon Innovation Center Venture”), in which the Company holds a 15% ownership interest, obtained $134.1 million of third-party debt financing, secured by four properties within the venture, with an initial advance of $113.1 million. The remaining funds available under the loan have not yet been drawn. On April 1, 2019, the venture received $111.0 million in net cash proceeds from the financing. The Company received $16.7 million for its share of the cash proceeds on April 12, 2019. The loan bears interest at LIBOR + 1.95% capped at a total maximum interest rate of 5.45% - 6.45% over the term of the loan and matures on March 29, 2024. On April 11, 2019, the venture obtained an additional $115.3 million of third-party debt financing secured by the remaining four properties within the venture. The loan bears interest at LIBOR + 1.80% capped at a total maximum interest rate of 6.3% and matures on April 11, 2024. On April 12, 2019, the Company received $13.8 million for its share of the cash proceeds from the financing. Guarantees As of June 30, 2019, the Real Estate Ventures had aggregate indebtedness of $605.5 million. These loans are generally mortgage or construction loans, most of which are nonrecourse to the Company, except for customary carve-outs. As of June 30, 2019, the loans to Real Estate Ventures for which there is recourse to the Company consist of the following: (i) a $0.3 million payment guarantee on a loan with a $3.7 million outstanding principal balance, provided to PJP VII; and (ii) up to a $41.3 million payment guarantee on a $150.0 million construction loan provided to 4040 Wilson. In addition, during construction undertaken by Real Estate Ventures, including 4040 Wilson, the Company has provided and expects to continue to provide cost overrun and completion guarantees, with rights of contribution among partners or members in the Real Estate Ventures, as well as customary environmental indemnities and guarantees of customary exceptions to nonrecourse provisions in loan agreements.

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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 -Publisher FASB -Name Accounting Standards Codification -Topic 810 -SubTopic 10 -Section S99 -Paragraph 4 -Subparagraph (SX 210.3A-04) -URI http://asc.fasb.org/extlink&oid=116822174&loc=d3e355119-122828 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -URI http://asc.fasb.org/topic&trid=2196965 + Details
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