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Investment in Unconsolidated Real Estate Ventures | 9 Months Ended
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Sep. 30, 2020
Equity Method Investments and Joint Ventures [Abstract] |
INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES | 4. INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES As of September 30, 2020, the Company held ownership interests in eight unconsolidated real estate ventures for a net aggregate investment balance of $367.8 million, which includes a negative investment balance in one unconsolidated real estate venture of $9.7 million, reflected within "Other liabilities" on the consolidated balance sheets. As of September 30, 2020, four of the real estate ventures owned properties that contained an aggregate of approximately 7.3 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 contained 321 apartment units. The Company accounts for its interests in the Real Estate Ventures, which range from 15% to 70%, using the equity method. Certain of the Real Estate Ventures are subject to specified priority allocations of distributable cash. The Company earned management fees from its Real Estate Ventures of $1.3 million and $3.2 million for the three and nine months ended September 30, 2020, respectively, and $1.0 million and $3.2 million for the three and nine months ended September 30, 2019, respectively. The Company earned leasing commission income from its Real Estate Ventures of $0.2 million and $0.9 million for the three and nine months ended September 30, 2020, respectively, and $0.3 million and $0.8 million for the three and nine months ended September 30, 2019, respectively. The Company had outstanding accounts receivable balances from its Real Estate Ventures of $1.4 million and $0.8 million as of September 30, 2020 and December 31, 2019, respectively. The amounts reflected in the following tables (except for the Company’s share of equity in income) are based on the financial information of the individual Real Estate Ventures. The following is a summary of the financial position of the Real Estate Ventures in which the Company held interests as of September 30, 2020 and December 31, 2019 (in thousands):
| September 30, 2020 |  | December 31, 2019
Net property | $ | 1,363,889 |  |  | $ | 834,367 |
Other assets | 442,834 |  |  | 342,002 |
Other liabilities | 323,442 |  |  | 290,071 |
Debt, net | 833,716 |  |  | 585,068 |
Equity (a) | 649,565 |  |  | 301,230 |
(a) | This amount does not include 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 nine-month periods ended September 30, 2020 and 2019 (in thousands):
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2020 |  | 2019 |  | 2020 |  | 2019
Revenue | $ | 43,109 |  |  | $ | 32,726 |  |  | $ | 105,554 |  |  | $ | 101,148 |
Operating expenses | (23,870 | ) |  | (17,869 | ) |  | (59,838 | ) |  | (53,956 | )
Interest expense, net | (6,175 | ) |  | (6,180 | ) |  | (16,320 | ) |  | (16,421 | )
Depreciation and amortization | (22,345 | ) |  | (13,094 | ) |  | (47,493 | ) |  | (40,279 | )
Gain on early extinguishment of debt | — |  |  | 4,371 |  |  | — |  |  | 4,371 |
Net loss | $ | (9,281 | ) |  | $ | (46 | ) |  | $ | (18,097 | ) |  | $ | (5,137 | )
Ownership interest % | Various |  |  | Various |  |  | Various |  |  | Various |
Company's share of net income (loss) | $ | (5,812 | ) |  | $ | (1,945 | ) |  | $ | (9,892 | ) |  | $ | (4,765 | )
Basis adjustments and other | 24 |  |  | (20 | ) |  | 10 |  |  | (49 | )
Equity in loss of Real Estate Ventures | $ | (5,788 | ) |  | $ | (1,965 | ) |  | $ | (9,882 | ) |  | $ | (4,814 | )
Commerce Square Venture On July 21, 2020, the Company sold a 30% preferred equity interest in the entities that own One Commerce Square and Two Commerce Square. After the transaction, the Company owns approximately 32% of the equity interest in Commerce Square Venture through preferred equity interest holdings and approximately 38% of the equity interest in Commerce Square Venture as the sole common equity holder, for a combined approximately 70% equity interest in the venture. The properties held by the newly formed joint ventures remain encumbered by the existing mortgages, which had a $222.1 million principal balance outstanding on the transaction date. Based on the facts and circumstances at the formation of the Commerce Square Venture, the Company determined that the venture is not a variable interest entity. As a result, the Company used the voting interest model under the accounting standard for consolidation in order to determine whether to consolidate the Commerce Square Venture. Based upon each member's substantive participating rights over the activities of the Commerce Square Venture under the operating and related agreements of the Commerce Square Venture, the Company does not have a controlling interest in the properties as the third party investor holds substantive participating rights in the properties. Therefore, the Company deconsolidated the properties and the venture is accounted for under the equity method of accounting. As a result, the Company measured its equity interest at fair value based on the fair value of the Commerce Square Venture properties and the distribution provisions of the real estate venture agreement. Since the Company retains a non-controlling interest in the Commerce Square Venture and there are no other facts and circumstances that preclude sale recognition, the contribution qualifies as the sale of a nonfinancial asset under the relevant guidance. Under the conventional approach of accounting for equity method investments, an investor applies its percentage ownership interest to the venture’s net income or loss to determine the investor’s share of the earnings or losses of the venture. This approach is inappropriate if the venture’s capital structure gives different rights and priorities to its investors. Therefore, the Company follows the hypothetical liquidation at book value (“HLBV”) method in determining its share of the venture’s earnings or losses for the reporting period as this method better reflects the Company’s claim on the venture’s book value at the end of each reporting period. Earnings for this equity method investment are recognized in accordance with the investment agreement and, where applicable, based upon the allocation of the investment’s net assets at book value as if the investment was hypothetically liquidated at the end of each reporting period.

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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 323 -URI http://asc.fasb.org/topic&trid=2196965 + Details
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