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INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES | 12 Months Ended
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Dec. 31, 2023
Equity Method Investments and Joint Ventures [Abstract] |
INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES | 4. INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES As of December 31, 2023, the Company held ownership interests in twelve unconsolidated real estate ventures for a net aggregate investment balance of $552.5 million, which includes a negative investment balance in one unconsolidated real estate venture of $48.7 million, reflected within “Other liabilities” on the consolidated balance sheets. As of December 31, 2023, five of the real estate ventures owned properties that contained an aggregate of approximately 9.1 million net rentable square feet of office space; two real estate ventures owned 1.4 acres of land held for development; four real estate venture owned 7.5 acres of land in active development; and one real estate venture owned a mixed used tower comprised of 250 apartment units and 0.2 million net rentable square feet of office/retail space. The Company accounts for its interests in the unconsolidated real estate ventures, which range from 15% to 78%, using the equity method. Certain of the unconsolidated real estate ventures are subject to specified priority allocations of distributable cash. The Company earned management fees from the unconsolidated real estate ventures of $8.1 million, $8.2 million and $8.1 million for the years ended December 31, 2023, 2022 and 2021, respectively. The Company earned leasing commissions from the unconsolidated real estate ventures of $3.8 million, $2.5 million and $3.8 million for the years ended December 31, 2023, 2022 and 2021, respectively. The Company had outstanding accounts receivable balances from the unconsolidated real estate ventures of $3.5 million and $2.9 million as of December 31, 2023 and 2022, 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 unconsolidated real estate ventures. The Company records operating losses of a real estate venture in excess of its investment balance if the Company is liable for the obligations of the real estate venture or is otherwise committed to provide financial support to the real estate venture. The Company’s investment in the unconsolidated real estate ventures as of December 31, 2023 and 2022, and the Company’s share of the unconsolidated real estate ventures’ income (loss) for the years ended December 31, 2023, 2022, and 2021 was as follows (in thousands):
| Ownership Percentage |  | Carrying Amount |  | Company's unconsolidated real estate venture Income (Loss) |  | Unconsolidated Real Estate Venture Debt at 100%, gross
|  |  | 2023 |  | 2022 |  | 2023 |  | 2022 |  | 2021 |  | 2023 |  | 2022
Office Properties |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commerce Square Venture | 78% (a) |  | $ | 272,216 |  |  | $ | 238,105 |  |  | $ | (18,791) |  |  | $ | (12,128) |  |  | $ | (15,501) |  |  | $ | 220,000 |  |  | $ | 206,737 |
Mid-Atlantic Office Venture (e) | 40% (a) |  | — |  |  | 31,005 |  |  | (26,448) |  |  | 412 |  |  | 932 |  |  | 132,770 |  |  | 128,904 |
Herndon Innovation Center Metro Portfolio Venture, LLC | 15% |  | 3,518 |  |  | 15,304 |  |  | (11,854) |  |  | (536) |  |  | (174) |  |  | 233,443 |  |  | 207,302 |
MAP Venture (b) | 50% |  | (48,733) |  |  | (35,411) |  |  | (10,580) |  |  | (8,340) |  |  | (8,683) |  |  | 179,842 |  |  | 182,053 |
Cira Square | 20% |  | 25,242 |  |  | 27,815 |  |  | (2,474) |  |  | (985) |  |  | — |  |  | 257,700 |  |  | 257,700 |
Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
4040 Wilson Venture (c) | 50% |  | 29,419 |  |  | 29,633 |  |  | (2,536) |  |  | (1,211) |  |  | (2,258) |  |  | 145,000 |  |  | 145,070 |
1919 Venture (d) | 50% |  | — |  |  | — |  |  | — |  |  | 1,392 |  |  | 427 |  |  | — |  |  | — |
Brandywine - AI Venture LLC | 50% |  | — |  |  | — |  |  | — |  |  | — |  |  | (721) |  |  | — |  |  | — |
Development Properties |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
3025 JFK Venture (c) | 58% |  | 62,034 |  |  | 57,630 |  |  | (4,456) |  |  | (35) |  |  | (118) |  |  | 152,032 |  |  | 60,118 |
JBG - 51 N Street (c) | 70% |  | 21,150 |  |  | 21,208 |  |  | (435) |  |  | (382) |  |  | (402) |  |  | — |  |  | — |
JBG - 1250 First Street Office (c) | 70% |  | 17,843 |  |  | 17,759 |  |  | (269) |  |  | (195) |  |  | (199) |  |  | — |  |  | — |
3151 Market Street Venture (c) | 64% |  | 90,645 |  |  | 63,751 |  |  | (72) |  |  | (8) |  |  | — |  |  | — |  |  | — |
One Uptown - Office (c) | 57% |  | 47,036 |  |  | 34,980 |  |  | — |  |  | — |  |  | — |  |  | 51,701 |  |  | 16,895 |
One Uptown - Multifamily (c) | 50% |  | 32,124 |  |  | 30,445 |  |  | — |  |  | — |  |  | — |  |  | 40,270 |  |  | — |
|  |  | $ | 552,494 |  |  | $ | 532,224 |  |  | $ | (77,915) |  |  | $ | (22,016) |  |  | $ | (26,697) |  |  | $ | 1,412,758 |  |  | $ | 1,204,779 |
(a)Ownership percentage represents the Company’s combined interest including preferred and common equity holdings. See “Commerce Square Venture” and “Mid-Atlantic Office JV” sections below for more information. (b)Included within “Other Liabilities” on the consolidated balance sheet. (c)This entity is a VIE. (d)On November 30, 2022, the Company sold its interest in 1919 Venture. See “1919 Venture” sections for more information on the disposal. (e)On January 9, 2024 the real estate venture’s secured mortgage loan matured. The real estate venture is in active discussions, including with the mortgage lender, as to a potential extension of the loan or other restructuring of the venture. The following is a summary of the financial position of the unconsolidated real estate ventures in which the Company held interests as of December 31, 2023 and December 31, 2022 (in thousands):
| December 31, 2023 |  | December 31, 2022
Net property | $ | 2,339,921 |  |  | $ | 2,117,226 |
Other assets | 534,658 |  |  | 506,213 |
Other liabilities | 443,536 |  |  | 446,101 |
Debt, net | 1,407,858 |  |  | 1,198,213 |
Equity (a) | 1,023,185 |  |  | 979,125 |
(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 unconsolidated real estate ventures in which the Company held interests during the twelve-month periods ended December 31, 2023, 2022 and 2021 (in thousands):
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
Revenue | $ | 232,895 |  |  | $ | 244,981 |  |  | $ | 214,792 |
Operating expenses | (122,181) |  |  | (124,608) |  |  | (117,273) |
Interest expense, net | (78,909) |  |  | (49,007) |  |  | (30,569) |
Depreciation and amortization | (100,205) |  |  | (103,378) |  |  | (97,147) |
Provision for impairment | — |  |  | — |  |  | (1,393) |
Net loss | $ | (68,400) |  |  | $ | (32,012) |  |  | $ | (31,590) |
Ownership interest % | Various |  | Various |  | Various
Company's share of net loss | $ | (39,637) |  |  | $ | (21,594) |  |  | $ | (25,972) |
Other-than-temporary impairment (a) | (37,176) |  |  | — |  |  | — |
Basis adjustments and other | (1,102) |  |  | (422) |  |  | (725) |
Equity in loss of unconsolidated real estate ventures | $ | (77,915) |  |  | $ | (22,016) |  |  | $ | (26,697) |
(a)Represents other-than-temporary impairment on investment in unconsolidated joint venture due to a decline in fair value below the carrying value of our investments in the unconsolidated joint venture for the year ended December 31, 2023. As of December 31, 2023, the aggregate principal payments of the unconsolidated real estate ventures recourse and non-recourse debt payable to third-parties are as follows (in thousands):
2024 | $ | 803,756 |
2025 | 152,032 |
2026 | 236,971 |
2027 | — |
2028 | 220,000 |
Thereafter | — |
Total principal payments | 1,412,759 |
Net deferred financing costs | (4,901) |
Outstanding indebtedness | $ | 1,407,858 |
One Uptown Ventures On December 1, 2021, the Company established the One Uptown Ventures with affiliates of Canyon Partners Real Estate to commence development of One Uptown, a $335.6 million mixed-use project in Austin, Texas. One Uptown has been designed to deliver 348,000 square feet of Class-A workspace and 15,000 square feet of street-level retail space (through the “office” joint venture) and 341 apartment residences and a public park (through the “multifamily” joint venture) and a six-story parking garage to be shared by the two joint ventures. The Company's partner in each of the two joint ventures has agreed, subject to customary funding conditions, including closing of the applicable construction loan, to fund approximately $64.5 million of the combined project costs in exchange for a 50% preferred equity interest in each of the two joint ventures, with the Company retaining a 50% common equity interest in each. Under the terms of each of the joint venture agreements, the joint venture partner had no obligation to fund any portion of the applicable project costs until the closing of the applicable construction loan. The absence of this obligation prevented Company from meeting the sale recognition criteria of ASC 606 until the applicable closings of the construction loans. On July 29, 2022, the One Uptown Ventures closed on two separate construction loans. The office joint venture closed on a $121.7 million construction loan which bears interest at Secured Overnight Offering Rate (“SOFR”) plus 3.00% and the multifamily joint venture closed on an $85.0 million construction loan which bears interest at SOFR plus 2.45%, plus, in each case, a daily SOFR adjustment of 10 basis points. Both loans mature in July 2026. The Company has also provided a carry guarantee and limited payment guarantee up to 30% and 15% of the principal balance of the $121.7 million and $85 million construction loan, respectively. The Company subsequently recognized the formation of the joint ventures and deconsolidated the projects upon the closing of the loans. The Company has determined that the each of the One Uptown Ventures is a VIE. As a result, the Company used the VIE model under the accounting standard for consolidation in order to determine whether to consolidate the One Uptown Ventures. Based upon each member's shared power over the activities of the One Uptown Ventures under the operating and related agreements, and the Company's lack of control over the development and construction phases of the project, the One Uptown Ventures are accounted for under the equity method of accounting. During the twelve months ended December 31, 2023, the Company contributed $10.8 million to the One Uptown - Office Venture, increasing the Company's aggregate investment balance to $47.0 million at December 31, 2023 and increasing the Company's equity ownership from 50% to 57%. The contribution was used to pay interest on the One Uptown - Office Venture construction loan and arose from higher than budgeted interest carry costs. 3151 Market Street Venture On July 14, 2022, the Company formed a joint venture, with an unaffiliated third party, to develop a life science/office building containing approximately 417,000 rentable square feet under a long-term ground lease located at 3151 Market Street in Philadelphia, Pennsylvania. The estimated project cost is approximately $317 million, and the joint venture partner has agreed, subject to customary funding conditions, to fund up to approximately $49.9 million of the project costs in exchange for a 35% preferred equity interest in the venture. The Company has determined that the 3151 Market Street Venture is VIE. As a result, the Company used the VIE model under the accounting standard for consolidation in order to determine whether to consolidate the 3151 Market Street Venture. Based upon each member's shared power over the activities of the 3151 Market Street Venture under the operating and related agreements, and the Company's lack of control over the development and construction phases of the project, 3151 Market Street Venture is accounted for under the equity method of accounting. During the twelve months ended December 31, 2023, the Company contributed $15.4 million to the 3151 Market Street Venture, increasing the Company's aggregate investment balance to $90.6 million at December 31, 2023 and increasing the Company's equity ownership from 58% to 64%. The contribution was used to pay interest on the 3151 Market Street Venture construction loan and arose from higher than budgeted interest carry costs. Cira Square On March 17, 2022, the Company formed a joint venture, Cira Square REIT, LLC (“Cira Square Venture”), for the purpose of acquiring Cira Square, an office property located at 2970 Market Street in Philadelphia, Pennsylvania containing 862,692 rentable square feet for a gross purchase price of $383.0 million. The Company owns a 20% common equity interest in Cira Square Venture and provided an initial capital contribution of $28.6 million on the closing date. On the closing date, Cira Square Venture obtained $257.7 million of third-party debt financing secured by the property. The loan bears interest at 3.50% over one-month term SOFR per annum capped at a total maximum interest rate of 6.75% per annum, and matures in March 2024. Based on the facts and circumstances at the formation of Cira Square Venture, the Company determined that the venture is not a VIE in accordance with the accounting standard for the consolidation of VIEs. As a result, the Company used the voting interest model under the accounting standard for consolidation in order to determine whether to consolidate Cira Square Venture. Based upon each member's substantive participating rights over the activities of Cira Square Venture under the operating and related agreements, it is not consolidated by the Company, and is accounted for under the equity method of accounting. 4040 Wilson Venture The 4040 Wilson LLC Venture (“4040 Wilson”) consists of one property containing an aggregate of 225,000 square feet of office/retail and 250 apartment units, located in the Metropolitan Washington, D.C. segment. The Company and its partner each own a 50% interest in 4040 Wilson. The residential component and office/retail portion of 4040 Wilson were substantially complete and placed into service during the first quarter of 2020 and the first quarter of 2021, respectively. During the fourth quarter of 2021, 4040 Wilson refinanced the $150.0 million secured construction loan into a $155.0 million mortgage loan secured by the property. The interest rate on this loan is 1.8% over term SOFR and matures in December 2026. Effective January 3, 2023, this debt was swapped to a fixed rate of 5.71% through the maturity of the loan. Brandywine - AI Venture During the year ended December 31, 2021, Brandywine - AI Venture, recorded a $1.4 million held for sale impairment charge related to 3141 Fairview Park Drive. The Company’s share of the impairment charge was $0.7 million, which is reflected in “Equity in loss of Real Estate Ventures” in the consolidated statements of operations for the year ended December 31, 2021. The impairment was measured based on an executed sale agreement with a third-party. The Company determined that its investment in the real estate venture is not impaired as the Company's share of the distributable cash is in excess of the Company's basis in the real estate venture. On November 9, 2021, BDN AI Venture sold 3141 Fairview Park Drive, the last remaining office property, totaling 183,618 rentable square feet in Falls Church, Virginia, at an aggregate sales price of $27.6 million. The Company received cash proceeds of $12.6 million after closing costs. The Company recorded an $3.0 million gain within the caption “Net gain on real estate venture transactions” within its consolidated statements of operations for the year ended December 31, 2021 upon liquidation of the venture. 3025 JFK Venture On February 2, 2021, the Company contributed its investment in a 99-year prepaid leasehold interest in a one-acre land parcel held for development at 3025 JFK Boulevard in Philadelphia, Pennsylvania to the 3025 JFK Venture. The Company's initial investment in this real estate venture at February 2, 2021 was $34.8 million. The real estate venture was formed to develop a 570,000 square foot mixed-use building at property under the long-term ground lease. The estimated project cost is approximately $287.3 million, and the joint venture partner agreed, subject to customary funding conditions, to fund up to approximately $45.2 million of the project costs in exchange for a 45% preferred equity interest in the venture and the Company will retain a 55% preferred equity interest. On July 23, 2021, the 3025 JFK Venture closed on a $186.7 million construction loan, which bears interest at 3.50% plus LIBOR (subject to a LIBOR floor of 0.25%) per annum and matures in July 2025. In addition to its $34.8 million credit for contribution of the leasehold interest at 3025 JFK Venture, the Company has funded $20.5 million of project costs as of December 31, 2022. The remaining project costs will be funded by the joint venture partner and the construction loan. During the twelve months ended December 31, 2023, the Company contributed $7.1 million to the 3025 JFK Venture increasing Company's equity ownership from 55% to 58%. Utilizing the proceeds from the contribution, the 3025 JFK Venture entered into an interest rate cap agreement to help mitigate the interest rate volatility associated with the variable interest rate on the 3025 JFK Venture's construction loan, which is scheduled to mature in July 2025. The interest rate cap has an initial notional value of $148.0 million which has accreted up to $187.0 million following the projected draw schedule. The strike rate of the interest rate cap is 3.00% and the stated interest rate of the construction loan is SOFR + 3.6%. With the interest rate cap in-place, the maximum interest rate due by the 3025 JFK Venture is 6.60%. The Company has determined that the 3025 JFK Venture is a VIE. As a result, the Company used the VIE model under the accounting standard for consolidation in order to determine whether to consolidate the 3025 JFK Venture. Based upon each member’s shared power over the activities of 3025 JFK Venture under the operating and related agreements, and the Company’s lack of control over the development and construction phases of the project, 3025 JFK Venture is accounted for under the equity method of accounting. Mid-Atlantic Office JV On December 21, 2020, the Company contributed a portfolio of twelve properties containing an aggregate of 1,128,645 square feet, nine of which are located in the Pennsylvania suburbs segment and three located in the Company's former Metropolitan Washington, D.C. segment, to the Mid-Atlantic Office JV, for a gross sales price of $192.9 million. After the transaction, the Company owns approximately 25% of the equity interest in the Mid-Atlantic Office JV through a $20.0 million preferred equity holding and approximately 15% of the equity interest through a common equity interest (representing 20% of the total common equity), for a combined approximately 40% equity interest in the venture. On the closing date, Mid-Atlantic Office JV also obtained $147.4 million of third-party debt financing secured by the twelve properties within the venture, with an initial advance of $120.8 million. The remaining funds available under the loan are $18.5 million. The loan bears interest at LIBOR + 3.15% capped at a total maximum interest rate of 5.7% and matured on January 9, 2024. The real estate venture is in discussions, including with the mortgage lender as to a potential extension of the loan or other restructuring of the venture. As of December 31, 2023, our investment in the Mid-Atlantic Office JV was zero, and we have discontinued applying the equity method of accounting on these assets as we have not guaranteed their obligations or otherwise committed to providing financial support. Commerce Square Venture The properties held by the venture are encumbered by existing mortgages that were set to expire on April 5, 2023. The lender of the mortgages provided the venture with a two month extension until June 5, 2023. On June 2, 2023, the mortgages were refinanced through a secured loan facility. The secured loan totals $220.0 million and bears an all-in fixed interest rate of 7.79% which matures in June 2028. In connection with the refinancing, the Company contributed $46.5 million to the Commerce Square Venture in exchange for an additional 8% equity interest in the venture. Herndon Innovation Center Metro Portfolio Venture, LLC The Herndon Innovation Center Metro Portfolio Venture, LLC (“Herndon Innovation Center”) consists of eight properties containing an aggregate of 1,293,197 square feet, located in the Company's former Metropolitan Washington, D.C. segment. The Company and its partner own 15% and 85% interests in the Herndon Innovation Center, respectively. The properties held by the venture are encumbered by a $233.4 million secured mortgage loan that is scheduled to mature in March 2024 and is nonrecourse to the Company. The Company and its partners are in active discussions, including with the mortgage lender, as to a potential extension of the loan or other restructuring on the venture. At present, there can be no assurance as to the outcome of these discussions. MAP Venture The MAP Venture owns 58 office properties that contain an aggregate of 3,924,783 square feet located in the Pennsylvania Suburbs, New Jersey/Delaware, Metropolitan Washington, D.C. and Richmond, Virginia (“MAP Venture”). The MAP Venture leases the land parcels under the 58 office properties through a ground lease that extends through February 2115. Annual payments by the MAP Venture, as tenant under the ground lease, initially total $11.9 million and increase 2.5% annually through November 2025. Thereafter, annual rental payments increase by 2.5% or CPI at the discretion of the lessor. The mortgage loan had an original maturity date of August 1, 2023. The lender provided the MAP Venture with three successive two-month extensions until February 27, 2024. At December 31, 2023, the mortgage balance was $179.8 million. The Company and its partner are actively working to recapitalize the MAP Venture and the mortgage debt prior to maturity, but there can be no assurances that the debt will be satisfied or additional extension options will be provided by the existing lender. At December 31, 2023, the Company's negative investment balance was $48.7 million. The Company has no obligation to fund additional equity to the MAP Venture. 1919 Venture On November 30, 2022, the Company sold its 50% ownership interest in the 1919 Venture for a gross sales price of $83.2 million, a portion of which satisfied in full the $44.4 million outstanding loan between the Company and the venture. The Company recorded a gain on sale of $26.7 million with the caption “Net gain on real estate venture transactions” within its consolidated statement of operations for the year ended December 31, 2022. JBG Ventures JBG Ventures consists of 51 N 50 Patterson, Holdings, LLC Venture (“51 N Street”) and 1250 First Street Office, LLC Venture (“1250 First Street”), with the Company owning a 70.0% equity interest and JBG/DC Manager, LLC (“JBG”) owning a 30.0% equity interest in each of the two ventures. 51 N Street owns 0.9 acres of undeveloped land and 1250 First Street, owns 0.5 acres of undeveloped land.

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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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