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Investments in Unconsolidated Entities
3 Months Ended
Mar. 31, 2021
Equity Method Investments and Joint Ventures [Abstract]  
Investments in Unconsolidated Entities Investments in Unconsolidated Entities
The interests discussed below are deemed to be variable interests in variable interest entities ("VIEs") and, based on an evaluation of the variable interests against the criteria for consolidation, the Company determined that it is not the primary beneficiary of the investments, as the Company does not have power to direct the activities of the entities that most significantly affect their performance. As such, the interest in the VIEs is recorded using the equity method of accounting in the accompanying consolidated financial statements. Under the equity method, the investments in the unconsolidated entities are stated at cost and adjusted for the Company’s share of net earnings or losses and reduced by distributions. Equity in earnings of real estate ventures is generally recognized based on the allocation of cash distributions upon liquidation of the investment at book value in accordance with the operating agreements. The Company's maximum exposure to losses associated with its unconsolidated investments is primarily limited to its carrying value in the investments.
Heritage Commons X, LTD
In June 2018, the Company, through an SPE, wholly-owned by the GCEAR Operating Partnership, formed a joint venture ("Heritage Commons X") for the construction and ownership of a four-story Class "A" office building with a net rentable area of approximately 200,000 square feet located in Fort Worth, Texas (the "Heritage Commons Property"). The Heritage Commons Property was completed in April 2019 and is 100% leased to Mercedes-Benz Financial Services USA.
On July 17, 2019, Heritage Commons X sold the Heritage Commons Property. On March 16, 2021, the Company received the final distribution of approximately $.03 million.
Digital Realty Trust, Inc.
In September 2014, the Company, through an SPE wholly-owned by the GCEAR Operating Partnership, acquired an 80% interest in a joint venture with an affiliate of Digital Realty Trust, Inc. ("Digital") for $68.4 million, which was funded with equity proceeds raised in the Company's public offerings. The gross acquisition value of the property was $187.5 million, plus closing costs, which was partially financed with debt of $102.0 million. The joint venture was created for purposes of directly or indirectly acquiring, owning, financing, operating and maintaining a data center facility located in Ashburn, Virginia (the "Digital Property"). The Digital Property is approximately 132,300 square feet and consists of certain data processing and communications equipment that is fully leased to a social media company and a financial services company with an average remaining lease term of approximately three years.
In September 2014, the joint venture entered into a secured term loan (the "Digital Loan") in the amount of approximately $102.0 million. The Digital Loan had an original maturity date of September 9, 2019 and included two extension options of 12 additional months each beyond the original maturity date. On March 29, 2019, the joint venture executed the first 12-month loan extension. Based on the executed extension, the new loan maturity date was September 9, 2020. The extension did not change the loan amount, rate or other substantive terms. The members were also required to issue a $10.2 million stand-by letter of credit, of which the Company's portion was $8.2 million.
Since the tenant did not execute a long term extension or sign a new lease with the joint venture, the joint venture elected not to accept the loan extension terms offered by the lender and subsequent discussions did not result in an additional loan extension in 2020. As a result, on September 9, 2020, the lender provided a notice of default for non-payment of the unpaid balance of the non-recourse Digital Loan and exercised its right to draw on the stand-by letter of credit. The Company funded the $8.2 million stand-by letter of credit with cash.
In accordance with the terms of the Digital operating agreement, the Company holds a guaranteed minimum return such that the Digital managing member will pay an amount to the Company in order for the Company to receive a minimum 7% return on investment, subject to a cap on actual cash amounts distributed to the managing member. As part of the wind up of the joint venture, the Company has recorded a receivable from the Digital managing member of $4.1 million. The $4.1 million payment was received in April 2021 and the Company has written off its remaining investment in the venture. In April 2021, the lender sold the Digital Loan and concurrently, the Digital-GCEAR 1 (Ashburn) joint venture executed a deed in lieu thereby extinguishing any further obligations. The Company is not exposed to any future funding obligations and there are no other future losses expected to arise from this investment.