4. Investments in Unconsolidated Joint Ventures

The investments in unconsolidated joint ventures consist of the following at June 30, 2015:



		Nominal % Ownership			Carrying Value of Investment (1)
Entity	Properties	Nominal % Ownership			June 30, 2015			December 31, 2014
					(in thousands)
Square 407 Limited Partnership	Market Square North	50.0	%		$	(10,161	)	$	(8,022	)
The Metropolitan Square Associates LLC	Metropolitan Square	51.0	%		9,188			8,539
BP/CRF 901 New York Avenue LLC	901 New York Avenue	25.0	%	(2)	(12,411		)	(1,080		)
WP Project Developer LLC	Wisconsin Place Land and Infrastructure	33.3	%	(3)	44,597			45,514
Annapolis Junction NFM, LLC	Annapolis Junction	50.0	%	(4)	26,812			25,246
540 Madison Venture LLC	540 Madison Avenue	60.0	%		68,627			68,128
500 North Capitol LLC	500 North Capitol Street, NW	30.0	%		(2,755		)	(2,250		)
501 K Street LLC	1001 6th Street	50.0	%	(5)	42,704			41,736
Podium Developer LLC	North Station (Phase I - Air Rights)	50.0	%		6,609			4,231
1265 Main Office JV LLC	1265 Main Street	50.0	%		2,209			N/A
BNY Tower Holdings LLC	Dock72 at the Brooklyn Navy Yard	50.0	%		9,228			N/A
					$	184,647		$	182,042

_______________


(1)	Investments with deficit balances aggregating approximately $25.3 million and $11.4 million at June 30, 2015 and December 31, 2014, respectively, have been reflected within Other Liabilities on the Company's Consolidated Balance Sheets.


(2)	The Company’s economic ownership has increased based on the achievement of certain return thresholds.


(3)	The Company’s wholly-owned entity that owns the office component of the project also owns a 33.3% interest in the entity owning the land, parking garage and infrastructure of the project.


(4)	The joint venture owns two in-service buildings, two buildings under construction and two undeveloped land parcels.


(5)	Under the joint venture agreement, the partner will be entitled to up to two additional payments from the venture based on increases in total square footage of the project above 520,000 square feet and achieving certain project returns at stabilization.

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 at an agreed upon fair value. Under these provisions, the Company is not compelled to purchase the interest of its outside joint venture partners.

The combined summarized balance sheets of the Company's unconsolidated joint ventures are as follows:



	June 30, 2015			December 31, 2014
	(in thousands)
ASSETS
Real estate and development in process, net	$	1,038,567		$	1,034,552
Other assets	243,773			264,097
Total assets	$	1,282,340		$	1,298,649
LIABILITIES AND MEMBERS’/PARTNERS’ EQUITY
Mortgage and notes payable	$	832,860		$	830,075
Other liabilities	35,483			34,211
Members’/Partners’ equity	413,997			434,363
Total liabilities and members’/partners’ equity	$	1,282,340		$	1,298,649
Company’s share of equity	$	212,065		$	209,828
Basis differentials (1)	(27,418		)	(27,786		)
Carrying value of the Company’s investments in unconsolidated joint ventures (2)	$	184,647		$	182,042

_______________

(1)

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 occur from impairment of investments and upon the transfer of assets that were previously owned by the Company into a joint venture. In addition, certain acquisition, transaction and other costs may not be reflected in the net assets at the joint venture level.


(2)	Investments with deficit balances aggregating approximately $25.3 million and $11.4 million at June 30, 2015 and December 31, 2014, respectively, have been reflected within Other Liabilities on the Company's Consolidated Balance Sheets.

The combined summarized statements of operations of the Company's unconsolidated joint ventures are as follows:



	For the three months ended June 30,				For the six months ended June 30,
	2015		2014		2015			2014
	(in thousands)
Total revenue (1)	$	39,152	$	38,437	$	78,684		$	76,471
Expenses
Operating	15,824		15,461		32,099			30,925
Depreciation and amortization	8,951		9,167		18,022			18,259
Total expenses	24,775		24,628		50,121			49,184
Operating income	14,377		13,809		28,563			27,287
Other expense
Interest expense	7,986		7,984		15,966			15,996
Net income	$	6,391	$	5,825	$	12,597		$	11,291

Company’s share of net income	$	2,902	$	2,578	$	17,544	(2)	$	5,203
Basis differential	176		256		368			447
Income from unconsolidated joint ventures	$	3,078	$	2,834	$	17,912		$	5,650

_______________

(1)

Includes straight-line rent adjustments of approximately $0.3 million and $0.3 million for the three months ended June 30, 2015 and 2014, respectively, and approximately $2.0 million and $0.9 million for the six months ended June 30, 2015 and 2014. Includes net above-/below-market rent adjustments of approximately $(0.1) million and $(0.1) million for the three months ended June 30, 2015 and 2014, respectively, and approximately $(0.1) million and $0.0 million for the six months ended June 30, 2015 and 2014, respectively.

(2)

During the six months ended June 30, 2015, the Company received a distribution of approximately $24.5 million, which was generated from the excess loan proceeds from the refinancing of 901 New York Avenue's mortgage loan to a new 10-year mortgage loan totaling $225.0 million. The Company’s allocation of income and distributions for the six months ended June 30, 2015 was not proportionate to its nominal ownership interest as a result of the achievement of specified investment return thresholds, as provided for in the joint venture agreement.

On May 8, 2015, the Company entered into a joint venture with an unrelated third party to redevelop an existing building into a Class A office building totaling approximately 115,000 net rentable square feet at 1265 Main Street in Waltham, Massachusetts. The joint venture partner contributed real estate and improvements, with an aggregate fair value of approximately $9.4 million, for its initial 50% interest in the joint venture. For its initial 50% interest, the Company will contribute cash totaling approximately $9.4 million as the joint venture incurs costs. The joint venture has entered into a fifteen-year lease with a tenant to occupy 100% of the building.

On June 26, 2015, the Company entered into a joint venture with an unrelated third party to develop Dock72, an office building totaling approximately 670,000 net rentable square feet located at the Brooklyn Navy Yard in Brooklyn, New York. Each partner contributed cash totaling approximately $9.1 million for their initial 50% interest in the joint venture. The joint venture entered into a 96-year ground lease, comprised of an initial term of 46 years, which may be extended by the joint venture to 2111, subject to certain conditions. The joint venture also entered into a 20-year lease with a tenant to occupy approximately 222,000 net rentable square feet at the building. In addition, the joint venture entered into an option agreement pursuant to which it may lease an additional land parcel at the site, which could support between 600,000 and 1,000,000 net rentable square feet of development. In connection with the execution of the option agreement, the joint venture paid a non-refundable option payment of $1.0 million.