5. Investments in Unconsolidated Joint Ventures

The investments in unconsolidated joint ventures consist of the following at March 31, 2019 and December 31, 2018:



		Nominal % Ownership			Carrying Value of Investment (1)
Entity	Properties	Nominal % Ownership			March 31, 2019			December 31, 2018
					(in thousands)
Square 407 Limited Partnership	Market Square North	50.0	%		$	(5,948	)	$	(6,424	)
The Metropolitan Square Associates LLC	Metropolitan Square	20.0	%		3,146			2,644
BP/CRF 901 New York Avenue LLC	901 New York Avenue	25.0	%	(2)	(13,215		)	(13,640		)
WP Project Developer LLC	Wisconsin Place Land and Infrastructure	33.3	%	(3)	37,821			38,214
Annapolis Junction NFM LLC	Annapolis Junction	50.0	%	(4)	25,284			25,268
540 Madison Venture LLC	540 Madison Avenue	60.0	%		66,452			66,391
500 North Capitol Venture LLC	500 North Capitol Street, NW	30.0	%		(4,781		)	(5,026		)
501 K Street LLC	1001 6th Street	50.0	%	(5)	42,500			42,557
Podium Developer LLC	The Hub on Causeway - Podium	50.0	%		69,849			69,302
Residential Tower Developer LLC	The Hub on Causeway - Residential	50.0	%		47,795			47,505
Hotel Tower Developer LLC	The Hub on Causeway - Hotel Air Rights	50.0	%		3,343			3,022
Office Tower Developer LLC	100 Causeway Street	50.0	%	(6)	46,881			23,804
1265 Main Office JV LLC	1265 Main Street	50.0	%		4,030			3,918
BNY Tower Holdings LLC	Dock 72	50.0	%		83,291			82,520
CA-Colorado Center Limited Partnership	Colorado Center	50.0	%		252,762			253,495
7750 Wisconsin Avenue LLC	7750 Wisconsin Avenue	50.0	%	(6)	70,147			69,724
BP-M 3HB Venture LLC	3 Hudson Boulevard	25.0	%		47,480			46,993
SMBP Venture LP	Santa Monica Business Park	55.0	%		175,799			180,952
					$	952,636		$	931,219

_______________


(1)	Investments with deficit balances aggregating approximately $23.9 million and $25.1 million at March 31, 2019 and December 31, 2018, respectively, have been reflected within Other Liabilities in 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 subsidiary that owns Wisconsin Place Office also owns a 33.3% interest in the joint venture entity that owns the land, parking garage and infrastructure of the project.


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


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


(6)	This entity is a VIE (See Note 2).

Certain of the Company’s unconsolidated joint venture agreements provide that, at certain specified times, each partner has the right to initiate a purchase or sale of its interest in the joint ventures. With limited exceptions, under these provisions, the Company is not compelled to purchase the interest of its outside joint venture partners. Under certain of the Company’s joint venture agreements, if certain return thresholds are achieved, the partners will be entitled to an additional promoted interest or payments.

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



	March 31, 2019		December 31, 2018
	(in thousands)
ASSETS
Real estate and development in process, net (1)	$	3,660,439	$	3,545,906
Other assets	534,534		543,512
Total assets	$	4,194,973	$	4,089,418
LIABILITIES AND MEMBERS’/PARTNERS’ EQUITY
Mortgage and notes payable, net	$	2,074,473	$	2,017,609
Other liabilities (2)	604,280		582,006
Members’/Partners’ equity	1,516,220		1,489,803
Total liabilities and members’/partners’ equity	$	4,194,973	$	4,089,418
Company’s share of equity	$	642,564	$	622,498
Basis differentials (3)	310,072		308,721
Carrying value of the Company’s investments in unconsolidated joint ventures (4)	$	952,636	$	931,219

_______________


(1)	At March 31, 2019, this amount includes right of use assets - finance leases and right of use assets - operating leases totaling approximately $248.9 million and $12.7 million, respectively.


(2)	At March 31, 2019, this amount includes lease liabilities - finance leases and lease liabilities - operating leases totaling approximately $393.9 million and $17.2 million, respectively.

(3)

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 result from impairments of investments, acquisitions through joint ventures with no change in control 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. At March 31, 2019 and December 31, 2018, there was an aggregate basis differential of approximately $315.3 million and $316.7 million, respectively, between the carrying value of the Company’s investment in the joint venture that owns Colorado Center and the joint venture’s basis in the assets and liabilities, which differential (excluding land) shall be amortized over the remaining lives of the related assets and liabilities.


(4)	Investments with deficit balances aggregating approximately $23.9 million and $25.1 million at March 31, 2019 and December 31, 2018, respectively, have been reflected within Other Liabilities in the Company’s Consolidated Balance Sheets.

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



	Three months ended March 31,
	2019			2018
	(in thousands)
Total revenue (1)	$	82,955		$	56,486
Expenses
Operating	30,499			22,849
Depreciation and amortization	28,646			14,725
Total expenses	59,145			37,574
Other expense
Interest expense	20,757			14,424
Net income	$	3,053		$	4,488

Company’s share of net income	$	1,584		$	1,826
Basis differential (2)	(1,371		)	(1,365		)
Income from unconsolidated joint ventures	$	213		$	461

_______________


(1)	Includes straight-line rent adjustments of approximately $5.8 million and $1.8 million for the three months ended March 31, 2019 and 2018, respectively.


(2)	Includes straight-line rent adjustments of approximately $0.5 million and $0.7 million for the three months ended March 31, 2019 and 2018, respectively. Also includes net above-/below-market rent adjustments of approximately $0.4 million and $0.4 million for the three months ended March 31, 2019 and 2018, respectively.

On January 24, 2019, a joint venture in which the Company has a 50% interest extended the loan collateralized by its Annapolis Junction Building Six property. At the time of the extension, the outstanding balance of the loan totaled approximately $13.0 million and was scheduled to mature on November 17, 2019, with one, one-year extension option, subject to certain conditions. The extended loan has a total commitment amount of approximately $14.3 million, bears interest at a variable rate equal to LIBOR plus 2.00% per annum and matures on November 17, 2020. Annapolis Junction Building Six is a Class A office property with approximately 119,000 net rentable square feet located in Annapolis, Maryland.