Commitments, Contingencies and Guarantees

Legal Proceedings

From time to time, we are party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of our business. Excluding ordinary, routine litigation incidental to our business, we are not currently a party to any legal proceedings that we believe would reasonably be expected to have a materially adverse effect on our business, financial condition or results of operations.

Concentration of Risk

We are subject to credit risk with respect to our tenant receivables and deferred rent receivables related to our tenant leases. Our tenants' ability to honor the terms of their respective leases remains dependent upon the economic, regulatory and social factors. We seek to minimize our credit risk from our tenant leases by (i) targeting smaller, more affluent tenants, from a diverse mix of industries, (ii) performing credit evaluations of prospective tenants and (iii) obtaining security deposits from our tenants. For the three months ended March 31, 2016 and 2015, no tenant accounted for more than 10% of our total revenues.

All of our properties (including the properties owned by our unconsolidated Funds) are located in Los Angeles County, California and Honolulu, Hawaii, and we are dependent on the Southern California and Honolulu economies. Therefore, we are susceptible to adverse local conditions and regulations, as well as natural disasters in those areas.

We are also subject to credit risk from the counterparties on our interest rate swap and interest rate cap contracts that we use to manage the risk associated with our floating rate debt. See Note 9 for the details of our interest rate contracts. We seek to

minimize our credit risk by entering into agreements with a variety of high quality counterparties with investment grade ratings.

We maintain our cash and cash equivalents at high quality financial institutions with investment grade ratings. Interest bearing accounts at each U.S. banking institution are insured by the FDIC up to $250 thousand.

Asset Retirement Obligations

Conditional asset retirement obligations represent a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement is conditional on a future event that may or may not be within our control. A liability for a conditional asset retirement obligation must be recorded if the fair value of the obligation can be reasonably estimated. Environmental site assessments and investigations have identified twenty-five properties in our consolidated portfolio, which included two properties owned by our consolidated joint venture which acquired the Westwood Portfolio, and four properties owned by our unconsolidated Funds, which contain asbestos, and would have to be removed in compliance with applicable environmental regulations if these properties undergo major renovations or are demolished. As of March 31, 2016, the obligations to remove the asbestos from these properties have indeterminable settlement dates, and we are unable to reasonably estimate the fair value of the associated conditional asset retirement obligation.

Development Contract

We are building an additional 475 apartments (net of existing units removed) at our Moanalua Hillside Apartments in Honolulu, Hawaii. We expect construction will take approximately 18 months and cost approximately $120.0 million. The $120.0 million estimated cost of the new units does not include the cost of the land which we owned before beginning the project. As of March 31, 2016, we had a commitment of $118.6 million for a contract directly related to this development project.

Guarantees

We made certain environmental and other limited indemnities and guarantees covering customary non-recourse carve- outs for loans related to both of our unconsolidated Funds. We have also guaranteed the related swaps. The entities have agreed to indemnify us for any amounts that we would be required to pay under these agreements. As of March 31, 2016, all obligations under these loans and swap agreements have been performed in accordance with the terms of those agreements. The table below summarizes the debt of our Funds as of March 31, 2016, the amounts represent 100% (not our pro-rata share) of amounts related to our Funds:

Fund⁽¹⁾

Principal Balance⁽¹⁾

(in millions)

Loan Maturity Date

Swap Maturity Date

Swap Fixed Interest Rate

Fund X⁽²⁾

325.0

5/1/2018

5/1/2017

2.35%

Partnership X⁽³⁾

110.0

3/1/2023

3/1/2021

2.30%

435.0

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(1)	See Note 5 for more information regarding our unconsolidated Funds.


(2)	Floating rate term loan, swapped to fixed, which is secured by six properties and requires monthly payments of interest only, with the outstanding principal due upon maturity. As of March 31, 2016, the maximum future payments under the swap agreement were approximately $2.1 million.


(3)	Floating rate term loan, swapped to fixed, which is secured by two properties and requires monthly payments of interest only, with the outstanding principal due upon maturity. As of March 31, 2016, the maximum future payments under the swap agreement were approximately $5.0 million.