INVESTMENT IN UNCONSOLIDATED JOINT VENTURES

As of June 30, 2018 and December 31, 2017, the Company’s investments in unconsolidated joint ventures were composed of the following (dollars in thousands):



				Investment Balance at
Joint Venture	Number of Properties	Location	Ownership %	June 30, 2018		December 31, 2017
NIP Joint Venture	4	Various	Less than 5.0%	$	2,514	$	3,674
110 William Joint Venture	1	New York, New York	60.0%	4,058		7,160
353 Sacramento Joint Venture	1	San Francisco, California	55.0%	44,414		44,743
				$	50,986	$	55,577

Investment in National Industrial Portfolio Joint Venture

On May 18, 2012, the Company, through an indirect wholly owned subsidiary, entered into a joint venture (the “NIP Joint Venture”) with OCM NIP JV Holdings, L.P. and HC KBS NIP JV, LLC (“HC-KBS”). The NIP Joint Venture has invested in a portfolio of industrial properties. The Company made an initial capital contribution of $8.0 million which represents less than a 5.0% ownership interest in the NIP Joint Venture as of June 30, 2018. Prior to the Company’s adoption of ASU No. 2016-01 on January 1, 2018, the Company accounted for its investment in the NIP Joint Venture using the cost method of accounting. Effective January 1, 2018, the Company elected to measure its investment in the NIP Joint Venture, which is an equity investment without a readily determinable value, at its cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer.

Prior to January 17, 2018, KBS REIT I, an affiliate of the Advisor, was a member of HC-KBS and had a participation interest in certain future potential profits generated by the NIP Joint Venture. However, KBS REIT I did not have any equity interest in the NIP Joint Venture. On January 17, 2018, KBS REIT I assigned its participation interest in the NIP Joint Venture to one of the other joint venture partners in the NIP Joint Venture. None of the other joint venture partners are affiliated with the Company or the Advisor.

As of June 30, 2018 and December 31, 2017, the book value of the Company’s investment in the NIP Joint Venture was $2.5 million and $3.7 million, respectively. During the three months ended June 30, 2018, the Company received a distribution of $0.9 million related to its investment in the NIP Joint Venture. The Company recognized $0.1 million of income distributions and $0.8 million of return of capital from the NIP Joint Venture. During the six months ended June 30, 2018, the Company received a distribution of $1.3 million related to its investment in the NIP Joint Venture. The Company recognized $0.2 million of income distributions and $1.1 million of return of capital from the NIP Joint Venture. During the three months ended June 30, 2017, the Company did not receive any distributions related to its investment in the NIP Joint Venture. During the six months ended June 30, 2017, the Company received a distribution of $2.9 million related to its investment in the NIP Joint Venture. The Company recognized $1.9 million of income distributions and $1.0 million of return of capital from the NIP Joint Venture.

Investment in 110 William Joint Venture

On December 23, 2013, the Company, through an indirect wholly owned subsidiary, entered into an agreement with SREF III 110 William JV, LLC (the “110 William JV Partner”) to form a joint venture (the “110 William Joint Venture”). On May 2, 2014, the 110 William Joint Venture acquired an office property containing 928,157 rentable square feet located on approximately 0.8 acres of land in New York, New York (“110 William Street”). Each of the Company and the 110 William JV Partner hold a 60% and 40% ownership interest in the 110 William Joint Venture, respectively.

The Company exercises significant influence over the operations, financial policies and decision making with respect to the 110 William Joint Venture but significant decisions require approval from both members. Accordingly, the Company has accounted for its investment in the 110 William Joint Venture under the equity method of accounting. Income, losses, contributions and distributions are generally allocated based on the members’ respective equity interests.

As of June 30, 2018 and December 31, 2017, the book value of the Company’s investment in the 110 William Joint Venture was $4.1 million and $7.2 million, respectively, which includes $1.5 million of unamortized acquisition fees and expenses incurred directly by the Company. During the six months ended June 30, 2017, the 110 William Joint Venture made a $58.2 million return of capital distribution to the Company and a $38.8 million return of capital distribution to the 110 William JV Partner funded with proceeds from the 110 William refinancing.

Summarized financial information for the 110 William Joint Venture follows (in thousands):



	June 30, 2018		December 31, 2017
Assets:
Real estate assets, net of accumulated depreciation and amortization	$	240,577	$	248,269
Other assets	34,886		32,331
Total assets	$	275,463	$	280,600
Liabilities and equity:
Notes payable, net	$	263,377	$	260,108
Other liabilities	7,745		11,016
Partners’ capital	4,341		9,476
Total liabilities and equity	$	275,463	$	280,600



	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Revenues	$	9,951		$	9,322		$	19,760		$	17,714
Expenses:
Operating, maintenance, and management	2,296			2,370			4,763			4,766
Real estate taxes and insurance	1,655			1,472			3,290			3,088
Depreciation and amortization	4,126			4,381			8,345			7,614
Interest expense	4,418			3,799			8,535			5,198
Total expenses	12,495			12,022			24,933			20,666
Other income	24			14			38			28
Net loss	$	(2,520	)	$	(2,686	)	$	(5,135	)	$	(2,924	)
Company’s equity in loss of unconsolidated joint venture	$	(1,522	)	$	(1,622	)	$	(3,102	)	$	(1,776	)

Investment in 353 Sacramento Joint Venture

On July 6, 2017, the Company, through an indirect wholly owned subsidiary, entered into an agreement with the Migdal Members to form the 353 Sacramento Joint Venture. On July 6, 2017, the Company sold a 45% equity interest in an entity that owns 353 Sacramento to the Migdal Members. The sale resulted in 353 Sacramento being owned by the 353 Sacramento Joint Venture, in which the Company indirectly owns 55% of the equity interests and the Migdal Members indirectly own 45% in the aggregate of the equity interests.

The Company exercises significant influence over the operations, financial policies and decision making with respect to the 353 Sacramento Joint Venture but significant decisions require approval from both members. Accordingly, the Company has accounted for its investment in the 353 Sacramento Joint Venture under the equity method of accounting. Income, losses, contributions and distributions are generally allocated based on the members’ respective equity interests.

As of June 30, 2018 and December 31, 2017, the book value of the Company’s investment in the 353 Sacramento Joint Venture was $44.4 million and $44.7 million, respectively. During the three and six months ended June 30, 2018, the Company made a $1.3 million contribution to the 353 Sacramento Joint Venture.

Summarized financial information for the 353 Sacramento Joint Venture follows (in thousands):



	June 30, 2018		December 31, 2017
Assets:
Real estate assets, net of accumulated depreciation and amortization	$	172,339	$	171,066
Other assets	8,574		6,472
Total assets	$	180,913	$	177,538
Liabilities and equity:
Notes payable, net	$	94,191	$	89,423
Other liabilities	6,393		7,313
Partners’ capital	80,329		80,802
Total liabilities and equity	$	180,913	$	177,538



	For the Three Months Ended June 30, 2018			For the Six Months Ended June 30, 2018
Revenues	$	2,627		$	5,296
Expenses:
Operating, maintenance, and management	891			1,769
Real estate taxes and insurance	605			1,217
Depreciation and amortization	1,387			2,837
Interest expense	1,348			2,587
Total expenses	4,231			8,410
Net loss	$	(1,604	)	$	(3,114	)
Company’s equity in loss of unconsolidated joint venture	$	(851	)	$	(1,649	)