4. INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES

As of December 31, 2017, the Company held ownership interests in 13 unconsolidated Real Estate Ventures for an aggregate investment balance of $194.6 million. The Company formed or acquired interests in these Real Estate Ventures with unaffiliated third parties to develop or manage office, residential and/or mixed-use properties or to acquire land in anticipation of the possible development of office, residential and/or mixed-use properties. As of December 31, 2017, seven of the real estate ventures owned properties that contain an aggregate of approximately 6.7 million net rentable square feet of office space; three of the real estate ventures owned 4.4 acres of land held for development; one real estate venture owned 1.3 acres of land in active development; and two real estate ventures owned residential towers that contain 345 and 321 apartment units, respectively. Subsequent to December 31, 2017, the Company completed transactions that reduced its interests in Real Estate Ventures and, as of the date of this Form 10-K, the Company owns interests in ten Real Estate Ventures. See Note 20, “Subsequent Events,” to the consolidated financial statements for further information.

The Company accounts for its unconsolidated interests in the Real Estate Ventures using the equity method. The Company’s unconsolidated interests range from 20% to 70%, subject to specified priority allocations of distributable cash in certain of the Real Estate Ventures.

The Company earned management fees from its Real Estate Ventures of $6.4 million, $6.7 million and $4.4 million for the years ended December 31, 2017, 2016 and 2015, respectively.

The Company earned leasing commission income from its Real Estate Ventures of $4.5 million, $3.8 million and $2.1 million for the years ended December 31, 2017, 2016 and 2015, respectively.

The Company has outstanding accounts receivable balances from its Real Estate Ventures of $0.9 million and $1.4 million for the years ended December 31, 2017 and 2016, respectively.

The amounts reflected in the following tables (except for the Company’s share of equity and income) are based on the historical financial information of the individual Real Estate Ventures. The Company does not record operating losses of a Real Estate Venture in excess of its investment balance unless the Company is liable for the obligations of the Real Estate Venture or is otherwise committed to provide financial support to the Real Estate Venture.

The Company’s investment in Real Estate Ventures as of December 31, 2017 and 2016, and the Company’s share of the Real Estate Ventures’ income (loss) for the years ended December 31, 2017 and 2016 was as follows (in thousands):

	Ownership	Carrying Amount				Company's Share of Real Estate Venture Income (Loss)						Real Estate Venture Debt at 100%				Current Interest			Debt
	Percentage (a)	2017		2016		2017			2016			2017		2016		Rate			Maturity
Office Properties
Brandywine-AI Venture LLC (b) (h)	50%	$	43,560	$	67,809	$	(4,465	)	$	(5,895	)	$	93,117	$	131,539		3.94	%	(c)
DRA (G&I) Austin (d) (h)	50%		13,972		52,886		(989	)		(1,880	)		249,481		405,734		3.51	%	(e)
MAP Venture (f)	50%		15,450		20,893		(3,443	)		(4,218	)		180,800		180,800	L+6.25%			Feb 2018 (f)
Four Tower Bridge (g)	65%		3,032		2,286		746			602			9,749		9,961		5.20	%	Feb 2021
PJP VII	25%		1,156		980		175			233			4,792		4,956	L+2.65%			Dec 2019
PJP II	30%		604		532		72			97			2,564		2,893		6.12	%	Nov 2023
PJP VI	25%		179		142		38			97			7,370		7,652		6.08	%	Apr 2023
1000 Chesterbrook Blvd. (h)			-		-		-			160			-		-
PJP V (h)			-		-		-			127			-		-
Invesco, L.P. (h)			-		-		-			261			-		-
Coppell Associates			-		-		-			12			-		-

Other
HSRE-BDN I, LLC (d)	50%		17,671		21,228		449			843			110,886		105,000	L+2.25%			Oct 2019
Brandywine 1919 Ventures (d) (i)	50%		22,268		27,462		(194	)		(1,529	)		88,860		79,250	L+1.75%			Oct 2018
TB-BDN Plymouth Apartments (h)			-		12,450		99			119			-		53,967

Development Properties
4040 Wilson (j)	50%		37,179		36,356		(255	)		(270	)		6,664		1,004	L+2.75%			Dec 2021
51 N Street	70%		21,212		20,318		(176	)		(114	)		-		-
1250 First Street Office	70%		17,867		17,304		(149	)		(15	)		-		-
Seven Tower Bridge (g)	20%		471		685		(214	)		(133	)		14,629		14,710		3.17	%	(k)
		$	194,621	$	281,331	$	(8,306	)	$	(11,503	)	$	768,912	$	997,466

(a)	Ownership percentage represents the Company’s entitlement to residual distributions after payments of priority returns, where applicable.

(b)	See “Brandywine - AI Venture: 7101 Wisconsin Avenue” and “Brandywine - AI Venture: Other Than Temporary Impairment” sections below for information discussing activity that occurred during 2017 relating to this venture.

(c)	The debt for these properties is comprised of two fixed rate mortgages: (1) $26.6 million with a 4.65% fixed interest rate due January 1, 2022, and (2) $66.5 million with a 3.22% fixed interest rate due August 1, 2019.

(d)

The basis differences associated with these ventures are allocated between cost and the underlying equity in the net assets of the investee and is accounted for as if the entity were consolidated (i.e., allocated to the Company’s relative share of assets and liabilities with an adjustment to recognize equity in earnings for the appropriate depreciation/amortization). The Company increased its ownership interest in the HSRE-BDN I, LLC venture (also referred to as the “evo at Cira South Venture”) to 50% on March 2, 2016. On June 10, 2016, HSRE-BDN I, LLC refinanced its debt. See “evo at Cira South Venture” section below for further details on these transactions. Also, see “Austin Venture” section below for information discussing this venture’s sale of eight office properties during 2017. Subsequent to December 31, 2017, the Company disposed of its interest in the evo at Cira South Venture. See Note 20, “Subsequent Events,” to the consolidated financial statements for further information.

(e)

The debt for these properties includes three mortgages: (1) $133.6 million that was swapped to a 1.43% fixed rate (for an all-in fixed rate of 3.44% incorporating the 2.01% spread) due November 1, 2018, (2) $28.7 million with a 4.50% fixed interest rate due April 6, 2019 and (3) $87.1 million that was swapped to a 1.36% fixed rate (or all-in fixed rate of 3.36% incorporating the 2.00% spread) due February 10, 2020. On October 18, 2017, the venture sold eight office buildings, seven of which were encumbered by an aggregate of $151.0 million of mortgage debt.

(f)

In order to fulfill interest rate protection requirements, a LIBOR interest rate cap of 1.75% was purchased, effective February 3, 2016 and maturing February 9, 2018, for a notional amount of $200.8 million. There are three options to extend the maturity date of the debt for three successive terms, each year representing a separate option. The first option to extend the maturity date has been exercised and extends the maturity date through February 9, 2019. The two remaining unexercised options extend the maturity through February 9, 2021.

(g)	Subsequent to December 31, 2017, the Company exchanged its 20% interest in Seven Tower Bridge to acquire the remaining 35% interest in Four Tower Bridge. See Note 20, “Subsequent Events,” to the consolidated financial statements for further information.

(h)

On October 18, 2017, the DRA (G&I) Austin venture sold eight office properties in Austin, Texas containing 1,164,496 square feet and encumbered by $151.0 million of mortgage debt for a gross sales price of $333.3 million. On September 14, 2017, the BDN-AI Venture completed the sale of 7101 Wisconsin Avenue, an office property containing 239,904 rentable square feet, located in Bethesda, Maryland, for a gross sales price of $105.7 million. On January 31, 2017, the Company sold its 50% interest in TB-BDN Plymouth Apartments, LP. On September 22, 2016, the Company liquidated its 25% ownership interest in PJP V. On June 30, 2016, the Company liquidated its 50% ownership interest in the venture known as 1000 Chesterbrook. The ownership interest in Invesco, L.P. was sold prior to December 31, 2015, and on August 19, 2016, the Company assigned its residual profits interest to the general partner of Invesco. See below for further detail on these dispositions.

(i)	The stated rate for the construction loan is LIBOR + 1.75%. To fulfill interest rate protection requirements, an interest rate cap was purchased at 4.50%.

(j)	During the fourth quarter of 2017, 4040 Wilson obtained a secured construction loan with a total borrowing capacity of $150.0 million.

(k)

Comprised of two fixed rate mortgages totaling $8.0 million that matured on March 1, 2017, which are currently in default, and accrue interest at a current rate of 7.00%, a $0.7 million 3.00% fixed rate loan through its September 1, 2025 maturity, a $2.0 million 4.00% fixed rate loan with interest only through its February 7, 2018 maturity and a $3.9 million 3.25% fixed rate loan with interest only beginning March 11, 2018 through its March 11, 2020 maturity.

The following is a summary of the financial position of the Real Estate Ventures as of December 31, 2017 and December 31, 2016 (in thousands):

	December 31, 2017								December 31, 2016
	DRA (G&I) Austin		Brandywine-AI Venture LLC		Other		Total		DRA (G&I) Austin		Brandywine-AI Venture LLC		Other		Total
Net property	$	263,557	$	158,960	$	661,448	$	1,083,965	$	493,960	$	229,160	$	733,883	$	1,457,003
Other assets		42,272		24,181		95,479		161,932		82,725		33,205		113,987		229,917
Other liabilities		24,131		4,493		69,083		97,707		40,280		6,440		82,967		129,687
Debt, net		248,700		92,917		424,803		766,420		403,671		131,161		454,906		989,738
Equity (a)		32,998		85,731		263,041		381,770		132,734		124,764		309,997		567,495

(a)

This amount includes the effect of the basis difference between the Company’s historical cost basis and the basis recorded at the Real Estate Venture level, which is typically amortized over the life of the related assets and liabilities. Basis differentials occur from the impairment of investments, purchases of third party interests in existing Real Estate Ventures and upon the transfer of assets that were previously owned by the Company into a Real Estate Venture. In addition, certain acquisition, transaction and other costs may not be reflected in the net assets at the Real Estate Venture level.

The following is a summary of results of operations of the Real Estate Ventures in which the Company had interests as of December 31, 2017, 2016 and 2015 (in thousands):

	Twelve-month period ended December 31, 2017
	DRA (G&I) Austin			Brandywine-AI Venture LLC			Other			Total
Revenue	$	85,500		$	29,500		$	101,271		$	216,271
Operating expenses		(35,997	)		(12,298	)		(51,045	)		(99,340	)
Interest expense, net		(13,985	)		(4,707	)		(21,521	)		(40,213	)
Depreciation and amortization		(34,026	)		(11,428	)		(32,986	)		(78,440	)
Loss on extinguishment of debt		(2,613	)		(811	)		-			(3,424	)
Net income (loss)	$	(1,121	)	$	256		$	(4,281	)	$	(5,146	)
Ownership interest %		50	%		50	%	(a)
Company's share of net income (loss)	$	(560	)	$	128		$	(1,432	)	$	(1,864	)
Other-than-temporary impairment (b)		-			(4,844	)		-			(4,844	)
Basis adjustments and other		(429	)		251			(1,420	)		(1,598	)
Equity in loss of Real Estate Ventures	$	(989	)	$	(4,465	)	$	(2,852	)	$	(8,306	)

	Twelve-month period ended December 31, 2016
	DRA (G&I) Austin			Brandywine-AI Venture LLC			Other			Total
Revenue	$	85,749		$	31,047		$	97,656		$	214,452
Operating expenses		(37,643	)		(13,654	)		(51,895	)		(103,192	)
Provision for impairment (c)		-			(10,476	)		-			(10,476	)
Interest expense, net		(15,052	)		(5,825	)		(19,437	)		(40,314	)
Depreciation and amortization		(38,365	)		(12,811	)		(34,562	)		(85,738	)
Net loss (d)	$	(5,311	)	$	(11,719	)	$	(8,238	)	$	(25,268	)
Ownership interest %		50	%		50	%	(a)
Company's share of net loss	$	(2,656	)	$	(5,860	)	$	(3,985	)	$	(12,501	)
Basis adjustments and other		776			(35	)		257			998
Equity in loss of Real Estate Ventures	$	(1,880	)	$	(5,895	)	$	(3,728	)	$	(11,503	)

	Twelve-month period ended December 31, 2015
	DRA (G&I) Austin			Brandywine-AI Venture LLC			Other			Total
Revenue	$	78,367		$	29,428		$	57,133		$	164,928
Operating expenses		(33,194	)		(11,872	)		(25,070	)		(70,136	)
Interest expense, net		(14,025	)		(5,310	)		(15,249	)		(34,584	)
Depreciation and amortization		(36,809	)		(12,678	)		(18,613	)		(68,100	)
Net loss	$	(5,661	)	$	(432	)	$	(1,799	)	$	(7,892	)
Ownership interest %		50	%		50	%	(a)				-
Company's share of net income (loss)	$	(2,831	)	$	(216	)	$	455		$	(2,592	)
Basis adjustments and other		1,596			(13	)		198			1,781
Equity in income (loss) of Real Estate Ventures	$	(1,235	)	$	(229	)	$	653		$	(811	)

(a)	The Company’s unconsolidated ownership interests range from 20% to 70%, subject to specified priority allocations of distributable cash in certain of the Real Estate Ventures.

(b)	See “Brandywine - AI Venture: Other Than Temporary Impairment” section below.

(c)	See “Brandywine - AI Venture: Station Square Impairment” section below.

(d)	During the year ended December 31, 2016, there were $7.1 million of acquisition deal costs related to the formation of the MAP Venture.

As of December 31, 2017, the aggregate principal payments of recourse and non-recourse debt payable to third-parties are as follows (in thousands):

2018	$	236,468
2019		390,707
2020		92,679
2021		17,162
2022		25,372
Thereafter		6,524
Total principal payments		768,912
Net deferred financing costs		(2,532	)
Outstanding indebtedness	$	766,380

Brandywine - AI Venture: 7101 Wisconsin Avenue

On September 14, 2017, the BDN-AI Venture completed the sale of 7101 Wisconsin Avenue, a property containing 230,904 rentable square feet located in Bethesda, Maryland, for a gross sales price of $105.7 million. At the time of sale, the property was encumbered by $37.4 million first mortgage financing, which was repaid in full at closing, resulting in a debt prepayment penalty of $0.8 million. Net of the first mortgage payoff and closing costs, BDN-AI Venture received cash proceeds of $63.6 million. For the Company’s 50% interest, it received net cash proceeds of $31.8 million and recognized a $13.8 million gain on the sale transaction. Subsequent to the sale transaction, the BDN-AI Venture continued to own five properties containing an aggregate of 874,479 rentable square feet.

Brandywine - AI Venture: Other Than Temporary Impairment

As of September 30, 2017, the Company evaluated the recoverability of its investment basis in BDN-AI Venture utilizing a discounted cash flow model. Based on the Company’s evaluation of the fair value of the Company’s investment in the five properties that remained owned by the BDN-AI Venture subsequent to the disposition of 7101 Wisconsin Avenue, the Company determined that a persistent weak demand for space and intense competition for tenants had reduced the Company’s share of the fair value of the remaining properties to be less than its investment basis in BDN-AI Venture. As a result, the Company concluded that the decline in value was other than temporary. As of September 30, 2017, the Company’s investment basis was $49.1 million, before a $4.8 million impairment charge. Subsequent to the recordation of this impairment charge, the Company had a net basis of $44.3 million in the venture.

Determining the current fair value of the Company’s investment is based on a number of factors that are difficult to predict. The market may decline further and future impairment charges may be needed. The Company measured this impairment based on a discounted cash flow analysis, using a hold period of 10 years, a residual capitalization rate of 7.5% and discount rates ranging from 7.8% to 8.5%. The assumptions to determine fair value under the income approach are Level 3 inputs in accordance with the fair value hierarchy established by Accounting Standards Codification (ASC) Topic 820, “Fair Value Measurements and Disclosures.”

Brandywine - AI Venture: 3141 Fairview Park Drive

On December 20, 2011, the Company formed a real estate venture, Brandywine - AI Venture LLC, (the "AICC Venture"), with Current Creek Investments, LLC ("Current Creek"), a wholly-owned subsidiary of Allstate Insurance Company. The Company and Current Creek each own a 50% interest in the AICC Venture. The AICC Venture owns three office properties, which the Company contributed to the AICC Venture upon its formation. The contributed office properties contain an aggregate of 587,317 net rentable square feet and consist of 3130 and 3141 Fairview Park Drive, both located in Falls Church, Virginia, and 7101 Wisconsin Avenue located in Bethesda, Maryland.

The Company maintained a regional management and leasing office at 3141 Fairview Park Drive. Consistent with the other four properties owned by the AICC Venture, financial control was shared, however, pursuant to the accounting standard for sales-leaseback transactions, the lease that the Company maintained at 3141 Fairview Park Drive resulted in the Company having continuing involvement that required 3141 Fairview Park Drive and its related operations to be consolidated by the Company under the financing method of accounting for sales of real estate. At formation, the Company concluded under ASC 810, “Consolidations,” that it was appropriate to deconsolidate the remaining two properties and account for them under the equity method of accounting.

On August 31, 2016, the Company terminated its lease for the regional management and leasing office at 3141 Fairview Park Drive. Accordingly, the Company no longer has continuing involvement, other than the equity method investment and property management agreement, with 3141 Fairview Park Drive and recorded the partial sale under the full accrual method of accounting. As a result of the sale accounting, the Company deconsolidated net assets of $45.6 million, a mortgage loan of $20.6 million and a financing liability of $12.4 million related to the property from its consolidated balance sheet and recorded a $12.6 million equity method investment. Upon recognizing the sale, there was no gain or loss, as 3141 Fairview Park Drive was impaired to its fair value during the second quarter of 2016.

On September 30, 2016, the Company funded a capital call totaling $10.3 million to the AICC Venture for its 50% share of the mortgage debt on 3141 Fairview Park Drive. Subsequently, the AICC Venture funded $20.6 million for the repayment of its mortgage debt.

The Company determined that the partial sale recognition does not have an impact on the accounting standard for VIEs because the underlying real estate venture agreements are unchanged. The Venture is not a VIE in accordance with the accounting standard for the consolidation of VIEs. As a result, the Company continues to use the voting interest model under the accounting standard for consolidation in order to determine whether to consolidate the Venture. Based upon each member’s substantive participating rights over the activities of the Venture under its operating and related agreements, it is not consolidated by the Company, and is accounted for under the equity method of accounting.

Brandywine - AI Venture: Station Square Impairment

On July, 10, 2012, Brandywine – AI Venture (the “AISS Venture”), an unconsolidated real estate venture in which the Company owns a 50% interest, acquired a three building office portfolio totaling 497,896 net rentable square feet in Silver Spring, Maryland (“Station Square”) valued at $120.6 million. During the period ended September 30, 2016, the AISS Venture recorded a $10.4 million held for use impairment charge related to Station Square, which is included in the Company’s Metropolitan D.C. segment. The Company's share of this impairment charge was $5.2 million and is reflected in equity in loss of Real Estate Ventures in its consolidated statement of operations for the period ended December 31, 2016. The fair value of the Station Square properties was primarily determined based on offers received for the properties. The remaining properties in the AISS Venture were evaluated for impairment, and based on an undiscounted cash flow analysis, no additional other than temporary impairment was identified.

All of the inputs used to determine the above-mentioned impairment charges are categorized Level 3 inputs in accordance with the fair value hierarchy established by Accounting Standards Codification (ASC) Topic 820, “Fair Value Measurements and Disclosures.”

The Company evaluated for other than temporary impairment in its investment in the AISS Venture in accordance with ASC 323, “Investments - Equity Method and Joint Ventures.” The investment in the AISS Venture was determined to be the level of account for evaluation of other than temporary impairment. The impairment recorded on the three properties was deemed to be an event that indicates the carrying amount of the investment might not be recoverable. Following the recognition of the Company’s proportionate share of the impairment charge through equity in loss of Real Estate Ventures, the Company evaluated the fair value of the investment in the AISS Venture through a hypothetical liquidation at book value method. No other than temporary impairment was identified.

The Parc at Plymouth Meeting Venture

On January 31, 2017, the Company sold its 50% interest in TB-BDN Plymouth Apartments, L.P., a real estate venture with Toll Brothers, at a gross sales value of $100.5 million, of which the Company was allocated 50% for its interest. The venture developed and operated a 398-unit multi-family complex in Plymouth Meeting, Pennsylvania encumbered by a $54.0 million construction loan. The construction loan was repaid commensurate with the sale of the Company’s 50% interest. As a result, the Company is no longer subject to a $3.2 million payment guarantee on the construction loan. The cash proceeds, after the payment of the Company’s share of the debt and closing costs, were $27.2 million. The carrying amount of the Company’s investment at the time of sale was $12.6 million, resulting in a $14.6 million gain on sale of an interest in the real estate venture.

PJP V

On September 22, 2016, the real estate venture known as PJP V sold its office property, comprised of 73,997 square feet, located in Charlottesville, Virginia. Also on September 22, 2016, using proceeds from the sale, the Company liquidated its entire 25% interest in the real estate venture for $3.4 million, net of closing costs. The carrying amount of the Company’s investment was $0.2 million at the time of sale, resulting in a recognized gain of $3.2 million related to the disposition.

Invesco Venture

On August 19, 2016, the Company assigned its residual profits interest in an unconsolidated real estate venture known as Invesco, L.P. to the general partner of Invesco L.P. for $7.0 million. At the time of sale, the Company’s investment basis in Invesco, L.P. was zero and the Company held no other ownership interest. As a result, the Company recorded the entire amount of the proceeds received as a gain on sale of unconsolidated real estate ventures in its consolidated statement of operations.

1000 Chesterbrook

On June 30, 2016, the real estate venture known as 1000 Chesterbrook sold its office property, comprised of 172,286 square feet, located in Berwyn, Pennsylvania for a sales price of $32.1 million. As of June 30, 2016, the Company owned a 50% interest in the 1000 Chesterbrook real estate venture. The proceeds to 1000 Chesterbrook, net of closing costs, proration adjustments and $23.2 million of debt assumed by the buyer, were $9.8 million. The Company recorded $3.2 million for its proportionate share of the Venture’s gain which is reflected in “Gain on Real Estate Venture transactions” in the accompanying consolidated statement of operations. The proceeds from the sale, along with $0.2 million of working capital, were distributed to the Company during the third quarter of 2016.

evo at Cira Centre South Venture

On January 25, 2013, the Company formed HSRE-Campus Crest IX Real Estate Venture (“evo at Cira”), a joint venture among the Company and two unaffiliated third parties: Campus Crest Properties, LLC (“Campus Crest”) and HSRE-Campus Crest IXA, LLC (“HSRE”). evo at Cira constructed a 33-story, 850-bed student housing tower located in the University City submarket of Philadelphia, Pennsylvania. Each of the Company and Campus Crest owned a 30% interest in evo at Cira and HSRE owned a 40% interest. evo at Cira developed the project on a one-acre land parcel held under a long-term ground lease with a third party lessor. The Company contributed to evo at Cira its tenancy rights under a long-term ground lease, together with associated development rights, at an agreed-upon value of $8.5 million.

The Company’s historical cost basis in the development rights that it contributed to the evo at Cira was $4.0 million, thus creating a $4.5 million basis difference at December 31, 2013 between the Company’s initial outside investment basis and its $8.5 million initial equity basis. As this basis difference is not related to a physical land parcel, but rather to development rights to construct evo at Cira, the Company will accrete the basis difference as a reduction of depreciation expense over the life of evo at Cira’s assets.

On March 2, 2016, the Company paid $12.8 million of cash and HSRE paid $6.6 million of cash to purchase Campus Crest’s entire 30% interest in evo at Cira and, as a result, each of the Company and HSRE owned a 50% interest in evo at Cira. Subsequent to the transaction, the Company’s investment basis in evo at Cira was $28.3 million. In conjunction with the purchase, the Company and HSRE entered into an amended and restated operating agreement, changing the legal name of evo at Cira to HSRE-BDN I, LLC, to govern their rights and obligations as sole members of evo at Cira.

On June 10, 2016, evo at Cira refinanced its $97.8 million construction facility maturing July 25, 2016 with a $117.0 million term loan bearing interest at LIBOR + 2.25% capped at a total maximum interest of 5.25% and maturing on October 31, 2019, with options to extend the term to June 30, 2021. evo at Cira received an advance of $105.0 million at closing. The additional $12.0 million capacity under the term loan may be funded if certain criteria relating to the operating performance of the student housing tower are met. The term loan is secured by a leasehold mortgage that holds an absolute assignment of leases and rents. Subsequent to refinancing and the receipt of amounts in escrow under the construction loan, evo at Cira distributed $6.3 million to the Company.

Subsequent to December 31, 2017, evo at Cira sold the student housing tower, the real estate venture’s sole asset, and the Company disposed of its ownership 50% interest. See Note 20, “Subsequent Events,” to the consolidated financial statements for further information.

The Company accounted for its investment in evo at Cira under the equity method of accounting. Based upon the reconsideration event caused by the refinancing of evo at Cira’s construction facility, the Company reassessed its consolidation conclusion. The Company determined that this Real Estate Venture was no longer a VIE in accordance with the accounting standard for the consolidation of VIEs because evo at Cira, through the refinancing of the construction facility and without further support from the Company or HSRE, demonstrated that it has sufficient equity at risk to finance its activities. As a result, the Company used the voting interest model under the accounting standard for consolidation in order to determine whether to consolidate evo at Cira. Based upon each member's substantive participating rights over the activities that significantly impact the operations and revenues of evo at Cira under the operating agreement and related agreements, evo at Cira is not consolidated by the Company, and is accounted for under the equity method of accounting. As a result of this transaction, the Company did not gain a controlling financial interest over evo at Cira; therefore, it was not required to remeasure its previously held equity interest to fair value at the date that it acquired the additional equity interest.

MAP Venture

On February 4, 2016, Brandywine Operating Partnership, L.P., together with subsidiaries of the Operating Partnership, entered into a series of related transactions (the “Och-Ziff Sale”) with affiliates of Och-Ziff Capital Management Group LLC (“Och-Ziff”) that resulted in the disposition by the Company of 58 office properties that contain an aggregate of 3,924,783 square feet for an aggregate purchase price of $398.1 million. The 58 properties are located in the Pennsylvania Suburbs, New Jersey/Delaware, Metropolitan Washington, D.C. and Richmond, Virginia. The related transactions involved: (i) the sale by the Company to MAP Fee Owner LLC, an affiliate of Och-Ziff (the “O-Z Land Purchaser”), of 100% of the Company’s fee interests in the land parcels (the “Land Parcels”) underlying the 58 office properties, together with rights to be the lessor under long-term ground leases (the “Ground Leases”) covering the Land Parcels and; (ii) the Company’s formation of MAP Ground Lease Venture LLC (the “MAP Venture”) with MAP Ground Lease Holdings LLC, an affiliate of Och-Ziff (the “O-Z Venture Partner”), (iii) the Company’s sale to MAP Venture of the office buildings and related improvements (the “Buildings”) situated on the Land Parcels; and (iv) the retention of a 50% noncontrolling equity interest in the MAP Venture.

The MAP Venture leases the Land Parcels from O-Z Land Purchaser through a ground lease that extends through February 2115. Annual payments by the MAP Venture, as tenant under the Ground Leases, initially total $11.9 million and increase 2.5% annually through November 2025.

At closing on February 4, 2016, the MAP Venture obtained a third party non-recourse debt financing of approximately $180.8 million secured by mortgages on the Buildings of the MAP Venture.

As a result of this transaction, the Company received $354.0 million in proceeds and maintains a 50% ownership interest in the MAP Venture valued as of February 4, 2016 at $25.2 million, which holds the leasehold interest in the Buildings. The MAP Venture was formed as a limited liability company in which the Company has been designated as the Managing Member. In addition, through an affiliate, the Company provides property management services at the Buildings on behalf of the MAP Venture for a market based management fee.

The Company has determined that the MAP Venture is a VIE in accordance with the accounting standard for consolidation of VIE’s. As a result, the Company used the VIE model under the accounting standard for consolidations to determine if it will consolidate the MAP Venture. Based on the provisions in the limited liability company agreement, the Company determined that it shares with O-Z Venture Partner the power to control the activities that most significantly impact the economics of the MAP Venture. Since control is shared, the Buildings were deconsolidated by the Company and accounted for under the equity method of accounting.

The Company is not required to fund the operating losses of the MAP Venture. Accordingly, it can only incur losses equal to its investment basis in the MAP Venture.

The Company has determined that this transaction does not represent a significant shift in the Company’s operations that has a major impact on the Company’s economic performance. As a result, the properties are not classified as discontinued operations on the consolidated financial statements.

Coppell Associates

On January 29, 2016, the Company sold its entire 50% interest in an unconsolidated real estate venture known as Coppell Associates. The proceeds to the Company, net of closing costs and related debt payoff, were $4.6 million. The carrying amount of the Company’s investment in Coppell Associates was a $1.1 million liability at the sale date, resulting in a $5.7 million gain on sale of its interest in the real estate venture. The investment was in a liability position because the Company, as a general partner, was required to fund losses of Coppell Associates. The negative investment balance represented the Company’s share of unfunded cumulative losses incurred in excess of its investment basis as of the date of sale.

Residence Inn Tower Bridge

On December 30, 2015, the Company sold its entire 50% ownership interest in an unconsolidated real estate venture known as Residence Inn Tower Bridge (the “Residence Inn”). The proceeds to the Company, net of closing costs and related debt payoff, were $6.1 million. The carrying amount of the Company’s investment in the Residence Inn amounted to $0.9 million at the sale date, resulting in a $5.2 million gain on sale of its interest in the Real Estate Venture.

JBG Ventures

On May 29, 2015, the Company and an unaffiliated third party, JBG/DC Manager, LLC ("JBG"), formed 51 N 50 Patterson, Holdings, LLC Venture ("51 N Street") and 1250 First Street Office, LLC Venture ("1250 First Street"), as real estate ventures, with the Company owning a 70.0% interest and JBG owning a 30.0% interest in each of the two ventures. At formation, the Company and JBG made cash contributions of $15.2 million and $6.5 million, respectively, to 51 N Street, which was used to purchase 0.9 acres of undeveloped land. At formation, the Company and JBG made cash capital contributions of $13.2 million and $5.7 million, respectively, to 1250 First Street, which was used to purchase 0.5 acres of undeveloped land.

Based on the facts and circumstances at the formation of each of the two ventures with JBG, the Company determined that each venture is a VIE in accordance with the accounting standard for the consolidation of VIEs. As a result, the Company used the variable interest model under the accounting standard for consolidation in order to determine whether to consolidate the JBG Ventures. JBG is the managing member of the ventures, and pursuant to the operating and related agreements, major decisions require the approval of both members. Based upon each member's shared power over the activities of each of the two ventures, which most significantly impact the economics of the ventures, neither venture is consolidated by the Company. Each venture is accounted for under the equity method of accounting.

Broadmoor Austin Associates

On June 22, 2015, the Company became the sole owner of Broadmoor Austin Associates upon the Company's acquisition from an unaffiliated third party of the remaining 50.0% ownership interest in Broadmoor Austin Associates. Broadmoor Austin Associates owns seven office buildings in Austin, Texas. See Note 3, "Real Estate Investments," for further information.

1919 Ventures

On January 20, 2011, the Company acquired a one acre parcel of land in Philadelphia, Pennsylvania for $9.3 million. The Company thereafter contributed the acquired land into a then newly-formed general partnership, referred to as “1919 Ventures” in return for a 50.0% general partner interest, with the remaining 50.0% interest owned by an unaffiliated third party, who contributed cash in exchange for its interest. On October 15, 2014, the Company acquired the 50% interest of the unaffiliated third party at fair value, which approximates carrying value. No remeasurement gain or loss on the Company’s previous investment was recorded at that time.

On October 21, 2014, the Company admitted an unaffiliated third party, LCOR/CalSTRS (“LCOR”) into 1919 Ventures, for $8.2 million, representing a 50% interest and, reflecting an agreed upon $16.4 million valuation of the land and improvements incurred by the Company on behalf of 1919 Ventures. After giving effect to settlement date contributions, distributions and credits, the Company and LCOR had each made, as of October 21, 2014, an additional $5.2 million capital contribution to 1919 Ventures for closing costs and development.

On October 27, 2014, 1919 Ventures announced a planned 29-story, 455,000 square foot contemporary glass tower development. The tower is a mixed-use development consisting of 321 luxury apartments, 24,000 square feet of commercial space and a 215-car structured parking facility. Development was substantially completed as of September 30, 2016. As of December 31, 2017, $88.9 million was outstanding on the construction loan and equity contributions of $29.6 million had been funded by each of the Company and LCOR.

Based upon the facts and circumstances at the formation of 1919 Ventures, the Company determined that 1919 Ventures is a VIE in accordance with the accounting standard for the consolidation of VIEs since the equity investment at risk is not sufficient to permit the entity to finance its activities without additional financial support. The initial equity contributed to this entity was not sufficient to fully finance the real estate construction as development costs are funded by the partners throughout the construction period. The Company determined that it was not the primary beneficiary of this VIE based on the fact that the Company has shared control of this entity along with the entity’s partner and therefore does not have controlling financial interests in this VIE.

Austin Venture

On October 16, 2013, the Company contributed a portfolio of seven office properties containing an aggregate of 1,398,826 rentable square feet located in Austin, Texas (the “Austin Properties”) to a newly-formed joint venture (the “Austin Venture”) with G&I VII Austin Office LLC (“DRA”). DRA and the Company agreed to an aggregate gross sales price of $330.0 million subject to an obligation on the Company’s part to fund the first $5.2 million of post-closing capital expenditures, of which $0.8 million was funded by the Company during 2013 and the remaining $4.4 million was funded by the Company during the twelve months ended December 31, 2014.

DRA owns a 50% interest in the Austin Venture and the Company owns a 50% interest in the Austin Venture, subject to the Company’s right to receive up to an additional 10% of distributions.

At closing the Austin Venture incurred third party debt financing of approximately $230.6 million secured by mortgages on the Austin Properties and used proceeds of this financing together with $49.7 million of cash contributions by DRA (less $1.9 million of closing costs and $6.9 million of closing prorations and lender holdbacks) to fund a $271.5 million distribution to the Company. The Company agreed to fund the first $5.2 million of post-closing capital expenditures on behalf of the Austin Venture, resulting in net proceeds of $266.3 million after funding the Company’s capital expenditure obligation. As part of the transaction, the Company’s subsidiary management company executed an agreement with the Austin Venture to provide property management and leasing services to the Austin Venture in exchange for a market-based fee.

The Company measured its equity interest at fair value based on the fair value of the Austin Properties and the distribution provisions of the real estate venture agreement. Since the Company retains a noncontrolling interest in the Austin Properties and there are no other facts and circumstances that preclude the consummation of a sale, the contribution qualifies as a partial sale of real estate under the relevant guidance for sales of real estate.

On April 3, 2014, the Company contributed two three-story, Class A office buildings, commonly known as “Four Points Centre,” containing an aggregate of 192,396 net rentable square feet in Austin, Texas to the Austin Venture.

On July 31, 2014, the Austin Venture acquired the Crossings at Lakeline, comprised of two three-story buildings containing an aggregate of 232,274 rentable square feet located in Austin, Texas for $48.2 million. The transaction was funded with $34.5 million of proceeds of a 3.87% fixed rate mortgage loan from a non-affiliated institutional lender and $12.8 million (net of $0.9 million in purchase adjustments) of cash capital contributions, with $6.4 million made by each of DRA and the Company. The Austin Venture expensed approximately $0.1 million of transaction costs to acquire the property, net of $0.6 million credit from the seller.

On October 17, 2014, the Austin Venture acquired River Place, comprised of seven Class A office buildings containing 590,881 rentable square feet located in Austin, Texas for $128.1 million. The transaction was funded through a combination of an $88.0 million short-term loan, secured by a mortgage, made by the Company to the Austin Venture and cash capital contributions of $18.9 million made by each of DRA and the Company to the Austin Venture. The short-term financing was provided by the Company while the Austin Venture secured permanent financing. As of December 31, 2014, the Company accounted the short-term financing as a note receivable. On January 30, 2015, the Austin Venture closed on a mortgage loan with a non-affiliated institutional lender, and used the proceeds of the loan to repay in full an $88.0 million short-term secured loan made by the Company to fund costs of the Austin Venture's acquisition of River Place. The Austin Venture expensed approximately $0.2 million of transaction costs to acquire the property.

On December 31, 2015, the Company contributed two newly constructed four-story, Class A office buildings, commonly known as “Encino Trace,” containing an aggregate of approximately 320,000 square feet in Austin, Texas to the Austin Venture. See Note 3, “Real Estate Investments,” for further information on the contribution.

On October 18, 2017, the Austin Venture sold eight office properties in Austin, Texas containing 1,164,496 square feet for a gross sales price of $333.3 million. Seven of the properties were encumbered by $151.0 million of mortgage debt. The Company’s share of cash proceeds, after payment of the of the mortgage debt, closing costs and prorations, was $86.4 million. The Company’s share of the Austin Venture’s gain on sale was $40.1 million. Additionally, the Company recognized a deferred gain on sale of $12.1 million, which was established on the Company’s balance sheet when certain assets were contributed to the Austin Venture on October 16, 2013. In accordance with the relevant guidance for the sales of real estate, the contributed properties qualified as a partial sale and a portion of the gain was deferred and accreted. The Company met the criteria to recognize the unaccreted portion of the deferred gain on the partial sale as the sales process was complete upon the Austin Venture selling the properties to a third party.

The summary of the transaction is as follows (in thousands);

	October 18, 2017
Gross sales price	$	333,250
Debt principal		(150,968	)
Debt prepayment penalties		(2,120	)
Closing costs and net prorations		(7,420	)
Cash to Austin Venture	$	172,742
Company's ownership interest		50	%
Cash to the Company	$	86,371

Cash to Austin Venture	$	172,742
Austin Venture basis of sold properties		(92,559	)
Austin Venture gain on sale	$	80,183
Company's ownership interest		50	%
Company's share of gain	$	40,092

Company's share of gain	$	40,092
Deferred gain from partial sale		12,072
Gain on real estate venture transactions	$	52,164

As of December 31, 2017, the Austin Venture holds 11 office properties in Austin, Texas containing 1,570,123 square feet and the Company’s remaining equity method investment balance is $14.0 million.

Based upon the facts and circumstances at the formation of the Austin Venture, the Company determined that the Austin Venture is not a VIE in accordance with the accounting standard for the consolidation of VIEs. As a result, the Company used the voting interest model under the accounting standard for consolidation in order to determine whether to consolidate the Austin Venture. Based upon each member’s substantive participating rights over the activities of the Austin Venture under the operating and related agreements of the Austin Venture, it is not consolidated by the Company and is accounted for under the equity method of accounting.

Reconsideration events have not changed the conclusion reached at formation, as the Austin Venture is operating under the same operating and related agreements and the economics are unchanged.

4040 Wilson Venture

On July 31, 2013, the Company formed 4040 Wilson LLC Venture (“4040 Wilson”) a joint venture between the Company and Ashton Park Associates LLC (“Ashton Park”), an unaffiliated third party. Each of the Company and Ashton Park owns a 50% interest in 4040 Wilson. 4040 Wilson expects to develop a 427,500 square foot mixed-use building representing the final phase of the eight building, mixed-use, Liberty Center complex developed by the parent company of Ashton Park in the Ballston submarket of Arlington, Virginia. 4040 Wilson is developing the building on a 1.3-acre land parcel contributed by Ashton Park to 4040 Wilson at an agreed upon value of $36.0 million. As of December 31, 2017, the Company and Ashton Park had each made a total of $36.9 million in capital contributions to the venture. During the fourth quarter of 2017, 4040 Wilson the venture obtained a secured construction loan with a total borrowing capacity of $150.0 million for the remainder of the project costs. As of December 31, 2017, $6.7 million had been advanced under the construction loan, and the venture had commenced construction of the mixed-use building.

Based upon the facts and circumstances at the formation of 4040 Wilson, the Company determined that 4040 Wilson is a VIE in accordance with the accounting standard for the consolidation of VIEs. As a result, the Company used the variable interest model under the accounting standard for consolidation in order to determine whether to consolidate 4040 Wilson. Based upon each member’s shared power over the activities of 4040 Wilson under the operating and related agreements of 4040 Wilson, and the Company’s lack of control over the development and construction phases of the project, 4040 Wilson is not consolidated by the Company and is accounted for under the equity method of accounting.

Guarantees

As of December 31, 2017, the Company’s unconsolidated real estate ventures had aggregate indebtedness to third parties of $768.9 million. These loans are generally mortgage or construction loans, most of which are non-recourse to the Company. As of December 31, 2017, the loans for which there is recourse to the Company consists of the following: (i) a $55.4 million payment guaranty on the term loan for evo at Cira (guarantee cancelled upon the disposition of the Company’s interest in evo at Cira subsequent to December 31, 2017. See Note 20, “Subsequent Events,” to the consolidated financial statements for further information); (ii) a $0.4 million payment guarantee on a loan provided to PJP VII; and (iii) up to a $41.3 million payment guaranty on a loan provided to 4040 Wilson.

In addition, during construction undertaken by real estate ventures, the Company has provided and expects to continue to provide cost overrun and completion guarantees, with rights of contribution among partners or members in the real estate ventures, as well as customary environmental indemnities and guarantees of customary exceptions to nonrecourse provisions in loan agreements.