(3) Co-investments

The Company has co-investments, which are accounted for under the equity method. The co-investments own, operate and develop apartment communities. The following table details the Company's co-investments (dollars in thousands):

	September 30, 2013		December 31, 2012

Membership interest in Wesco I	$	142,362	$	143,874
Membership interest in Wesco III		37,766		9,941
Partnership interest in Fund II		4,301		53,601
Membership interest in a limited liability company that owns Expo		18,356		18,752
Total operating co-investments		202,785		226,168

Membership interests in limited liability companies that own and are developing Epic, Connolly Station, Mosso I & II, Elkhorn, and The Village		294,573		186,362
Membership interests in limited liability companies that own and are developing The Huxley and The Dylan		17,894		16,552
Membership interest in a limited liability company that owns and is developing One South Market		17,009		-
Total development co-investments		329,476		202,914

Membership interest in Wesco II that owns a preferred equity interest in Parkmerced with a preferred return of 10.1%		93,983		91,843
Preferred interest in related party limited liability company that owns Sage at Cupertino with a preferred return of 9.5%		16,159		14,438
Preferred interest in a related party limited liability company that owns Madison Park at Anaheim with a preferred return of 9%		13,824		13,175
Preferred interest in a limited liability company that owns an apartment development in Redwood City with a preferred return of 12%		9,234		-
Preferred interest in related party limited liability company that owns an apartment development in San Jose with a preferred return of 12%		8,614		-
Preferred interests in limited liability companies that own apartment communities in downtown Los Angeles with preferred returns of 9% and 10% repaid in 2013		-		22,807
Total preferred interest investments		141,814		142,263

Total co-investments	$	674,075	$	571,345

In January 2013, the Company invested $8.6 million as a preferred equity interest investment in an apartment development in Redwood City, California. The investment has a preferred return of 12% and matures in January 2016.

In March 2013, the Company received the redemption of $9.7 million of preferred equity related to two properties located in downtown Los Angeles. The Company recorded $0.4 million in redemption penalties due to the early redemption of these preferred equity investments.

In June 2013, the Company received the redemption of $13.1 million of preferred equity related to a property located in downtown Los Angeles. The Company recorded $0.5 million of income from redemption penalties due to the early redemption of these preferred equity investments.

In August 2013, the Company made an $8.5 million preferred equity investment in a multifamily development project located in San Jose, California. The investment has a preferred return of 12% and matures in 3 years.

During the third quarter of 2013, the Company restructured the terms of a preferred equity investment on a property located in Anaheim, California, reducing the rate from 13% to 9%, while extending the maximum term by one year. The Company recorded $0.4 million of income related to the restructured investment.

The combined summarized balance sheet and statements of operations for co-investments are as follows (dollars in thousands).

	September 30, 2013		December 31, 2012
Balance sheets:
Rental properties and real estate under development	$	1,698,072	$	1,745,147
Other assets		86,081		168,061

Total assets	$	1,784,153	$	1,913,208

Debt	$	651,818	$	820,895
Other liabilities		114,405		91,922
Equity		1,017,930		1,000,391

Total liabilities and equity	$	1,784,153	$	1,913,208

Company's share of equity	$	674,075	$	571,345

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Statements of operations:
Property revenues	$	24,796		$	34,425		$	78,913		$	96,981
Property operating expenses		(10,170	)		(12,686	)		(29,872	)		(35,852	)
Net property operating income		14,626			21,739			49,041			61,129

Gain on sale of real estate		137,845			-			146,663			-
Interest expense		(6,052	)		(9,453	)		(18,924	)		(25,790	)
General and administrative		(1,419	)		(916	)		(4,472	)		(2,632	)
Depreciation and amortization		(8,718	)		(12,821	)		(29,314	)		(35,593	)

Net (loss) income	$	136,282		$	(1,451	)	$	142,994		$	(2,886	)
Company's share of net income	$	40,802		$	3,547		$	52,295		$	8,998