INVESTMENT IN UNCONSOLIDATED AND CONSOLIDATED JOINT VENTURES

The Company maintains investments in joint ventures. The Company accounts for its investments in unconsolidated joint ventures using the equity method of accounting unless the venture is a variable interest entity, or VIE, and meets the requirements for consolidation. The Company’s investment in its unconsolidated joint ventures at March 31, 2018 was $30,098,000. The equity in the income of the unconsolidated joint ventures was $167,000 for the three months ended March 31, 2018. The unconsolidated joint ventures have not been consolidated as of March 31, 2018, because the Company does not control the investments. The Company’s current joint ventures are as follows:

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Petro Travel Plaza Holdings LLC – TA/Petro is an unconsolidated joint venture with TravelCenters of America, LLC for the development and management of travel plazas and convenience stores. The Company has 50% voting rights and shares 60% of profit and losses in this joint venture. It houses multiple commercial eating establishments as well as diesel and gasoline operations in TRCC. The Company does not control the investment due to its having only 50% voting rights, and because our partner in the joint venture is the managing partner and performs all of the day-to-day operations and has significant decision making authority regarding key business components such as fuel inventory and pricing at the facility. At March 31, 2018, the Company had an equity investment balance of $17,955,000 in this joint venture.

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Majestic Realty Co. – Majestic Realty Co., or Majestic, is a privately-held developer and owner of master planned business parks in the United States. The Company partnered with Majestic to form two 50/50 joint ventures to acquire, develop, manage, and operate industrial real estate at TRCC. The partners have equal voting rights and equally share in the profit and loss of the joint venture. At March 31, 2018, the Company's investment balance in these joint ventures was in deficit position of $579,000, based on the reasons discussed below.

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TRC-MRC 2, LLC was formed to acquire, lease, and maintain a fully occupied warehouse at TRCC-West. The partnership acquired the 651,909 square foot building for $24,773,000 and was largely financed through a $21,080,000 promissory note guaranteed by both partners. The promissory note matures in September 2020 and currently has an outstanding principal balance of $21,080,000. Since inception, we have received excess distributions resulting in a deficit balance of $576,000. In accordance with the applicable accounting guidance, these excess distributions are reclassified to the liabilities section of our consolidated balance sheet. We will continue to record our equity in the net income as a debit to the investment account, and if it becomes positive, it will again be shown as an asset on our consolidated balance sheet. If it becomes obvious that any excess distribution may not be returned (upon joint venture liquidation or otherwise), we will recognize any balance classified as a liability as income immediately.

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TRC-MRC 1, LLC was formed to develop and operate an approximately 480,480 square foot industrial building at TRCC-East. The joint venture completed construction of the building during the third quarter of 2017. Since inception of the joint venture, we received distributions of $1,952,000 representing excess distributions resulting in a deficit balance of $3,000. In accordance with the applicable accounting guidance, these excess distributions are reclassified to the liabilities section of our consolidated balance sheet. We will continue to record our equity in the net income as a debit to the investment account, and if it becomes positive, it will again be shown as an asset on our consolidated balance sheet. If it becomes obvious that any excess distribution may not be returned (upon joint venture liquidation or otherwise), we will recognize any balance classified as a liability as income immediately. The joint venture currently has borrowings under a $25,000,000 construction loan of which $21,080,000 has been drawn.


•	Rockefeller Joint Ventures – The Company has three joint ventures with Rockefeller Group Development Corporation, or Rockefeller. At March 31, 2018, the Company’s combined equity investment balance in these three joint ventures was $12,143,000.

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Two joint ventures are for the development of buildings on approximately 91 acres and are part of an agreement for the potential development of up to 500 acres of land in TRCC. The Company owns a 50% interest in each of the joint ventures. Currently, the Five West Parcel LLC joint venture owns and leases a 606,000 square foot building to Dollar General which has now been extended to April 2022 and includes an option to extend for an additional three years. For operating revenue, please see the following table. The Five West Parcel LLC joint venture currently has an outstanding term loan with a balance of $9,577,000 that matures on May 5, 2022. The Company and Rockefeller guarantee the performance of the debt. The second of these joint ventures, 18-19 West LLC, was formed in August 2009 through the contribution of 61.5 acres of land by the Company, which is being held for future development. Both of these joint ventures are being accounted for under the equity method due to both members having significant participating rights in the management of the ventures.

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The third joint venture is the TRCC/Rock Outlet Center LLC joint venture, which was formed during the second quarter of 2013 to develop, own, and manage a net leasable 326,000 square-foot outlet center on land at TRCC-East. The cost of the outlet center was approximately $87,000,000 and was funded through a construction loan for up to 60% of the costs. The remaining 40% was funded through equity contributions from the two members. The Company controls 50% of the voting interests of TRCC/Rock Outlet Center LLC, thus it does not control by voting interest alone. The Company is the named managing member, and as such we considered the presumption that a managing member controls the limited liability company. The managing member's responsibilities relate to the routine day-to-day activities of TRCC/Rock Outlet Center LLC. However, all operating decisions during development and operations, including the setting and monitoring of the budget, leasing, marketing, financing and selection of the contractor for any of the project's construction, are jointly made by both members of the joint venture. Therefore, the Company concluded that both members have significant participating rights that are sufficient to overcome the presumption of the Company controlling the joint venture through it being named the managing member. Therefore, the investment in TRCC/Rock Outlet Center LLC is being accounted for under the equity method. The TRCC/Rock Outlet Center LLC joint venture is separate from the aforementioned agreement to potentially develop up to 500 acres of land in TRCC. During the fourth quarter of 2013, the TRCC/Rock Outlet Center LLC joint venture entered into a construction line of credit agreement with a financial institution for $52,000,000 that, as of March 31, 2018, had an outstanding balance of $48,284,000. The Company and Rockefeller guarantee the performance of the debt.

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Centennial Founders, LLC – Centennial Founders, LLC, or CFL, is a joint venture with TRI Pointe Homes and CalAtlantic that was organized to pursue the entitlement and development of land that the Company owns in Los Angeles County. Based on the Second Amended and Restated Limited Company Agreement of CFL and the change in control and funding that resulted from the amended agreement, CFL qualified as a VIE, beginning in the third quarter of 2009, and the Company was determined to be the primary beneficiary. As a result, CFL has been consolidated into our financial statements beginning in that quarter. Our partners retained a noncontrolling interest in the joint venture. On November 30, 2016, CFL and Lewis Investment Company, or Lewis, entered a Redemption and Withdrawal Agreement, whereby Lewis irrevocably and unconditionally withdrew as a member of CFL, CFL redeemed Lewis' entire interest for no consideration. As a result, our noncontrolling interest balance was reduced by $11,039,000. At March 31, 2018, the Company owned 90.89% of CFL.

The Company’s investment balance in its unconsolidated joint ventures differs from its respective capital accounts in the respective joint ventures. The differential represents the difference between the cost basis of assets contributed by the Company and the agreed upon contribution value of the assets contributed.

Unaudited condensed statement of operations for the three months ended March 31, 2018 and condensed balance sheet information of the Company’s unconsolidated joint ventures as of March 31, 2018 are as follows:



	Three Months Ended March 31,
	2018		2017		2018			2017			2018			2017
	Joint Venture										TRC
($ in thousands)	Revenues				Earnings(Loss)						Equity in Earnings(Loss)
Petro Travel Plaza Holdings, LLC	$	24,677	$	26,407	$	887		$	1,502		$	532		$	901
Five West Parcel, LLC	697		716		191			269			96			134
18-19 West, LLC	3		3		(27		)	(24		)	(13		)	(13		)
TRCC/Rock Outlet Center, LLC¹	1,475		2,549		(1,095		)	(1,009		)	(548		)	(505		)
TRC-MRC 1, LLC	—		—		(1		)	(2		)	(1		)	(1		)
TRC-MRC 2, LLC²	978		935		202			(575		)	101			(288		)
	$	27,830	$	30,610	$	157		$	161		$	167		$	228

Centennial Founders, LLC	$	87	$	1	$	(18	)	$	(110	)	Consolidated

(1) Revenues for TRCC/Rock Outlet Center are presented net of non-cash tenant allowance amortization of $0.4 million and $0.5 million as of March 31, 2018 and 2017, respectively.
(2) Earnings for TRC-MRC 2, LLC include non-cash amortization of purchase accounting adjustments related to in-place leases of $0.2 million and $1.0 million as of March 31, 2018 and 2017, respectively.



	March 31, 2018										December 31, 2017
	Joint Venture								TRC		Joint Venture								TRC
($ in thousands)	Assets		Debt			Equity			Equity		Assets		Debt			Equity			Equity
Petro Travel Plaza Holdings, LLC	$	68,283	$	(15,280	)	$	50,592		$	17,955	$	67,435	$	(15,280	)	$	49,705		$	17,422
Five West Parcel, LLC	15,922		(9,577		)	6,163			2,897		15,738		(9,711		)	5,972			2,802
18-19 West, LLC	4,683		—			4,678			1,769		4,704		—			4,704			1,782
TRCC/Rock Outlet Center, LLC	80,221		(48,284		)	31,081			7,477		81,610		(48,769		)	32,177			8,025
TRC-MRC 1, LLC	25,652		(21,080		)	4,540			—		25,380		(19,433		)	4,541			—
TRC-MRC 2, LLC	20,323		(21,080		)	(1,153		)	—		20,336		(21,080		)	(992		)	—
Total	$	215,084	$	(115,301	)	$	95,901		$	30,098	$	215,203	$	(114,273	)	$	96,107		$	30,031

Centennial Founders, LLC	90,002		—			89,569			***		89,721		—			88,862			***

*** Centennial Founders, LLC is consolidated within the Company's financial statements.