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 as of March 31, 2019 was $29,503,000. Equity in earnings from unconsolidated joint ventures was $876,000 for the three months ended March 31, 2019. The unconsolidated joint ventures have not been consolidated as of March 31, 2019, 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 – is an unconsolidated joint venture with TravelCenters of America that develops and manages travel plazas, gas stations, convenience stores, and fast food restaurants throughout TRCC. The Company has 50% of the voting rights but participates in 60% of all profits and losses. The Company does not control the investment due to it only having 50% of the voting rights. Our partner 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. The Company's investment in this joint venture was $19,548,000 as of March 31, 2019.

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Majestic Realty Co. – Majestic Realty Co., or Majestic, is a privately-held developer and owner of master planned business parks throughout the United States. The Company formed three 50/50 joint ventures with Majestic 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 ventures. The Company and Majestic guarantee the performance of all outstanding debt.

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In November 2018, TRC-MRC 3, LLC was formed to pursue the development, construction, leasing, and management of a 579,040 square foot industrial building on the Company's property at TRCC-East. We anticipate construction to be completed in 2019, and plan to deliver the space in the fourth quarter of 2019 to a tenant that has entered into a lease agreement to occupy 67% of this rentable space. The Company's investment in this joint venture was $100,000 as of March 31, 2019. See Note 17 Subsequent Events for further disclosures related TRC-MRC 3, LLC.

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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 that was largely financed through a promissory note guaranteed by both partners. The promissory note was refinanced on June 1, 2018 with a $25,240,000 promissory note. The note matures on July 1, 2028 and currently has an outstanding principal balance of $24,877,000. Since inception, we have received excess distributions resulting in a deficit balance of $2,482,000. In accordance with the applicable accounting guidance, we reclassified excess distributions to Other Liabilities within our Consolidated Balance Sheets. We will continue to record equity in earnings as a debit to the investment account and if it were to become positive, we will reclassify the liability to an asset. If it becomes obvious that any excess distribution may not be returned (upon joint venture liquidation or otherwise), we will immediately recognize the liability as income.

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TRC-MRC 1, LLC was formed to develop and operate a 480,480 square foot industrial building at TRCC-East. The facility is currently leased to Dollar General and L’Oréal USA, the largest subsidiary of L’Oréal. Since inception, we have received excess distributions resulting in a deficit balance of $275,000. In accordance with the applicable accounting guidance, we reclassified excess distributions to Other Liabilities within our Consolidated Balance Sheets. We will continue to record equity in earnings as a debit to the investment account and if it were to become positive, we will reclassify the liability to an asset. If it becomes obvious that any excess distribution may not be returned (upon joint venture liquidation or otherwise), we will immediately recognize the liability as income. The joint venture refinanced its construction loan in December 2018 with a mortgage loan. The original balance of the mortgage loan was $25,030,000, of which $24,943,000 was outstanding as of March 31, 2019.


•	Rockefeller Joint Ventures – The Company has three joint ventures with Rockefeller Group Development Corporation, or Rockefeller. At March 31, 2019, the Company’s combined equity investment balance in these three joint ventures was $9,855,000.

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Two joint ventures are for the development of buildings on approximately 91 acres of our land and are part of an agreement for the potential development of up to 500 acres of land in TRCC that are tied to Foreign Trade Zone designation. 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 July 2022, and includes an option 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 $9,038,000 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 that was formed in 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 the joint venture by voting interest alone. The Company is the named managing member. The managing member's responsibilities relate to the routine day-to-day activities of TRCC/Rock Outlet Center LLC. However, all operating decisions during the development period and ongoing operations, including the setting and monitoring of the budget, leasing, marketing, financing and selection of the contractor for any 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 has a credit agreement with a financial institution for $52,000,000 that, as of March 31, 2019, had an outstanding balance of $46,341,000. 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 that was initially formed with TRI Pointe Homes, Lewis Investment Company, or Lewis, and CalAtlantic 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 was 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 entered a Redemption and Withdrawal Agreement, whereby Lewis irrevocably and unconditionally withdrew as a member of CFL, and CFL redeemed Lewis' entire interest for no consideration. As a result, our noncontrolling interest balance was reduced by $11,039,000. On December 31, 2018, CFL and CalAtlantic entered a Redemption and Withdrawal Agreement, whereby CalAtlantic irrevocably and unconditionally withdrew as a member of CFL, and CFL redeemed CalAtlantic's entire interest for no consideration. As a result, the noncontrolling interest balance was reduced by $13,172,000. At March 31, 2019, the Company owned 92.32% 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, 2019 and condensed balance sheet information of the Company’s unconsolidated joint ventures as of March 31, 2019 are as follows:



	Three Months Ended March 31,
	2019		2018		2019			2018			2019			2018
	Joint Venture										TRC
($ in thousands)	Revenues				Earnings(Loss)						Equity in Earnings(Loss)
Petro Travel Plaza Holdings, LLC	$	25,406	$	24,677	$	1,870		$	887		$	1,122		$	532
Five West Parcel, LLC	684		697		171			191			86			96
18-19 West, LLC	3		3		(28		)	(27		)	(14		)	(13		)
TRCC/Rock Outlet Center, LLC¹	1,898		1,475		(785		)	(1,095		)	(393		)	(548		)
TRC-MRC 1, LLC	736		—		(5		)	(1		)	(2		)	(1		)
TRC-MRC 2, LLC²	984		978		154			202			77			101
Total	$	29,711	$	27,830	$	1,377		$	157		$	876		$	167

Centennial Founders, LLC	$	122	$	87	$	64		$	(18	)	Consolidated

(1) Revenues for TRCC/Rock Outlet Center are presented net of non-cash tenant allowance amortization of $0.5 million and $0.4 million as of March 31, 2019 and 2018, 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 as of both of March 31, 2019 and 2018.



	March 31, 2019										December 31, 2018
	Joint Venture								TRC		Joint Venture								TRC
($ in thousands)	Assets		Debt			Equity			Equity		Assets		Debt			Equity			Equity
Petro Travel Plaza Holdings, LLC	$	70,441	$	(15,284	)	$	53,247		$	19,548	$	69,096	$	(15,283	)	$	51,377		$	18,426
Five West Parcel, LLC	15,125		(9,038		)	5,922			2,777		15,157		(9,173		)	5,751			2,691
18-19 West, LLC	4,632		—			4,626			1,769		4,654		—			4,654			1,783
TRCC/Rock Outlet Center, LLC	74,062		(46,341		)	26,746			5,309		75,194		(46,826		)	27,531			5,702
TRC-MRC 1, LLC	29,629		(24,943		)	3,998			—		29,692		(25,030		)	4,018			—
TRC-MRC 2, LLC	20,358		(24,877		)	(6,281		)	—		20,362		(25,014		)	(5,763		)	—
TRC-MRC 3, LLC	$	3,866	$	—		$	200		$	100	$	—	$	—		$	—		$	—
Total	$	218,113	$	(120,483	)	$	88,458		$	29,503	$	214,155	$	(121,326	)	$	87,568		$	28,602

Centennial Founders, LLC	$	94,397	$	—		$	94,002		***		$	93,840	$	—		$	93,188		***

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