5. Investments in Joint Ventures

Bank of America Portfolio

The Company owns a 50% interest in a joint venture, or the Joint Venture, of a portfolio of 88 properties, or the Bank of America Portfolio, located across the United States totaling approximately 3.6 million rentable square feet and 90% leased to Bank of America, N.A., under a master lease with expiration dates through 2023, with a total portfolio occupancy of approximately 93%. The Bank of America Portfolio was acquired in December of 2012. The acquisition was financed with a $200,000 floating rate, interest-only mortgage loan maturing in 2014, collateralized by 67 properties of the portfolio. The remaining properties are unencumbered. During the three and six months ended June 30, 2013, the Joint Venture sold 20 and 25 properties for proceeds of $21,381 and $31,248, respectively. At June 30, 2013 and December 31, 2012, the investment has a carrying value of $49,865 and $72,541, respectively, and for the three and six months ended June 30, 2013, the Company recorded its pro rata share of net loss of the Joint Venture of $2,634 and $3,852, respectively. During the three and six months ended June 30, 2013, the Company received distributions of $19,325 and $20,575 from the Joint Venture, respectively.

In May 2013, the Joint Venture sold the successor borrower of a defeased mortgage loan and the related pledged treasury securities. The loan had previously encumbered the Bank of America Portfolio’s properties, which the Joint Venture had acquired at acquisition of the Bank of America Portfolio. The pledged treasury securities were U.S. Treasury bonds designated as collateral for the mortgage note payables. The Joint Venture received proceeds of $3,600 and recognized a loss on sale of $4,535.

Philips Building

The Company owns a 25% interest in the equity owner of a fee interest in 200 Franklin Square Drive, a 200,000 square foot building located in Somerset, New Jersey which is 100% net leased to Philips Holdings, USA Inc., a wholly-owned subsidiary of Royal Philips Electronics through December 2021. The property is financed by a $41,000 fixed rate mortgage loan maturing in 2025. As of June 30, 2013 and December 31, 2012, the investment had a carrying value of $55 and $201, respectively. The Company recorded its pro rata share of net income of the joint venture of $31 and $61 for the three and six months ended June 30, 2013, respectively. The Company recorded its pro rata share of net income of the joint venture of $29 and $57 for the three and six months ended June 30, 2012, respectively. During the three and six months ended June 30, 2013, the Company received distributions of $103 and $206 from the joint venture, respectively.

The Condensed Consolidated Balance Sheets for the Company’s joint ventures at June 30, 2013 and December 31, 2012 are as follows:

	June 30, 2013		December 31, 2012
Assets:
Real estate assets, net	$	383,685	$	452,692
Other assets ⁽¹⁾		38,599		219,760
Total assets	$	422,284	$	672,452
Liabilities and members' equity:
Mortgages payable⁽¹⁾	$	241,000	$	553,140
Other liabilities		78,685		90,255
Members' equity		102,599		29,057
Liabilities and members' equity	$	422,284	$	672,452

⁽¹⁾

The Bank of America Portfolio acquired a pool of treasury securities that defeased the mortgage loan that had previously encumbered the Bank of America Portfolio’s properties. The pledged government securities are U.S. Treasury bonds designated as defeasance collateral for mortgage notes payable of $0 and $312,140 as of June 30, 2013 and December 31, 2012, respectively.

The Condensed Consolidated Statements of Operations for the Company's joint ventures for the three and six months ended June 30, 2013 and 2012 or partial period for acquisitions or dispositions which closed during these periods, are as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Revenues	$	18,541	$	914	$	37,799	$	1,829
Operating expenses		9,212		3		19,485		6
Interest⁽¹⁾		5,692		520		12,622		1,051
Depreciation		4,668		270		9,567		541
Total expenses		19,572		793		41,674		1,598
Net income (loss) from operations		(1,031)		121		(3,875)		231
Net gain (loss) on disposals		(4,535)		-		(4,535)		-
Net income (loss)	$	(5,566)	$	121	$	(8,410)	$	231
Company's equity in net loss within continuing operations	$	(2,604)	$	29	$	(3,792)	$	57
Company's equity in net income within discontinued operations	$	-	$	-	$	804	$	-

⁽¹⁾

The Bank of America Portfolio net loss includes interest expense of $2,849 and $7,092 for the three and six months ended June 30, 2013 from a defeased mortgage acquired as part of the Joint Venture’s acquisition. The pool of treasury securities pledged as collateral for the mortgage loan generate sufficient cash flows to cover the debt service requirements, but do not generate income to offset the interest expense. The defeased mortgage and corresponding pool of pledged treasury securities were sold in May 2013 for a loss of $4,535.