Investment in Unconsolidated Partnerships

6 Months Ended

Jun. 30, 2011

Investment in Unconsolidated Partnerships

Investment in Unconsolidated Partnerships

8. Investment in Unconsolidated Partnerships

The accompanying consolidated financial statements include investments in two limited liability companies with Prudential Real Estate Investors ("PREI"), and in 10165 McKellar Court, L.P. ("McKellar Court"), a limited partnership with Quidel Corporation, the tenant which occupies the McKellar Court property. General information on the PREI limited liability companies and the McKellar Court partnership (each referred to in this footnote individually as a "partnership" and collectively as the "partnerships") as of June 30, 2011 was as follows:




Name	Partner	Company's Ownership Interest	Company's Economic Interest	Date Acquired
PREI I LLC(1)	PREI	20%	20%	April 4, 2007
PREI II LLC(2)	PREI	20%	20%	April 4, 2007
McKellar Court(3)	Quidel Corporation	22%	22%	September 30, 2004

____________

(1)

PREI I LLC owns a portfolio of six properties in Cambridge, Massachusetts comprised of laboratory/office buildings. At June 30, 2011, there were $203.3 million in outstanding borrowings on the PREI joint ventures' secured acquisition and interim loan facility, with a contractual interest rate of 3.69% (including the applicable credit spread) which matures on February 10, 2012. At maturity, the PREI joint ventures may refinance the secured acquisition and interim loan facility, depending on market conditions and the availability of credit, or they may repay the principal balance through capital contributions of the members. At June 30, 2011, there were $205.6 million in outstanding borrowings on the secured construction loan facility entered into by a wholly owned subsidiary of the Company's joint venture with PREI I LLC, with a contractual interest rate of 1.69% (including the applicable credit spread) which matures on August 13, 2011. At maturity, the wholly owned subsidiary may refinance the loan, depending on market conditions and the availability of credit, or it may repay the principal balance of the construction loan through capital contributions of the members.

(2)

The Company's remaining investment in PREI II LLC (maximum exposure to losses) was approximately $818,000 at June 30, 2011.


(3)	The Company's investment in the McKellar Court partnership (maximum exposure to losses) was approximately $12.4 million at June 30, 2011. The Company's economic interest in the McKellar Court partnership entitles it to 75% of the extraordinary cash flows after repayment of the partners' capital contributions and 22% of the operating cash flows.

The Company acts as the operating member or partner, as applicable, and day-to-day manager for the partnerships. The Company is entitled to receive fees for providing construction and development services (as applicable) and management services to the PREI joint ventures. The Company earned approximately $244,000 and $514,000 in fees for the three and six months ended June 30, 2011, respectively, and approximately $392,000 and $919,000 in fees for the three and six months ended June 30, 2010, respectively, for services provided to the PREI joint ventures, which are reflected in tenant recoveries and other income in the consolidated statements of income.

The condensed combined balance sheets for all of the Company's unconsolidated partnerships were as follows (in thousands):




	June 30, 2011		December 31, 2010
Assets:
Investments in real estate, net	$	608,022	$	620,430
Cash and cash equivalents (including restricted cash)	13,291		7,914
Intangible assets, net	11,662		12,303
Other assets	24,871		26,412
Total assets	$	657,846	$	667,059
Liabilities and members' equity:
Mortgage notes payable and secured construction loan	$	419,169	$	415,933
Other liabilities	15,292		18,101
Members' equity	223,385		233,025
Total liabilities and equity	$	657,846	$	667,059
Company's net investment in unconsolidated partnerships	$	55,313	$	57,265

The condensed combined statements of operations for the unconsolidated partnerships were as follows (in thousands):




	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Total revenues	$	9,609		$	9,286		$	18,964		$	17,014
Rental operations expenses and real estate taxes	5,186			4,863			10,955			9,278
Depreciation and amortization	4,710			3,460			9,306			6,765
Professional fees	139			148			367			552
Interest expense, net of interest income	3,285			2,533			6,720			5,014
Total expenses	13,320			11,004			27,348			21,609
Net loss	$	(3,711	)	$	(1,718	)	$	(8,384	)	$	(4,595	)
Company's equity in net loss of unconsolidated partnerships	$	(466	)	$	(100	)	$	(1,115	)	$	(377	)

- Definition

The entire disclosure for equity investment, or group of investments, for which combined disclosure is appropriate, including: (a) the name of each investee and percentage of ownership of common stock, (b) accounting policies for investments in common stock, (c) difference between the amount at which the investment is carried and the amount of underlying equity in net assets and the accounting treatment of the difference, (d) the total fair value of each identified investment for which a market value is available, (e) summarized information as to assets, liabilities, and results of operations of the investees (for investments in unconsolidated subsidiaries, common stock of joint ventures, or other investments using the equity method), and (f) material effects of possible conversions, exercises, or contingent issuances of the investee. Other disclosures include (a) the names of any investee in which the investor owns 20 percent or more of the voting stock and investment is not accounted for using the equity method, and the reasons why not, and (b) the names of any investee in which the investor owns less than 20 percent of the voting stock and the investment is accounted for using the equity method, and the reasons why it is.

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