Investment in Unconsolidated Joint Ventures

As of December 31, 2015, our investment in unconsolidated joint ventures consists of effective 50% interests in three joint ventures that own data center properties at 2001 Sixth Avenue in Seattle, Washington, 2020 Fifth Avenue in Seattle, Washington and 33 Chun Choi Street in Hong Kong, and 20% interests in two joint ventures, one of which owns 10 data center properties with an investment fund managed by Prudential Real Estate Investors (PREI®) and the other which owns one data center property with an affiliate of Griffin Capital Essential Asset REIT, Inc. (GCEAR). The following tables present summarized financial information for our material joint ventures for the years ended December 31, 2015, 2014, and 2013 (in thousands):



2015	% Ownership		Net Investment in Properties		Total Assets		Mortgage Loans		Total Liabilities		Equity / (Deficit)			Revenues		Property Operating Expense			Net Operating Income			Net Income (Loss)
Unconsolidated Joint Ventures
2001 Sixth Avenue	50.00	%	$	33,757	$	44,732	$	102,998	$	107,807	$	(63,075	)	$	43,734	$	(15,205	)	$	28,529		$	14,171
2020 Fifth Avenue	50.00	%	46,633		55,257		47,000		47,857		7,400			8,474		(1,177		)	7,297			4,840
33 Chun Choi Street (Hong Kong)	50.00	%	138,742		179,525		—		4,173		175,352			17,700		(5,358		)	12,342			4,480
PREI ®	20.00	%	419,498		481,175		208,000		293,276		187,898			40,011		(6,157		)	33,854			15,121
GCEAR	20.00	%	119,952		175,301		102,025		105,197		70,104			19,730		(8,249		)	11,481			(1,262		)
Total Unconsolidated Joint Ventures			$	758,582	$	935,990	$	460,023	$	558,310	$	377,679		$	129,649	$	(36,146	)	$	93,503		$	37,350
Our investment in and share of equity in earnings of unconsolidated joint ventures											$	106,107										$	15,491
2014	% Ownership		Net Investment in Properties		Total Assets		Mortgage Loans		Total Liabilities		Equity / (Deficit)			Revenues		Property Operating Expense			Net Operating Income			Net Income (Loss)
Unconsolidated Joint Ventures
2001 Sixth Avenue	50.00	%	$	37,620	$	42,537	$	104,523	$	110,749	$	(68,212	)	$	39,807	$	(14,707	)	$	25,100		$	11,982
2020 Fifth Avenue	50.00	%	47,239		55,123		47,000		47,795		7,328			8,308		(1,086		)	7,222			4,844
33 Chun Choi Street (Hong Kong)	50.00	%	143,014		165,912		—		10,210		155,702			8,671		(2,625		)	6,046			2,976
PREI ®	20.00	%	429,358		492,494		208,000		296,480		196,014			39,467		(6,144		)	33,323			12,378
GCEAR	20.00	%	122,521		186,041		102,025		104,661		81,380			6,050		(2,311		)	3,739			(1,603		)
Total Unconsolidated Joint Ventures			$	779,752	$	942,107	$	461,548	$	569,895	$	372,212		$	102,303	$	(26,873	)	$	75,430		$	30,577
Our investment in and share of equity in earnings of unconsolidated joint ventures											$	94,729										$	13,289
2013	% Ownership		Net Investment in Properties		Total Assets		Mortgage Loans		Total Liabilities		Equity / (Deficit)			Revenues		Property Operating Expense			Net Operating Income			Net Income (Loss)
Unconsolidated Joint Ventures
2001 Sixth Avenue	50.00	%	$	33,980	$	39,674	$	105,953	$	111,943	$	(72,269	)	$	37,625	$	(11,981	)	$	25,644		$	12,346
700/750 Central Expressway	50.00	%	—		—		—		—		—			55		(1		)	54			58
2020 Fifth Avenue	50.00	%	47,901		53,389		47,000		47,525		5,864			7,513		(522		)	6,991			5,756
33 Chun Choi Street (Hong Kong)	50.00	%	102,428		122,890		—		8,382		114,508			—		(44		)	(44		)	(150		)
PREI ®	20.00	%	400,528		460,062		185,000		276,212		183,850			9,577		(4,479		)	5,098			2,641
Total Unconsolidated Joint Ventures			$	584,837	$	676,015	$	337,953	$	444,062	$	231,953		$	54,770	$	(17,027	)	$	37,743		$	20,651
Our investment in and share of equity in earnings of unconsolidated joint ventures											$	70,504										$	9,796

We amortize the difference between the cost of our investment in the joint ventures and the book value of the underlying equity into income on a straight-line basis consistent with the lives of the underlying assets. The amortization of this difference was approximately $0.3 million, $0.5 million and $0.1 million for the years ended December 31, 2015, 2014 and 2013, respectively.

PREI ^® Joint Venture

On September 27, 2013, we formed a joint venture with an investment fund managed by Prudential Real Estate Investors (PREI^®). We contributed nine Powered Base Building^® data centers valued at approximately $366.4 million plus 20% of $2.8 million of closing costs. The PREI^®-managed fund contributed cash equal to their 80% interest in the joint venture assets at fair value and we retained a 20% interest. The joint venture is structured to provide a current annual preferred return from cash flow first to the PREI^®-managed interest, then to our interest, after which a portion of any excess cash flows is shared by the partners based on their respective interests and the remaining portion is paid to us as a promote interest. We perform the day-to-day accounting and property management functions for the joint venture and, as such, earn a management fee. Although we are the managing member of the joint venture and manage the day-to-day activities, all significant decisions, including approval of annual budgets, require approval of the PREI-managed member. Thus, we concluded we do not own a controlling interest and account for our interest in the joint venture as an equity method investment.

The joint venture has arranged a $185.0 million five-year unsecured bank loan at LIBOR plus 180 basis points, representing a loan-to-value ratio of approximately 50%. Proceeds from the debt offset the contribution amounts required of the partners. The transaction generated approximately $328.6 million of net proceeds to us, comprised of our share of the initial draw-down on the bank loan in addition to the PREI^® fund’s equity contribution, less our share of closing costs and accordingly we recognized a gain of approximately $115.6 million on the sale of the 80% interest in the nine properties during the year ended December 31, 2013.

Differences between the Company’s investment in the joint venture and the amount of the underlying equity in net assets of the joint venture are due to basis differences resulting from the Company’s equity investment recorded at its historical basis versus the fair value of the Company’s contributed interest in the joint venture. Our proportionate share of the earnings or losses related to this unconsolidated joint venture is reflected as equity in earnings of unconsolidated joint ventures on the accompanying consolidated income statements.

On March 5, 2014, we contributed the 636 Pierce Street property, which we acquired in December 2013, the joint venture. The property was valued at approximately $40.4 million and subject to $26.1 million in debt, which the joint venture assumed. The PREI® fund contributed approximately $11.4 million in cash for their 80% share of the net asset value of $14.3 million. Subsequent to the closing, the joint venture refinanced the existing debt with $23.0 million drawn from the joint venture’s bank facility. Including the refinance costs, the PREI® fund contributed $17.5 million for the 636 Pierce Street property, bringing their contributed capital in the joint venture to $164.8 million. The transaction generated net proceeds of approximately $11.4 million and resulted in a $1.9 million gain.

Griffin Capital Essential Asset REIT, Inc. Joint Venture

On September 9, 2014, we formed a joint venture with an affiliate of Griffin Capital Essential Asset REIT, Inc. (GCEAR). We contributed to the joint venture the property located at 43915 Devin Shafron Drive (Building A) in Ashburn, Virginia, which is a Turn-Key Flex® data center property valued at approximately $185.5 million (excluding approximately $2.1 million of closing costs). GCEAR contributed cash to the joint venture and holds an 80% interest in the joint venture. We retained a 20% interest in the joint venture. The joint venture agreement provides for a current annual preferred return from cash flow first to GCEAR and then to us, after which a portion of any excess cash flows is shared by the partners based on their respective interests and the remaining portion is paid to us as a promote interest. We perform the day-to-day accounting and property management functions for the joint venture and the property and, as such, earn management fees. Although we are the managing member of the joint venture and manage the day-to-day activities, certain major decisions, including approval of annual budgets, require approval of the GCEAR member. Thus, we concluded we do not own a controlling interest and account for our interest in the joint venture as an equity method investment.

The joint venture arranged a $102.0 million five-year secured bank loan at LIBOR plus 225 basis points, representing a loan-to-value ratio of approximately 55%. The joint venture entered into an interest rate swap agreement to effectively fix the interest rate on approximately $51.0 million of borrowings under the loan through September 2019. Two one-year extensions of the maturity date are available under the loan agreement, which the joint venture may exercise if certain conditions are met. Proceeds from this loan offset the initial cash capital contribution amount required from GCEAR and was used to provide us with a special distribution on account of a portion of the contribution value of the property. The transaction generated approximately $167.5 million of net proceeds to us, comprised of our share of the initial draw-down on the bank loan in addition to GCEAR’s equity contribution, less our share of closing costs. Accordingly we recognized a gain of approximately $93.5 million on the sale of the 80% interest in the joint venture during the year ended December 31, 2014.

Differences between the Company’s investment in the joint ventures and the amount of the underlying equity in net assets of the joint ventures result from the Company’s equity investment recorded at its historical basis versus the fair value of the Company’s contributed interest recorded at the joint venture level. Our proportionate share of the earnings or losses related to these unconsolidated joint ventures is reflected as equity in earnings of unconsolidated joint ventures on the accompanying consolidated income statements and reflects the amortization of such basis differences.

Sale of Investment

On October 17, 2014, we closed on the sale of our investment in a developer of data centers in the Southwestern U.S. and Mexico, generating net proceeds of approximately $31.7 million. We recognized a gain on sale of approximately $14.6 million in the fourth quarter of 2014. The original investment of $17.1 million was included in other assets on the consolidated balance sheet.