7. Investment in Unconsolidated Joint Venture

We provided mezzanine financing totaling $15.3 million to an unaffiliated third-party entity (the “Borrower”) that owns an apartment complex in Denver, Colorado (the “Prospect Park”). The Borrower also had a senior construction loan with a third-party construction lender (the “Senior Lender”) in an aggregate original principal amount of $40.0 million. The senior construction loan was guaranteed by the owners of the developer. We also had a personal guaranty from the owners of the developer guaranteeing completion of Prospect Park and payment of any cost overruns. Our mezzanine loan was secured by all of the membership interests of the Borrower and was subordinate to the senior construction loan. Our advances of $15.3 million initially had annual stated interest rates ranging from 10% to 18%.

Pursuant to the terms of the mezzanine loan, we participate in the residual interests of Prospect Park attributable to a sale or refinancing even though we have no actual ownership interest. We evaluated this ADC Arrangement and determined that its characteristics were similar to a jointly-owned investment or partnership. Accordingly, our investment is accounted for as an unconsolidated joint venture under the equity method of accounting instead of loan accounting.

On December 15, 2017, the Borrower sold Prospect Park to an unrelated third-party for a contractual sales price of approximately $100.5 million. In connection with the sale, the Borrower repaid the Senior Construction Loan in full and we received aggregate proceeds of approximately $21.6 million representing the repayment in full of the outstanding principal and accrued interest due on our mezzanine loan. Additionally, the Borrower has placed approximately $15.1 million of the net proceeds from the sale into an escrow account to be used for settlement of the amount due to us for our participation in the residual interests of Prospect Park. The carrying value of our unconsolidated investment in Prospect Park was $10.9 million and $14.7 million as of December 31, 2017 and 2016, respectively. Our carrying amount as of December 31, 2017 represents the minimum amount payable to us for our participation in the residual interests of Prospect Park.

Both the senior construction loan and our mezzanine loan were in technical default as of December 31, 2016 due to a delay in completion of Prospect Park. Prospect Park was subsequently completed in January 2017 and the Borrower funded all cost overruns. On March 23, 2017, the Senior Lender executed a loan amendment extending the maturity date of the senior construction loan to March 24, 2018. The Senior Lender’s loan amendment also increased the interest rate by 75 basis points to 30-day LIBOR plus 3.75% and added provisions which required the maintenance of certain prescribed minimum occupancy and rental rates at future dates. On May 8, 2017, we amended the terms of our mezzanine loan to mirror the maturity date of the senior construction loan and change the interest rate to 11.0% for the entire balance of the mezzanine loan. The amended terms were effective as of March 1, 2017.

We considered the impact of these events on the accounting treatment and determined the ADC Arrangement would continue to be accounted for as an unconsolidated joint venture under the equity method of accounting. We continued to monitor this situation and any impact these events might have had on our ability to ultimately realize the investment. The ADC Arrangement was reassessed at each reporting period.

In connection with this investment, we capitalized interest of approximately $0.2 million and $0.5 million, respectively, during the years ended December 31, 2016 and 2015. For the year ended December 31, 2017, we recorded equity earnings of $17.9 million related to our unconsolidated investment in Prospect Park. For the years ended December 31, 2016 and 2015, we recorded no equity earnings related to our unconsolidated investment in Prospect Park.