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INVESTMENT IN UNCONSOLIDATED JOINT VENTURES
 6 Months Ended
Jun. 30, 2020
Equity Method Investments and Joint Ventures [Abstract]  
INVESTMENT IN UNCONSOLIDATED JOINT VENTURES INVESTMENT IN UNCONSOLIDATED JOINT VENTURES
As of June 30, 2020 and December 31, 2019, the Company’s investments in unconsolidated joint ventures were composed of the following (dollars in thousands):
Number of Properties as of June 30, 2020Investment Balance at
Joint VentureLocationOwnership %June 30, 2020December 31, 2019
NIP Joint Venture———$—  $1,225  
110 William Joint Venture1New York, New York60.0%—  —  
353 Sacramento Joint Venture1San Francisco, California55.0%43,207  42,214  
Battery Point Series A-3 Preferred UnitsN/AN/AN/A13,991  13,991  
Pacific Oak Opportunity Zone Fund I2VariousN/A21,280  20,846  
$78,478  $78,276  
Investment in National Industrial Portfolio Joint Venture
On May 18, 2012, the Company, through an indirect wholly owned subsidiary, entered into a joint venture (the “NIP Joint Venture”) with OCM NIP JV Holdings, L.P. and HC KBS NIP JV, LLC (“HC-KBS”). The NIP Joint Venture has invested in a portfolio of industrial properties. The Company made an initial capital contribution of $8.0 million, which represents less than a 5.0% ownership interest in the NIP Joint Venture as of June 30, 2020.
Prior to January 17, 2018, KBS REIT I, an affiliate of KBS Capital Advisors, was a member of HC-KBS and had a participation interest in certain future potential profits generated by the NIP Joint Venture.  However, KBS REIT I did not have any equity interest in the NIP Joint Venture. On January 17, 2018, KBS REIT I assigned its participation interest in the NIP Joint Venture to one of the other joint venture partners in the NIP Joint Venture. None of the other joint venture partners are affiliated with the Company or the Advisor.
During the six months ended June 30, 2020, the NIP Joint Venture sold the remaining properties. During the six months ended June 30, 2020, the Company received a distribution of $1.3 million related to its investment in the NIP Joint Venture and the Company recognized $0.1 million as income distribution and $1.2 million as a return of capital from the NIP Joint Venture. During the three and six months ended June 30, 2019, the Company received a distribution of $0.3 million related to its investment in the NIP Joint Venture, which is reflected as a return of capital from the NIP Joint Venture.
Investment in 110 William Joint Venture
On December 23, 2013, the Company, through an indirect wholly owned subsidiary, entered into an agreement with SREF III 110 William JV, LLC (the “110 William JV Partner”) to form a joint venture (the “110 William Joint Venture”). On May 2, 2014, the 110 William Joint Venture acquired an office property containing 928,157 rentable square feet located on approximately 0.8 acres of land in New York, New York (“110 William Street”). Each of the Company and the 110 William JV Partner hold a 60% and 40% ownership interest in the 110 William Joint Venture, respectively.
The Company exercises significant influence over the operations, financial policies and decision making with respect to the 110 William Joint Venture but significant decisions require approval from both members. Accordingly, the Company has accounted for its investment in the 110 William Joint Venture under the equity method of accounting. Income, losses, contributions and distributions are generally allocated based on the members’ respective equity interests.
As of June 30, 2020 and December 31, 2019, the book value of the Company’s investment in the 110 William Joint Venture was $0. During the six months ended June 30, 2019, the 110 William Joint Venture made a $7.8 million distribution to the Company and a $5.2 million distribution to the 110 William JV Partner funded with proceeds from the 110 William refinancing (discussed below). The distribution exceeded the book value of the Company’s investment in the 110 William Joint Venture, and the Company recorded the $7.8 million distribution as a gain included in equity in income of unconsolidated joint ventures during the six months ended June 30, 2019. This gain was recorded because the Company determined that the distribution is not refundable and it does not have an implicit or explicit commitment to fund the 110 William Joint Venture. During the six months ended June 30, 2019, the Company suspended the equity method of accounting and the Company will not record the Company's share of losses and will not record the Company's share of any subsequent income for the 110 William Joint Venture until the Company’s share of net income exceeds the gain recorded and the Company’s share of the net losses not recognized during the period the equity method was suspended. During the six months ended June 30, 2020, the Company did not record equity in income from the 110 William Joint venture.
Summarized financial information for the 110 William Joint Venture follows (in thousands):
June 30, 2020December 31, 2019
Assets:
       Real estate assets, net of accumulated depreciation and amortization$247,301  $242,430  
       Other assets39,971  35,747  
       Total assets$287,272  $278,177  
Liabilities and equity:
       Notes payable, net$308,441  $292,221  
       Other liabilities7,992  10,664  
       Partners’ deficit(29,161) (24,708) 
Total liabilities and equity$287,272  $278,177  

Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Revenues$8,617  $9,442  $16,599  $17,701  
Expenses:
       Operating, maintenance, and management1,596  2,280  3,898  4,452  
       Real estate taxes and insurance1,822  1,725  3,645  3,430  
       Depreciation and amortization2,939  2,839  5,582  5,503  
       Interest expense4,042  4,124  7,968  8,732  
Total expenses10,399  10,968  21,093  22,117  
Total other income16  39  38  71  
Net loss$(1,766) $(1,487) $(4,456) $(4,345) 
Company’s share of net loss (1)
$(1,060) $(892) $(2,674) $(2,607) 
_____________________
(1) During the three and six months ended June 30, 2019, the Company recorded $0 and $0.3 million of net losses in equity in income of unconsolidated joint ventures and suspended the recording of the Company’s remaining share of net losses.
Investment in 353 Sacramento Joint Venture
On July 6, 2017, the Company, through an indirect wholly owned subsidiary, entered into an agreement with the Migdal Members to form a joint venture (the “353 Sacramento Joint Venture”). On July 6, 2017, the Company sold a 45% equity interest in an entity that owns an office building containing 284,751 rentable square feet located on approximately 0.35 acres of land in San Francisco, California (“353 Sacramento”) to the Migdal Members. The sale resulted in 353 Sacramento being owned by the 353 Sacramento Joint Venture, in which the Company indirectly owns 55% of the equity interests and the Migdal Members indirectly own 45% in the aggregate of the equity interests.
The Company exercises significant influence over the operations, financial policies and decision making with respect to the 353 Sacramento Joint Venture but significant decisions require approval from both members. Accordingly, the Company has accounted for its investment in the 353 Sacramento Joint Venture under the equity method of accounting. Income, losses, contributions and distributions are generally allocated based on the members’ respective equity interests.
Summarized financial information for the 353 Sacramento Joint Venture follows (in thousands):
June 30, 2020December 31, 2019
Assets:
       Real estate assets, net of accumulated depreciation and amortization$184,980  $180,592  
       Other assets18,850  21,822  
       Total assets$203,830  $202,414  
Liabilities and equity:
       Notes payable, net$115,427  $115,280  
       Other liabilities10,792  11,193  
       Partners’ capital77,611  75,941  
Total liabilities and equity$203,830  $202,414  

Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Revenues$5,364  $4,187  $10,251  $8,345  
Expenses:
       Operating, maintenance, and management836  939  1,517  1,769  
       Real estate taxes and insurance728  694  1,481  1,395  
       Depreciation and amortization1,639  1,563  3,241  3,131  
       Interest expense1,021  1,447  2,342  2,866  
Total expenses4,224  4,643  8,581  9,161  
Net income (loss)$1,140  $(456) 1,670  (816) 
Company’s equity in income (loss) of unconsolidated joint venture$665  $(215) $993  $(379) 
Battery Point Series A-3 Preferred Units
Beginning October 28, 2016, the Company invested in Battery Point Series B Preferred Units and on March 20, 2019, the Company, through an indirect wholly owned subsidiary, entered into a redemption agreement for the Battery Point Series B Preferred Units. The redemption agreement resulted in the redemption of the Company’s entire investment of 13,000 Series B Preferred Units with a per-unit price of $1,000 with an aggregate outstanding principal balance of $13.0 million. The Company received a principal paydown of $7.7 million plus accrued interest and an exit fee.  In addition, the Company received 210,000 shares of Battery Point Series A-3 Preferred Units with a per-unit price of $25 with an aggregate face amount of $5.3 million. The Battery Point Series A-3 Preferred Units are entitled to a monthly dividend based on an annual rate of 7.5%. The annual dividend rate increases to 10% for the Battery Point Series A-3 Preferred Units not redeemed by February 28, 2020 and to 11% for the Battery Point Series A-3 Preferred Units not redeemed by February 28, 2021. On each monthly dividend payment date, Battery Point has the obligation to use 20% of the net proceeds of any and all future equity capital raising to redeem the Series A-3 Preferred Units. The Battery Point Series A-3 Preferred Units are redeemable at any time by Battery Point and holders of Series A-3 Preferred Shares may elect to redeem their units beginning on February 28, 2021, subject to Battery Point’s board of directors’ determination that the company has sufficient cash.
During the year ended December 31, 2019, the Company purchased additional 430,000 shares of Battery Point Series A-3 Preferred Units for an aggregate amount of $10.8 million.
The Company does not have a unilateral right to redeem the Battery Point Series A-3 Preferred Units on a stated redemption date, therefore the Company classified the Series A-3 Preferred Units as an equity investment without a readily determinable fair value.  In accordance with ASC 321, Investments - Equity Securities, the Company may elect to measure an equity investment without a readily determinable value that does not qualify for the practical expedient to estimate fair value using the net asset value per share, at its cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.  The Company elected to measure its investment in the Battery Point Series A-3 Preferred Units in accordance with the above accounting guidance and recorded its investment in the Battery Point Series A-3 Preferred Units as of June 30, 2020, at a carrying value of $14.0 million and with a total of 640,000 shares.  During the six months ended June 30, 2020 and 2019, the Company received distributions of $0.7 million and $0.1 million, respectively, which were recognized as dividend income from real estate equity securities.
On July 1, 2020, the Company acquired Battery Point. As a result of this acquisition, the Company’s 640,000 shares of Battery Point Series A-3 Preferred Units will be eliminated in consolidation. See Note 16, "Subsequent Events - Battery Point Trust Inc. Acquisition" for more information.
Investment in Pacific Oak Opportunity Zone Fund I
During the year ended December 31, 2019, the Company acquired 91 Class A Units for $20.6 million in Pacific Oak Opportunity Zone Fund I. As of December 31, 2019, the book value of the Company’s investment in Pacific Oak Opportunity Zone Fund I was $20.8 million, which includes $0.2 million of acquisition fees. As of June 30, 2020, Pacific Oak Opportunity Zone Fund I consolidated two joint ventures with real estate under development. As of June 30, 2020, the Company has concluded that Pacific Oak Opportunity Zone Fund I qualifies as a Variable Interest Entity (“VIE”) because there is insufficient equity at risk to finance the entity’s activities and the entity is structured with non-substantive voting rights. The Company concluded it is not the primary beneficiary of this VIE since it does not have the power to direct the activities that most significantly impact the entity’s economic performance and will account for its investment under the equity method of accounting.  
The Company’s maximum exposure to loss as a result of its involvement with this VIE is limited to the carrying value of the investment in Pacific Oak Opportunity Zone Fund I which totaled $21.3 million as of June 30, 2020.