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INVESTMENT IN UNCONSOLIDATED JOINT VENTURES
 9 Months Ended
Sep. 30, 2020
Equity Method Investments and Joint Ventures [Abstract]  
INVESTMENT IN UNCONSOLIDATED JOINT VENTURES INVESTMENT IN UNCONSOLIDATED JOINT VENTURES
As of September 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 September 30, 2020Investment Balance at
Joint VentureLocationOwnership %September 30, 2020December 31, 2019
NIP Joint Venture———$— $1,225 
110 William Joint Venture1New York, New York60.0%— — 
353 Sacramento Joint Venture1San Francisco, California55.0%43,790 42,214 
Battery Point Series A-3 Preferred UnitsN/AN/AN/A— 13,991 
Pacific Oak Opportunity Zone Fund I3VariousN/A20,891 20,846 
PORT II OP LP7Southaven, MississippiN/A5,005 — 
$69,686 $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 September 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 nine months ended September 30, 2020, the NIP Joint Venture sold the remaining properties. During the nine months ended September 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 nine months ended September 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 September 30, 2020 and December 31, 2019, the book value of the Company’s investment in the 110 William Joint Venture was $0. During the nine months ended September 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 nine months ended September 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 nine months ended September 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 nine months ended September 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):
September 30, 2020December 31, 2019
Assets:
       Real estate assets, net of accumulated depreciation and amortization$247,304 $242,430 
       Other assets43,178 35,747 
       Total assets$290,482 $278,177 
Liabilities and equity:
       Notes payable, net$312,664 $292,221 
       Other liabilities8,257 10,664 
       Partners’ deficit(30,439)(24,708)
Total liabilities and equity$290,482 $278,177 

Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Revenues$10,005 $9,274 $26,604 $26,975 
Expenses:
       Operating, maintenance, and management2,096 2,367 5,994 6,818 
       Real estate taxes and insurance1,935 1,818 5,580 5,248 
       Depreciation and amortization3,139 2,946 8,721 8,449 
       Interest expense4,125 4,084 12,093 12,816 
Total expenses11,295 11,215 32,388 33,331 
Total other income12 34 50 105 
Net loss$(1,278)$(1,907)$(5,734)$(6,251)
Company’s share of net loss (1)
$(767)$(1,144)$(3,440)$(3,751)
_____________________
(1) During the three and nine months ended September 30, 2019, the Company recorded $0 and $0.3 million of net losses in equity in income of unconsolidated entities and suspended the recording of the Company’s remaining share of net losses. During the three and nine months ended September 30, 2020, the Company did not record equity in income of unconsolidated entities.
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):
September 30, 2020December 31, 2019
Assets:
       Real estate assets, net of accumulated depreciation and amortization$183,176 $180,592 
       Other assets18,434 21,822 
       Total assets$201,610 $202,414 
Liabilities and equity:
       Notes payable, net$115,500 $115,280 
       Other liabilities7,507 11,193 
       Partners’ capital78,603 75,941 
Total liabilities and equity$201,610 $202,414 

Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Revenues$5,520 $3,933 $15,771 $12,278 
Expenses:
       Operating, maintenance, and management932 923 2,450 2,693 
       Real estate taxes and insurance755 700 2,235 2,095 
       Depreciation and amortization1,894 1,718 5,135 4,849 
       Interest expense948 1,420 3,290 4,286 
Total expenses4,529 4,761 13,110 13,923 
Net income (loss)$991 $(828)$2,661 $(1,645)
Company’s equity in income (loss) of unconsolidated joint venture$583 $(419)$1,576 $(798)
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.
On July 1, 2020, the Company acquired, through its subsidiaries, Battery Point. As a result of the Battery Point acquisition, the Company’s 640,000 shares of Battery Point Series A-3 Preferred Units were eliminated in consolidation. During the nine months ended September 30, 2020 and 2019, the Company received distributions of $0.9 million and $0.2 million, respectively, which were recognized as dividend income from real estate equity securities.
Prior to the acquisition of Battery Point, the Company accounted for its investment in the Battery Point A-3 Preferred Units as an equity-method investment. The acquisition-date carrying value of the previous equity interest was $14.0 million and is included in the measurement of the consideration transferred. The Company recognized a gain of $2.0 million as a result of remeasuring its prior equity interest in the Battery Point A-3 Preferred Units held before the acquisition. The gain is included in the line item “Gain from remeasurement of prior equity interest” in the consolidated statement of operations.
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 September 30, 2020, Pacific Oak Opportunity Zone Fund I consolidated three joint ventures with real estate under development. As of September 30, 2020, the Company has concluded that Pacific Oak Opportunity Zone Fund I qualifies as a 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 $20.9 million as of September 30, 2020. During both of the three and nine months ended September 30, 2020, the Company recorded $0.6 million of net loss in equity in income of unconsolidated entities.