3.	Real Estate Fund Investments

Real estate fund investments are presented at fair value on our consolidated balance sheets and are comprised of (i) Property Funds and (ii) Alternative Investment Funds.

The Company

Below is a summary of the fair value of fund investments on our consolidated balance sheet.


(Amounts in thousands)	As of
Balance Sheet	June 30, 2015		December 31, 2014
Real Estate Fund Investments:
Property Funds	$	193,081	$	183,216
Alternative Investment Funds		142,464		140,171
Total	$	335,545	$	323,387

Below is a summary of the fair value of fund investments on our consolidated statement of income.


(Amounts in thousands)	Three Months Ended		Six Months Ended
Income Statement	June 30, 2015		June 30, 2015
Investment income	$	2,853	$	7,348
Investment expenses		45		191
Net investment income		2,808		7,157
Net unrealized gains		11,264		12,136
Income from real estate fund investments	$	14,072	$	19,293

Property Funds

The purpose of the Property Funds is to invest in office buildings and related facilities primarily in New York City, Washington, D.C. and San Francisco. As of June 30, 2015, the Property Funds were comprised of (i) Fund II, (ii) Fund III, (iii) Fund VII and (iv) Fund VII-H.

The following is a summary of the investments of our Property Funds.

				As of June 30, 2015
	% Ownership			60 Wall Street			One Market Plaza				50 Beale Street
Fund II		10.0	%		46.3	%		-				-
Fund III		3.1	%		16.0	%		2.0	%			-
Fund VII/VII-H ⁽¹⁾		7.2	%		-			-				42.8	%
Total Property Funds					62.3	%		2.0	%			42.8	%
Other Investors					37.7	%		98.0	%	⁽²⁾		57.2	%
Total					100.0	%		100.0	%			100.0	%

⁽¹⁾

As of June 30, 2015, Fund VII and Fund VII-H had an aggregate of $57,600,000 of committed capital that had not yet been invested. On July 10, 2015, Fund VII and Fund VII-H entered into an agreement to acquire 670 Broadway, a 77,480 square foot office building located in the NoHo submarket of Manhattan, for $112,000,000.

⁽²⁾	Includes a 49.0% direct ownership interest held by us.

Alternative Investment Funds

The purpose of the Alternative Investment Funds is to invest primarily in real estate related debt and preferred equity investments. As of June 30, 2015, the Alternative Investment Funds were comprised of (i) PGRESS, (ii) PGRESS-H, (iii) PGRESS-A and (iv) Fund VIII, which had an aggregate of $580,200,000 of committed capital (including $95,200,000 of capital which was committed in the second quarter), of which we have invested $51,000,000.

The following is a summary of the investments of our Alternative Investment Funds.


(Amounts in thousands)		%	Interest/			As of
Fund	Investment Type	Ownership	Dividend Rate		Initial Maturity	June 30, 2015		December 31, 2014
Fund VIII	Mezzanine Loan	1.7%		8.3%	Jan-2022	$	46,747	$	45,947
PGRESS Funds	Preferred Equity Investments	4.9% - 5.4%	10.3% - 15.0%		Sep-2015 - Feb-2019		95,717		94,224
						$	142,464	$	140,171

The Predecessor

Below is a summary of realized and unrealized gains from real estate fund investments on our consolidated statement of income.


(Amounts in thousands)	Three Months Ended		Six Months Ended
Income Statement	June 30, 2014		June 30, 2014
Realized gains on real estate fund investments	$	-	$	-
Unrealized gains on real estate fund investments		33,750		79,917
Realized and unrealized gains, net	$	33,750	$	79,917

Asset Management Fees

Our predecessor earned asset management fees from the Funds it managed. Asset management fees and expenses related to Funds included in the combined consolidated statement of income are eliminated in combination and consolidation. The limited partners’ share of such fees are reflected as a reduction of net income attributable to noncontrolling interests, which results in a corresponding increase in net income attributable to our Predecessor.

Below is a summary of the asset management fees earned by our Predecessor.


(Amounts in thousands)	Three Months Ended			Six Months Ended
Income Statement	June 30, 2014			June 30, 2014
Gross asset management fees	$	7,527		$	14,937
Eliminated fees⁽¹⁾		(392	)		(782	)
Net asset management fees	$	7,135		$	14,155

⁽¹⁾	Eliminated fees reflect a reduction in asset management fees from the general partner interest in each of the Funds.

The following tables summarize the income statements for the three and six months ended June 30, 2014 for each of the Property Funds’ underlying investments.

(Amounts in thousands)	Property Funds' Underlying Investments for the Three Months Ended June 30, 2014
Statements of Income	1633 Broadway			900 Third Ave			31 West 52nd St			1301 Ave of the Americas			One Market Plaza			Liberty Place			1899 Penn. Ave			2099 Penn. Ave			425 Eye St
Revenues:
Rental income	$	37,251		$	8,982		$	18,122		$	27,139		$	17,910		$	1,690		$	1,940		$	43		$	2,642
Tenant reimbursement income		3,096			751			1,300			2,318			273			563			967			1			83
Fee and other income		702			168			1,333			1,087			681			9			28			7			(179	)
Total revenue		41,049			9,901			20,755			30,544			18,864			2,262			2,935			51			2,546
Expenses:
Building operating		13,268			4,038			5,774			13,008			6,836			1,086			1,348			1,143			1,390
Related party management fees		784			261			329			427			177			61			66			1			79
Operating		14,052			4,299			6,103			13,435			7,013			1,147			1,414			1,144			1,469
Depreciation and amortization		2,780			2,144			5,545			9,341			8,682			-			940			-			1,398
General and administrative		10			24			7			24			281			11			11			12			107
Total expenses		16,842			6,467			11,655			22,800			15,976			1,158			2,365			1,156			2,974
Operating income (loss)		24,207			3,434			9,100			7,744			2,888			1,104			570			(1,105	)		(428	)
Unrealized gain on interest rate swaps		5,665			1,169			1,686			2,872			3,529			-			-			-			-
Interest and debt expense		(12,894	)		(3,696	)		(5,564	)		(15,379	)		(13,334	)		(945	)		(1,129	)		(1,380	)		(1,301	)
Unrealized depreciation on investment in real estate		-			-			-			-			-			(459	)		-			(520	)		-
Net income (loss) before taxes		16,978			907			5,222			(4,763	)		(6,917	)		(300	)		(559	)		(3,005	)		(1,729	)
Income tax benefit (expense)		-			-			-			-			-			(29	)		114			-			24
Net income (loss)	$	16,978		$	907		$	5,222		$	(4,763	)	$	(6,917	)	$	(329	)	$	(445	)	$	(3,005	)	$	(1,705	)

(Amounts in thousands)	Property Funds' Underlying Investments for the Six Months Ended June 30, 2014
Statements of Income	1633 Broadway			900 Third Ave			31 West 52nd St			1301 Ave of the Americas			One Market Plaza			Liberty Place			1899 Penn. Ave			2099 Penn. Ave			425 Eye St
Revenues:
Rental income	$	72,970		$	17,764		$	36,221		$	53,749		$	36,123		$	3,729		$	4,044		$	76		$	5,300
Tenant reimbursement income		5,913			1,514			2,489			4,434			661			1,184			2,107			3			827
Fee and other income		1,224			612			2,615			1,657			2,044			23			56			10			-
Total revenues		80,107			19,890			41,325			59,840			38,828			4,936			6,207			89			6,127
Expenses:
Building operating		26,879			8,083			11,517			25,688			14,001			2,168			2,605			2,223			2,904
Related party management fees		1,485			525			655			837			394			132			141			2			184
Operating		28,364			8,608			12,172			26,525			14,395			2,300			2,746			2,225			3,088
Depreciation and amortization		5,567			3,731			11,074			18,555			17,686			-			1,923			-			2,793
General and administrative		10			31			34			51			294			16			16			399			114
Total expenses		33,941			12,370			23,280			45,131			32,375			2,316			4,685			2,624			5,995
Operating income (loss)		46,166			7,520			18,045			14,709			6,453			2,620			1,522			(2,535	)		132
Unrealized gain on interest rate swaps		12,945			2,935			4,288			6,125			10,444			-			-			-			-
Interest and debt expense		(25,625	)		(7,353	)		(11,069	)		(30,549	)		(27,072	)		(1,890	)		(2,257	)		(2,208	)		(2,520	)
Unrealized depreciation on investment in real estate		-			-			-			-			-			(489	)		-			(530	)		-
Net income (loss) before taxes		33,486			3,102			11,264			(9,715	)		(10,175	)		241			(735	)		(5,273	)		(2,388	)
Income tax benefit (expense)		-			-			-			-			-			(26	)		182			-			(2,315	)
Net income (loss)	$	33,486		$	3,102		$	11,264		$	(9,715	)	$	(10,175	)	$	215		$	(553	)	$	(5,273	)	$	(4,703	)