6.Real Estate Fund Investments

Unconsolidated Real Estate Funds

Alternative Investment Fund

We are the general partner and investment manager of Paramount Group Real Estate Fund VIII L.P. (“Fund VIII”), an Alternative Investment Fund, which invests in mortgage and mezzanine loans and preferred equity investments. Fund VIII completed its final closing in April 2016 with $775,200,000 in capital commitments, of which $369,950,000 has been called and substantially invested as of December 31, 2017. These investments have various stated interest rates ranging from 5.50% to 9.61% and maturities ranging from October 2018 to December 2027. Fund VIII’s investment period is scheduled to end in April 2019, unless extended by us until April 2020. As of December 31, 2017, our ownership interest in Fund VIII was approximately 1.3%.

Property Funds

We are the general partner and investment manager of Paramount Group Real Estate Fund VII, L.P. (“Fund VII”) and its parallel fund, Paramount Group Real Estate Fund VII-H, L.P. (“Fund VII-H”). During 2017, certain other property funds, of which we were the general partner and investment manager, sold their interests in the underlying properties as more fully described below. The following is a summary of the property funds, our ownership interests in these funds and the funds’ ownership interest in the underlying properties as of December 31, 2017 and 2016.

		As of December 31,
		2017			2016
	Paramount	0 Bond Street			60 Wall Street ⁽¹⁾			One Market Plaza ⁽²⁾			50 Beale Street ⁽³⁾			0 Bond Street
	Ownership	0 Bond Street			60 Wall Street ⁽¹⁾			One Market Plaza ⁽²⁾			50 Beale Street ⁽³⁾			0 Bond Street
Fund II	10.0%		-			46.3	%		-			-			-
Fund III	3.1%		-			16.0	%		2.0	%		-			-
Fund VII/VII-H	7.2%		100.0	%		-			-			42.8	%		100.0	%
Total Property Funds			100.0	%		62.3	%		2.0	%		42.8	%		100.0	%
Other Investors			-			37.7	%		98.0	%		57.2	%		-
Total			100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

⁽¹⁾

On January 24, 2017, Fund II and Fund III, together with the other investors sold their interest in 60 Wall Street to a newly formed joint venture, in which we have a 5.0% ownership interest. Accordingly, beginning on January 24, 2017, we account for our investment in 60 Wall Street under the equity method. See Note 5, Investments in Unconsolidated Joint Ventures.

⁽²⁾	On December 13, 2017, Fund III sold its 2.0% interest in One Market Plaza to a third party investor.

⁽³⁾	On July 17, 2017, Fund VII and Fund VII-H completed the sale of their 42.8% interest in 50 Beale to us and a new joint venture, in which we have a 36.6% ownership interest. See Note 3, Acquisitions.

The following tables summarize our investments in these unconsolidated real estate funds as of December 31, 2017 and 2016, and income or loss recognized from these investments for the years ended December 31, 2017 and 2016.

	As of December 31,
(Amounts in thousands)	2017		2016
Our Share of Investments:
Property funds	$	2,429	$	22,811
Alternative investment fund		4,824		5,362
Investments in unconsolidated real estate funds	$	7,253	$	28,173


	For the Year Ended December 31,
(Amounts in thousands)	2017			2016
Our Share of Net Loss:
Net investment income (loss)	$	236		$	(324	)
Net realized loss		(126	)		-
Net unrealized loss		(663	)		(1,706	)
Carried interest		(5,590	)		1,532
Loss from unconsolidated real estate funds ⁽¹⁾	$	(6,143	)	$	(498	)

⁽¹⁾

Excludes asset management and other fee income from real estate funds, which is included as a component of “fee and other income” on our consolidated statements of income for the years ended December 31, 2017 and 2016.

The following tables provide the summarized financial information of our unconsolidated real estate funds as of the dates and for the periods set forth below.


(Amounts in thousands)	As of December 31,
Balance Sheets:	2017		2016
Real estate investments	$	405,931	$	639,609
Cash and cash equivalents		5,076		7,608
Other assets		74		152
Total assets	$	411,081	$	647,369

Other liabilities	$	1,308	$	1,931
Total liabilities		1,308		1,931
Equity		409,773		645,438
Total liabilities and equity	$	411,081	$	647,369

(Amounts in thousands)	For the Year Ended December 31,
Income Statements:	2017			2016
Investment income	$	29,013		$	20,484
Investment expenses		7,086			7,466
Net investment income		21,927			13,018
Net realized losses		(72,134	)		-
Previously recorded unrealized losses		35,682			-
Net unrealized (losses) gains		(6,266	)		14,275
(Loss) income from real estate fund investments	$	(20,791	)	$	27,293

Consolidated Real Estate Funds

Prior to January 1, 2016, our real estate funds were consolidated into our consolidated financial statements and accordingly 100% of the income or loss from our real estate funds was reported as “income from real estate fund investments” and the noncontrolling share of such income or loss was reflected as “net (income) loss attributable to noncontrolling interests in consolidated real estate funds”. On January 1, 2016, we adopted ASU 2015-02 using the modified retrospective method, which required us to deconsolidate all of our real estate funds that were previously accounted for at fair value, except for RDF, which is accounted for at historical cost and continues to be consolidated into our consolidated financial statements. The following table sets forth the details of income from these funds, including our share thereof.

	For the
	Year Ended
(Amounts in thousands)	December 31, 2015
Net investment income	$	12,274
Net realized gains		13,884
Previously recorded unrealized gains on exited investments		(6,584	)
Net unrealized gains		18,401
Income from real estate fund investments ⁽¹⁾		37,975
Less: noncontrolling interests in consolidated real estate funds ⁽²⁾		(24,896	)
Income from real estate fund investments attributable to Paramount Group, Inc.	$	13,079

⁽¹⁾

Represents income from our real estate funds that were consolidated during 2015, including Fund II, Fund III, Fund VII, Fund VII-H, Fund VIII, Paramount Group Real Estate Special Situations Fund L.P., Paramount Group Real Estate Special Situations Fund-A L.P. and Paramount Group Real Estate Special Situations Fund-H L.P.

⁽²⁾

Includes $5,481 of asset management fee income that was reflected as a reduction of the amounts attributable to noncontrolling interests for the year ended December 31, 2015.