Investments in Unconsolidated Joint Ventures

9 Months Ended

Sep. 30, 2019

Equity Method Investments And Joint Ventures [Abstract]

Investments in Unconsolidated Joint Ventures

5.	Investments in Unconsolidated Joint Ventures

On February 7, 2019, we completed the acquisition of 111 Sutter Street, a 293,000 square foot office building in San Francisco, California. Simultaneously with closing, we brought in a joint venture partner to acquire 51.0% of the equity interest. We have retained the remaining 49.0% equity interest and manage and lease the asset. The purchase price was $227,000,000. In connection with the acquisition, the joint venture completed a $138,200,000 financing of the property. The four-year loan is interest only at LIBOR plus 215 basis points and has three one-year extension options. We began accounting for our investment in 111 Sutter Street, under the equity method, from the date of the acquisition.

Prior to 2019, our consolidated Residential Development Fund (“RDF”), in which we have a 7.4% interest, owned a 25.0% economic interest in One Steuart Lane, a residential condo development project (the “project”) in San Francisco, California. Accordingly, prior to 2019, our economic interest in the project was 1.85%. In March 2019 and again in September 2019, RDF acquired an additional 10.0% economic interest in the project, in two separate transactions, for an aggregate of $19,110,000. Subsequent to these transactions, RDF’s economic interest in the project increased to 35.0% and our economic interest (based on our 7.4% ownership) increased to 2.6%. We continue to consolidate our 7.4% interest in RDF and reflect the 92.6% interest we do not own, as “noncontrolling interests” in our consolidated financial statements.

On August 21, 2019, we acquired a 44.1% equity interest in a joint venture that owns 55 Second Street, a 384,000 square foot Class A office building in San Francisco, California. The transaction valued the property at $401,700,000. In connection with the acquisition, the joint venture assumed the existing $137,500,000 mortgage loan and upsized it by an additional $50,000,000. The $187,500,000 mortgage loan is interest-only at a fixed rate of 3.88% and matures in October 2026. We began accounting for our investment in 55 Second Street, under the equity method of accounting from the date of the acquisition.

The following tables summarize our investments in unconsolidated joint ventures as of the dates thereof and the income or loss from these investments for the periods set forth below.

(Amounts in thousands)	Paramount	As of
Our Share of Investments:	Ownership	September 30, 2019		December 31, 2018
712 Fifth Avenue ⁽¹⁾	50.0%	$	-	$	-
111 Sutter Street	49.0%		42,625		-
55 Second Street ⁽²⁾	44.1%		95,874		-
60 Wall Street ⁽²⁾	5.0%		20,425		22,353
One Steuart Lane ⁽²⁾	35.0% ⁽³⁾		69,545		52,923	⁽⁴⁾
Oder-Center, Germany ⁽²⁾	9.5%		3,514		3,587
Investments in unconsolidated joint ventures		$	231,983	$	78,863

	For the Three Months Ended							For the Nine Months Ended
(Amounts in thousands)	September 30,							September 30,
Our Share of Net (Loss) Income:	2019				2018			2019				2018
712 Fifth Avenue ⁽¹⁾	$	373			$	558		$	1,290			$	3,166
111 Sutter Street		(1,266	)			-			(3,387	)	⁽⁵⁾		-
55 Second Street ⁽²⁾		(336	)	⁽⁵⁾		-			(336	)	⁽⁵⁾		-
60 Wall Street ⁽²⁾		(138	)			(116	)		(436	)			(291	)
One Steuart Lane ⁽²⁾		1				-			(6	)			(18	)
Oder-Center, Germany ⁽²⁾		34				30			60				74
(Loss) income from unconsolidated joint ventures	$	(1,332	)		$	472		$	(2,815	)		$	2,931

⁽¹⁾

^{As of September 30, 2019, our basis in the partnership that owns 712 Fifth Avenue, was negative $18,647 resulting from distributions made to us in excess of our share of earnings recognized. Accordingly, we no longer recognize our proportionate share of earnings from the venture because we have no further obligation to fund additional capital to the venture. Instead, we only recognize earnings to the extent we receive cash distributions from the venture.}

⁽²⁾

^{As of September 30, 2019, the carrying amount of our investments in 55 Second Street, 60 Wall Street, One Steuart Lane and Oder-Center is greater than our share of equity in these investments by $499, $2,728, $969 and $4,786, respectively, and primarily represents the unamortized portion of our capitalized acquisition costs. Basis differences allocated to depreciable assets are being amortized into “(loss) income from unconsolidated joint ventures” over the estimated useful life of the related assets.}

⁽³⁾	^{Represents RDF’s economic interest in One Steuart Lane.}

⁽⁴⁾

^{Includes a $7,086 basis adjustment which was recorded upon the adoption of ASU 2017-05 on January 1, 2018.}

⁽⁵⁾

^{Represents our share of earnings from the date of acquisition through September 30, 2019.}

The following tables provide the combined summarized financial information of 712 Fifth Avenue, 111 Sutter Street, 55 Second Street and 60 Wall Street as of the dates and for the periods set forth below.

(Amounts in thousands)	As of
Balance Sheets:	September 30, 2019		December 31, 2018
Real estate, net	$	1,645,769	$	1,055,240
Intangible assets, net		121,687		97,658
Other assets		95,341		84,864
Total assets	$	1,862,797	$	1,237,762

Notes and mortgages payable, net	$	1,192,646	$	866,079
Intangible liabilities, net		25,610		-
Other liabilities		24,580		15,177
Total liabilities		1,242,836		881,256
Equity		619,961		356,506
Total liabilities and equity	$	1,862,797	$	1,237,762


(Amounts in thousands)	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
Income Statements:	2019			2018			2019			2018
Revenues:
Rental revenue	$	39,359		$	34,088		$	111,981		$	102,666
Fee and other income		267			125			617			371
Total revenues		39,626			34,213			112,598			103,037
Expenses:
Operating expenses		17,065			13,090			46,060			38,873
Depreciation and amortization		17,156			11,898			46,166			35,888
Total expenses		34,221			24,988			92,226			74,761
Other income (expense):
Interest and other income, net		179			192			478			559
Interest and debt expense		(12,673	)		(9,820	)		(36,046	)		(28,209	)
Net (loss) income before income taxes		(7,089	)		(403	)		(15,196	)		626
Income tax benefit		2			-			2			-
Net (loss) income	$	(7,087	)	$	(403	)	$	(15,194	)	$	626