Investments in and Advances to Unconsolidated Real Estate Ventures

12 Months Ended

Dec. 31, 2019

Equity Method Investments and Joint Ventures [Abstract]

Investments in and Advances to Unconsolidated Real Estate Ventures

Investments in Unconsolidated Real Estate Ventures

The following is a summary of the composition of our investments in unconsolidated real estate ventures:



	Ownership Interest ⁽¹⁾	December 31,
Real Estate Venture Partners	Ownership Interest ⁽¹⁾	2019		2018
		(In thousands)
Prudential Global Investment Management ("PGIM")	50.0%	$	215,624	$	—
CPPIB	55.0%	109,911		97,521
Landmark	1.8% - 49.0%	77,944		84,320
CBREI Venture	5.0% - 64.0%	68,405		73,776
Berkshire Group	50.0%	46,391		43,937
Brandywine	30.0%	13,830		13,777
CIM Group ("CIM") and Pacific Life Insurance Company ("PacLife")	16.7%	10,385		9,339
Other		536		208
Total investments in unconsolidated real estate ventures		$	543,026	$	322,878

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⁽¹⁾	Ownership interests as of December 31, 2019. We have multiple investments with certain venture partners with varying ownership interests.

We provide leasing, property management and other real estate services to our unconsolidated real estate ventures. We recognized revenue, including expense reimbursements, of $28.5 million, $26.1 million and $12.9 million for each of the three years in the period ended December 31, 2019 for such services.

PGIM

In December 2019, we sold a 50.0% interest in a real estate venture that owns Central Place Tower, a 552,000 square foot office building located in Arlington, Virginia, to PGIM for the gross sales price of $220.0 million. Per the terms of the venture agreement, we determined the venture was not a VIE and we do not have a controlling financial interest in the venture. As a result, we deconsolidated our remaining 50.0% interest in the real estate venture and recorded a gain as our unconsolidated interest was increased to reflect its fair value. We recognized an aggregate $53.4 million gain, net of certain liabilities, recorded as "Gain on sale of real estate" in our statement of operations for the year ended December 31, 2019, on the partial sale and remeasurement of our remaining interest in the real estate venture subsequent to the transfer of control.

CPPIB

As of December 31, 2019 and 2018, we had a zero investment balance in the real estate venture that owns 1101 17th Street and had suspended the equity method of accounting for the venture since June 30, 2018. We will recognize as income any future distributions from the venture until our share of unrecorded earnings and contributions exceeds the cumulative excess distributions previously recognized in income. During the years ended December 31, 2019 and 2018, we recognized income of $6.4 million and $8.3 million related to distributions from this venture, which was included in "Income (loss) from unconsolidated real estate ventures, net" in our statement of operations. During the year ended December 31, 2018, we also recognized the $5.4 million negative investment balance as income within "Income (loss) from unconsolidated real estate ventures, net" in our statement of operations as a result of the venture refinancing a mortgage payable collateralized by the property and eliminating certain principal guaranty provisions that had been included in a prior loan.

In December 2018, our unconsolidated real estate venture with CPPIB sold The Warner, a 583,000 square foot office building located in Washington, D.C., for $376.5 million. In connection with the sale, the unconsolidated real estate venture recognized a gain on sale of $32.5 million, of which our proportionate share was $20.6 million, which was included in "Income (loss) from unconsolidated real estate ventures, net" in our statement of operations for the year ended December 31, 2018. Additionally, in connection with the sale, our unconsolidated real estate venture repaid the related mortgage payable of $270.5 million.

In February 2018, we entered into a real estate venture with CPPIB to develop and own 1900 N Street, an under construction commercial asset in Washington, D.C. We contributed 1900 N Street, valued at $95.9 million, to the real estate venture, and CPPIB committed to contribute approximately $101.3 million to the venture for a 45.0% interest, which reduced our ownership interest from 100.0% at the real estate venture's formation to 55.0% as CPPIB's contributions were funded.

CIM and PacLife

In January 2018, we invested $10.1 million for a 16.67% interest in a real estate venture with CIM and PacLife, which purchased the 1,152-key Wardman Park hotel, located adjacent to the Woodley Park Metro Station in northwest Washington, D.C. Prior to the acquisition by this venture, the JBG Legacy Funds owned a 47.64% interest in the Wardman Park hotel. The JBG Legacy Funds did not receive any proceeds from the sale, as the net proceeds were used to satisfy the prior mortgage debt. A third-party asset manager oversees the hotel operations on behalf of the venture and our involvement will increase only to the extent a land development opportunity becomes the primary business plan for the asset.

JP Morgan

In August 2018, JP Morgan, our former partner in the real estate venture that owned the Investment Building, a 401,000 square foot office building located in Washington, D.C., acquired our 5.0% interest in the venture for $24.6 million, resulting in a gain of $15.5 million, which was included in "Income (loss) from unconsolidated real estate ventures, net" in our statement of operations for the year ended December 31, 2018.

The following is a summary of the debt of our unconsolidated real estate ventures:



	Weighted Average Effective Interest Rate ⁽¹⁾	December 31,
	Weighted Average Effective Interest Rate ⁽¹⁾	2019			2018
		(In thousands)
Variable rate ⁽²⁾	4.10%	$	629,479		$	461,704
Fixed rate ⁽³⁾	3.98%	561,236			665,662
Unconsolidated real estate ventures - mortgages payable		1,190,715			1,127,366
Unamortized deferred financing costs		(2,859		)	(1,998		)
Unconsolidated real estate ventures - mortgages payable, net ⁽⁴⁾		$	1,187,856		$	1,125,368

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⁽¹⁾	Weighted average effective interest rate as of December 31, 2019.


⁽²⁾	Includes variable rate mortgages payable with interest rate cap agreements.


⁽³⁾	Includes variable rate mortgages payable with interest rates fixed by interest rate swap agreements.


⁽⁴⁾	See Note 19 for additional information on guarantees of the debt of certain of our unconsolidated real estate ventures.

The following is a summary of the financial information for our unconsolidated real estate ventures:



	December 31,
	2019		2018
Combined balance sheet information:	(In thousands)
Real estate, net	$	2,493,961	$	2,050,985
Other assets, net ⁽¹⁾	291,092		169,264
Total assets	$	2,785,053	$	2,220,249

Borrowings, net	$	1,187,856	$	1,125,368
Other liabilities, net ⁽¹⁾	168,243		94,845
Total liabilities	1,356,099		1,220,213
Total equity	1,428,954		1,000,036
Total liabilities and equity	$	2,785,053	$	2,220,249

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⁽¹⁾	On January 1, 2019, our unconsolidated real estate ventures adopted Topic 842, which required the ventures to record operating right-of-use assets totaling $52.4 million and related lease liabilities totaling $44.1 million.



	Year Ended December 31,
	2019			2018			2017
Combined income statement information:	(In thousands)
Total revenue	$	266,653		$	300,032		$	135,256
Operating income ⁽¹⁾	18,041			56,262			14,741
Net loss	(32,507		)	(1,155		)	(7,593		)

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⁽¹⁾

Includes gain on sale of The Warner of $32.5 million recognized by our unconsolidated real estate venture with CPPIB during the year ended December 31, 2018.