ORM Timber Fund II, Inc. (Fund II), ORM Timber Fund III (REIT) Inc. (Fund III), and ORM Timber Fund IV LLC (Fund IV), collectively “the Funds”, were formed by Olympic Resource Management LLC (ORMLLC), a wholly owned subsidiary of the Partnership, for the purpose of raising capital to purchase timberlands. The objective of these Funds is to generate a return on investments through the acquisition, management, value enhancement, and sale of timberland properties. Each fund is organized to operate for a specific term from the end of its respective investment period; ten years for each of Fund II and Fund III and fifteen years for Fund IV. Fund II and Fund III are scheduled to terminate in March 2021 and December 2025, respectively. Fund IV will terminate on the fifteenth anniversary of its investment period. Fund IV’s investment period will end on the earlier of placement of all committed capital or December 31, 2019, subject to certain extension provisions.

Pope Resources and ORMLLC together own 20% of Fund II, 5% of Fund III, and 15% of Fund IV. The Funds are considered variable interest entities because their organizational and governance structures are the functional equivalent of a limited partnership. As the managing member of the Funds, the Partnership is the primary beneficiary of each of the Funds as it has the authority to direct the activities that most significantly impact their economic performance, as well as the right to receive benefits and the obligation to absorb losses that could potentially be significant to the Funds. Accordingly, the Funds are consolidated into the Partnership’s financial statements. Additionally, the obligations of each of the Funds are non-recourse to the Partnership.

In January 2017, Fund II closed on the sale of one of its tree farms, located on the Oregon coast, for $26.5 million. The carrying value of this tree farm, consisting of $11.1 million for timber and roads and $2.8 million for land, is reflected in land and timber held for sale on the consolidated balance sheets as of December 31, 2016. The consolidated pretax results generated by this tree farm were losses of $24,000 and $89,000 for the quarter and nine months ended September 30, 2016, respectively, and a gain on sale of $12.5 million for the nine months ended September 30, 2017. The Partnership’s share of these pretax results were losses of $5,000 and $18,000 for the quarter and nine months ended September 30, 2016, respectively, and a gain on sale of $2.5 million for the nine months ended September 30, 2017.

The Partnership’s condensed consolidated balance sheets include assets and liabilities of the Funds as of September 30, 2017 and December 31, 2016, which were as follows:



(in thousands)	September 30, 2017		December 31, 2016
Assets:
Cash	$	2,960	$	1,066
Land and timber held for sale	—		13,941
Other current assets	1,489		2,195
Total current assets	4,449		17,202
Properties and equipment, net of accumulated depletion and depreciation (2017 - $48,238; 2016 - $38,306)	240,019		249,197
Total assets	$	244,468	$	266,399
Liabilities and equity:
Current liabilities	$	2,437	$	2,256
Long-term debt, net of unamortized debt issuance costs	57,285		57,268
Total liabilities	59,722		59,524
Funds’ equity	184,746		206,875
Total liabilities and equity	$	244,468	$	266,399