INVESTMENT IN UNCONSOLIDATED VENTURES

As of September 30, 2014, the Company held ownership interests in 17 unconsolidated Real Estate Ventures, of which $197.5 million is included in assets and $1.2 million is included in other liabilities relating to the negative investment balance of one real estate venture. The Company formed or acquired interests in these ventures with unaffiliated third parties to develop or manage office properties or to acquire land in anticipation of possible development of office or residential properties. As of September 30, 2014, 11 of the Real Estate Ventures owned 58 office buildings that contain an aggregate of approximately 6.1 million net rentable square feet; two Real Estate Ventures owned 3.8 acres of undeveloped parcels of land; three Real Estate Venture owned 21.8 acres of land under development; one Real Estate Venture owned a residential tower that contains 345 apartment units and one Real Estate Venture owned a hotel property that contains 137 rooms in Conshohocken, PA.

The Company accounts for its unconsolidated interests in its Real Estate Ventures using the equity method. The Company’s unconsolidated interests range from 20% to 65%, subject to specified priority allocations of distributable cash in certain of the Real Estate Ventures.

The amounts reflected in the following tables (except for the Company’s share of equity and income) are based on the historical financial information of the individual Real Estate Ventures. The Company does not record operating losses of a Real Estate Venture in excess of its investment balance unless the Company is liable for the obligations of the Real Estate Venture or is otherwise committed to provide financial support to the Real Estate Venture.

The following is a summary of the financial position of the Real Estate Ventures as of September 30, 2014 and December 31, 2013 (in thousands):



	September 30, 2014			December 31, 2013
Net property	$	1,140,798		$	965,475
Other assets	166,020			164,152
Other liabilities	59,690			49,442
Debt	852,636			699,860
Equity	394,492			380,325

Company’s share of equity (Company’s basis) (a)	197,539		(b)	180,512

(a) This amount includes the effect of the basis difference between the Company's historical cost basis and the basis recorded at the Real Estate Venture level, which is typically amortized over the life of the related assets and liabilities. Basis differentials occur from the impairment of investments, purchases of third party interests in existing Real Estate Ventures and upon the transfer of assets that were previously owned by the Company into a Real Estate Venture. In addition, certain acquisition, transaction and other costs may not be reflected in the net assets at the Real Estate Venture level.

(b) Does not include the negative investment balance of one real estate venture totaling $1.2 million as of September 30, 2014, which is included in other liabilities.

The Company held interests in 17 Real Estate Ventures containing an aggregate of approximately 6.1 million net rentable square feet as of the three and nine-month periods ended September 30, 2014 and 17 Real Estate Ventures containing an aggregate of approximately 6.2 million net rentable square feet as of the three and nine-month periods ended September 30, 2013. The following is a summary of results of operations of the Real Estate Ventures in which the Company had interests during these periods (in thousands):



	Three-month periods ended September 30,						Nine-month periods ended September 30,
	2014			2013			2014			2013
Revenue	$	37,446		$	30,684		$	106,905		$	108,500
Operating expenses	(15,433		)	(13,199		)	(44,257		)	(48,671		)
Interest expense, net	(9,245		)	(9,223		)	(26,234		)	(28,167		)
Depreciation and amortization	(13,552		)	(9,893		)	(40,423		)	(33,778		)
Net loss	(784		)	(1,631		)	(4,009		)	(2,116		)
Company’s share of income (loss) (Company’s basis)	(486		)	714			(733		)	3,757

Austin Venture - The Crossings

On July 31, 2014, the Austin Venture completed the acquisition of the Crossings at Lakeline, comprised of two 3-story buildings containing 232,274 rentable square feet located in Austin, TX for $48.2 million. The transaction was funded with $34.5 million of mortgage loan proceeds and $12.8 million (net of $0.9 million in purchase adjustments) of cash contributions, with $6.4 million from each of DRA and the Company. The fixed rate mortgage loan was financed through a non-affiliated third party. The Austin Venture incurred approximately $0.1 million of transaction costs to acquire the property. The Austin Venture expensed the acquisition costs and allocated the purchase price of the property, net of $0.6 million credit from the seller.

Based on the facts and circumstances of this acquisition, the consummation of the acquisition did not cause the Austin Venture to become a VIE to the Company. Accordingly, the Company continues to assess the consolidation of the Austin Venture under the voting interest model and its investment continues to be accounted for under the equity method of accounting.

Austin Venture - Four Points Centre

On April 3, 2014, the Company contributed two 3-story, Class A office buildings, containing an aggregate of 192,396 net rentable square feet, known as Four Points Centre in Austin, Texas to the Austin Venture. See Note 3 for further information on the contribution.

Guarantees

As of September 30, 2014, the Company had provided guarantees on behalf of certain real estate ventures, consisting of (i) a $24.7 million payment guarantee on the construction loan for the project being undertaken by evo at Cira; (ii) a $3.2 million payment guarantee on the construction loan for the development project being undertaken by TB-BDN Plymouth Apartments; and (iii) a $0.5 million payment guarantee on a loan provided to PJP VII. In addition, during construction undertaken by Real Estate Ventures, the Company has provided and expects to continue to provide cost overrun and completion guarantees, with rights of contribution among partners in the real estate venture, as well as customary environmental indemnities and guarantees of customary exceptions to nonrecourse provisions in loan agreements. For additional information regarding these real estate ventures, see "Investments in Unconsolidated Ventures" in notes to the audited financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013.