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INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES
 9 Months Ended
Sep. 30, 2024
Equity Method Investments and Joint Ventures [Abstract]  
INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES
4. INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES
As of September 30, 2024, the Company held ownership interests in thirteen unconsolidated real estate ventures, with a net aggregate investment balance of $602.7 million. As of September 30, 2024, six of the real estate ventures owned properties (directly or through leasehold interests) that contained an aggregate of approximately 9.1 million net rentable square feet of office space; two of the real estate ventures owned 1.4 acres of land held for development; four of the real estate ventures owned 7.5 acres of land in active development; and one of the real estate ventures owned a mixed-used tower comprised of 250 apartment units and 0.2 million net rentable square feet of office/retail space.
The Company accounts for its interests in the unconsolidated real estate ventures, which range from 5% to 78%, using the equity method. Certain of the unconsolidated real estate ventures are subject to specified priority allocations of distributable cash, including cash from operations and cash from capital events, such as sales of properties.
The Company earned management fees from the unconsolidated real estate ventures of $2.2 million and $2.1 million for the three months ended September 30, 2024 and 2023, respectively, and $5.9 million and $6.2 million for the nine months ended September 30, 2024 and 2023, respectively.
The Company earned leasing commissions from the unconsolidated real estate ventures of $0.2 million and $1.5 million for the three months ended September 30, 2024 and 2023, respectively, and $1.7 million and $2.9 million for the nine months ended September 30, 2024 and 2023, respectively.
The Company had outstanding accounts receivable balances from the unconsolidated real estate ventures of $4.6 million and $3.5 million as of September 30, 2024 and December 31, 2023, respectively.
The amounts reflected in the following tables (except for the Company’s share of equity in income) are based on the financial information of the individual unconsolidated real estate ventures.
The following is a summary of the financial position of the unconsolidated real estate ventures in which the Company held interests as of September 30, 2024 and December 31, 2023 (in thousands):
September 30, 2024 (b)
December 31, 2023
Net property$1,760,185 $2,339,921 
Other assets278,441 534,658 
Other liabilities147,265 443,536 
Debt, net824,714 1,407,858 
Equity (a)1,066,647 1,023,185 
(a)This amount does not include 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)Excludes amounts related to the Herndon Innovation Center Metro Portfolio Venture, LLC and the New MAP Venture as the Company discontinued applying the equity method of accounting. The Company discontinued applying the equity method of accounting on the Herndon Innovation Center Metro Portfolio Venture, LLC after March 31, 2024 and discontinued applying the equity method of accounting on the New MAP Venture after June 30, 2024.
The following is a summary of results of operations of the unconsolidated real estate ventures in which the Company held interests during the three and nine-month periods ended September 30, 2024 and 2023 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2024 (a)20232024 (a)2023
Revenue$33,058 $58,986 $122,951 $175,939 
Operating expenses(13,680)(31,641)(63,985)(90,531)
Interest expense, net(12,030)(21,591)(44,980)(55,769)
Depreciation and amortization(14,518)(24,635)(54,499)(73,636)
Provision for impairment(116,543)— (116,543)— 
Loss on property disposition490 — — — 
Net loss$(123,223)$(18,881)$(157,056)$(43,997)
Ownership interest %VariousVariousVariousVarious
Company's share of net loss$(119,111)$(10,130)$(146,992)$(23,782)
Other-than-temporary impairment (b)(6,833)— (6,833)— 
Basis adjustments and other82 (609)(132)(722)
Equity in loss of unconsolidated real estate ventures$(125,862)$(10,739)$(153,957)$(24,504)
(a)Excludes amounts related to the Herndon Innovation Center Metro Portfolio Venture, LLC and the New MAP Venture as the Company discontinued applying the equity method of accounting. The Company discontinued applying the equity method of accounting on the Herndon Innovation Center Metro Portfolio Venture, LLC after March 31, 2024 and the New MAP Venture after June 30, 2024.
(b)Represents other-than-temporary impairment on investment in an unconsolidated joint venture due to a decline in fair value below the carrying value of our investments in the unconsolidated joint venture for the quarter ended September 30, 2024.
Mid-Atlantic Office Venture
On August 9, 2024 as part of a loan restructuring for the Mid-Atlantic Office Venture which included forgiveness of $39.8 million of the Venture's debt, the Company funded its $4.1 million portion of a lender pay down for the venture. Brandywine’s contribution is an equity method investment in the Mid-Atlantic Office JV. The Company recorded the contribution to Investment in unconsolidated real estate ventures on the consolidated balance sheet. The Mid-Atlantic Office Venture has liquidation rights and priorities that are different from ownership percentages. As such, equity in earnings is determined using the hypothetical liquidation book value (“HLBV”) method. Income or loss is recorded based on changes in what would be received should the entity liquidate all of its assets (as valued in accordance with GAAP) and distribute the resulting proceeds based on the terms of the respective agreements. The HLBV method is a balance sheet focused approach commonly applied to equity investments where cash distribution percentages vary at different points in time and are not directly linked to an equity holder’s ownership percentage.
Commerce Square Venture
On August 26, 2024, the Company agreed to fund and has subsequently funded, in November 2024, an additional $23 million common equity contribution to the Commerce Square Venture, the proceeds from which will be used by the Commerce Square Venture to pay down the preferred equity position of the Company’s current partner in the Commerce Square Venture, thereby increasing a portion of the Company’s ownership interest in the Commerce Square Venture to 84%. In connection with the Company’s funding agreement, the Commerce Square Venture recorded impairment charges of $116.5 million during the quarter ended September 30, 2024 based on the excess of the carrying value of the properties over their estimated fair value. The estimated fair value is considered Level 3 in accordance with ASC 820 and was based upon the third party appraisal.
4040 Wilson Venture
During the quarter ended September 30, 2024, our partner elected to acquire our 50% ownership interest in the 4040 Wilson Venture based on an agreed upon property valuation of $190.5M. As a result, the Company recognized an other than temporary impairment loss on its investment in the unconsolidated joint ventures of $6.8 million.
Original MAP Venture and New MAP Venture
On June 28, 2024, the Company recapitalized one of its unconsolidated real estate ventures, referred to as the “Original MAP Venture,” in which the Company had a negative investment balance of $52.2 million as of March 31, 2024 and a 50% ownership interest. Through the recapitalization, the Original MAP Venture transferred, for $26.0 million, 14 of the 57 properties in which it held ground lease interests to a newly-formed real estate venture, referred to below as the “KB JV,” owned equally between the Company and the ground lessor of the land on which all of the 57 properties are situated. The Original MAP Venture used substantially all of the proceeds it received from the transfer of the 14 properties to pay down its non-recourse mortgage loan to $154.6 million. Through the recapitalization of the Original MAP Venture, the Company redeemed the entire interest of its former partner in the Original MAP Venture for a nominal amount and reversed the Company’s negative investment balance to zero, resulting in a one-time, non-cash gain of $53.8 million. The non-recourse mortgage loan was amended as part of the pay-down, and, as amended, has a scheduled maturity date of March 1, 2027 (subject to mandatory pay downs as properties that remain owned by the New MAP Venture are sold), bears interest at SOFR plus 2.75% and provides the lender with a 95% entitlement to residual cash from operations and capital proceeds, if any, after the mortgage loan has been repaid and after all obligations to the ground lessor and other third parties have been satisfied. Pursuant to the amended loan, the Company has agreed to fund up to $12 million for tenant and capital improvements pursuant to leases that the Company proposes, in its discretion, to enter into at the properties owned by the New MAP Venture, which amounts, when funded, will accrue interest at 8.0% per annum.As of June 30, 2024, the Company's investment in the New MAP Venture was zero, and the Company discontinued applying the equity method of accounting on the New MAP Venture. The Company has not guaranteed any of the obligations of the New MAP Venture or otherwise committed to funding any future losses.
KB JV
As discussed above under “Original MAP Venture and New MAP Venture,” on June 28, 2024, the Company formed a new joint venture, KB JV, LLC (the "KB JV"), which acquired leasehold interests in 14 properties from the Original MAP Venture for $26.0 million. The 14 properties owned by the KB JV contain of an aggregate of 641,819 net rentable square feet and are located in Richmond, Virginia. The Company owns a 50% equity interest in the KB JV and the portfolio assets are unencumbered by third party debt. In connection with the formation of KB JV, KB JV loaned $13.0 million to the Company to fund a portion of the purchase of the 14 properties. The loan from KB JV is classified as “Unsecured term loan, net” on the consolidated balance sheet. If the properties owned by the KB JV are sold, the fee owner of the properties, has agreed to cause both the leasehold and fee interests in the portfolio to be sold.