4. INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES

As of March 31, 2018, the Company held ownership interests in 10 unconsolidated Real Estate Ventures for an aggregate investment balance of $171.4 million. The Company formed or acquired interests in these Real Estate Ventures with unaffiliated third parties to develop or manage office, residential and/or mixed-use properties or to acquire land in anticipation of possible development of office, residential and/or mixed-use properties. As of March 31, 2018, six of the real estate ventures owned properties that contain an aggregate of approximately 6.6 million net rentable square feet of office space; two real estate ventures owned 1.4 acres of land held for development; one real estate venture owned 1.3 acres of land in active development: and one real estate venture owned a residential tower that contains 321 apartment units.

The Company accounts for its unconsolidated interests in the Real Estate Ventures using the equity method. The Company’s unconsolidated interests range from 25% to 70%, subject to specified priority allocations of distributable cash in certain of the Real Estate Ventures.

The Company earned management fees from its Real Estate Ventures of $1.3 million and $1.5 million for the three-month periods ended March 31, 2018 and March 31, 2017, respectively.

The Company earned leasing commission income from its Real Estate Ventures of $0.8 million and $1.3 million for the three-month periods ended March 31, 2018 and March 31, 2017, respectively.

The Company had outstanding accounts receivable balances from its Real Estate Ventures of $1.4 million and $0.9 million as of March 31, 2018 and December 31, 2017, respectively.

The amounts reflected in the following tables (except for the Company’s share of equity and income) are based on the 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 in which the Company held interests as of March 31, 2018 and December 31, 2017 (in thousands):

	March 31, 2018
	DRA (G&I) Austin		Brandywine-AI Venture LLC		HSRE-BDN I, LLC (evo at Cira Centre South) (a)		Other		Total
Net property	$	263,384	$	159,159	$	-	$	488,224	$	910,767
Other assets		35,080		24,520		-		84,092		143,692
Other liabilities		17,189		4,844		-		72,129		94,162
Debt, net		247,844		92,813		-		294,662		635,319
Equity (b)		33,431		86,022		-		205,525		324,978

	December 31, 2017
	DRA (G&I) Austin		Brandywine-AI Venture LLC		HSRE-BDN I, LLC (evo at Cira Centre South)		Other		Total
Net property	$	263,557	$	158,960	$	143,990	$	517,458	$	1,083,965
Other assets		42,272		24,181		8,563		86,916		161,932
Other liabilities		24,131		4,493		1,648		67,435		97,707
Debt, net		248,700		92,917		110,136		314,667		766,420
Equity (b)		32,998		85,731		40,769		222,272		381,770

(a)	On January 10, 2018, evo at Cira sold the 345-unit student housing tower, its sole operating asset. See ‘evo at Cira Disposition’ section below.

(b)

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.

The following is a summary of results of operations of the Real Estate Ventures in which the Company held interests during the three-month periods ended March 31, 2018 and 2017 (in thousands):

	Three-month period ended March 31, 2018
	DRA (G&I) Austin			Brandywine-AI Venture LLC			HSRE-BDN I, LLC (evo at Cira Centre South)			Other			Total
Revenue	$	14,356		$	5,836		$	995		$	21,634		$	42,821
Operating expenses		(6,066	)		(2,544	)		(250	)		(11,908	)		(20,768	)
Interest expense, net		(2,294	)		(864	)		(388	)		(4,580	)		(8,126	)
Depreciation and amortization		(5,698	)		(2,137	)		(376	)		(6,173	)		(14,384	)
Loss on early extinguishment of debt		-			-			(718	)		-			(718	)
Net income (loss)	$	298		$	291		$	(737	)	$	(1,027	)	$	(1,175	)
Ownership interest %		50	%		50	%		50	%	(a)			(a)
Company's share of net income (loss)	$	149		$	146		$	(369	)	$	(632	)	$	(706	)
Basis adjustments and other		(69	)		15			11			(76	)		(119	)
Equity in income (loss) of Real Estate Ventures	$	80		$	161		$	(358	)	$	(708	)	$	(825	)

	Three-month period ended March 31, 2017
	DRA (G&I) Austin			Brandywine-AI Venture LLC			HSRE-BDN I, LLC (evo at Cira Centre South)			Other			Total
Revenue	$	21,552		$	7,325		$	3,154		$	22,248		$	54,279
Operating expenses		(9,313	)		(2,940	)		(679	)		(12,234	)		(25,166	)
Interest expense, net		(3,689	)		(1,145	)		(898	)		(5,098	)		(10,830	)
Depreciation and amortization		(9,229	)		(2,809	)		(1,128	)		(7,595	)		(20,761	)
Net income (loss)	$	(679	)	$	431		$	449		$	(2,679	)	$	(2,478	)
Ownership interest %		50	%		50	%		50	%	(a)			(a)
Company's share of net income (loss)	$	(340	)	$	216		$	225		$	(1,262	)	$	(1,161	)
Basis adjustments and other		(25	)		310			7			121			413
Equity in income (loss) of Real Estate Ventures	$	(365	)	$	526		$	232		$	(1,141	)	$	(748	)

(a)	The Company’s unconsolidated ownership interests ranged from 25% to 70% during the three-month periods ended March 31, 2018 and 20% to 70% during the three-month period ended March 31, 2017, subject to specified priority allocations of distributable cash in certain of the Real Estate Ventures.

Four Tower Bridge Acquisition

On January 5, 2018, the Company acquired, from its real estate venture partner in both the Four Tower Bridge real estate venture and the Seven Tower Bridge real estate venture, the remaining 35% ownership interest in the Four Tower Bridge real estate venture through a nonmonetary exchange for the Company's 20% ownership interest in the Seven Tower Bridge real estate venture. The Four Tower Bridge real estate venture owned an office property containing 86,021 square feet in Conshohocken, Pennsylvania encumbered with $9.7 million in debt. The Company previously accounted for its noncontrolling interest in Four Tower Bridge using the equity method. As a result of the exchange transaction, the Company obtained control of the Four Tower Bridge property and recognized a gain of $11.6 million. For further information regarding the accounting of the transaction, see Note 3, “Real Estate Investments.”

evo at Cira Disposition

On January 10, 2018, evo at Cira, a real estate venture in which the Company held a 50% interest, sold its sole asset, a 345-unit student housing tower, at a gross sales value of $197.5 million. The student housing tower, located in Philadelphia, Pennsylvania, was encumbered by a secured loan with a principal balance of $110.9 million at the time of sale, which was repaid in full from the sale proceeds. The Company’s share of net cash proceeds from the sale, after debt repayment and closing costs, was $43.0 million. As the Company’s investment basis was $17.3 million, a gain of $25.7 million was recorded.

Guarantees

As of March 31, 2018, the Real Estate Ventures had aggregate indebtedness to third parties of $639.3 million. These loans are generally mortgage or construction loans, most of which are non-recourse to the Company. As of March 31, 2018, the loans for which there is recourse to the Company consist of the following: (i) a $0.4 million payment guarantee on a loan with a $4.3 million outstanding principal balance, provided to PJP VII and (ii) up to a $41.3 million payment guarantee on a $150.0 million loan provided to 4040 Wilson. In addition, during construction undertaken by real estate ventures, including 4040 Wilson, the Company has provided and expects to continue to provide cost overrun and completion guarantees, with rights of contribution among partners or members in the real estate ventures, as well as customary environmental indemnities and guarantees of customary exceptions to nonrecourse provisions in loan agreements.