Investment in Unconsolidated Entities Investment in Unconsolidated Entities

6 Months Ended

Jun. 30, 2015

Schedule of Equity Method Investments [Line Items]

The following table identifies our investment in unconsolidated entities as of June 30, 2015:



(Dollar amounts in thousands)				Partner				Construction		Cumulative		Maximum
		Ownership	Total	Contribution				Management Fee		Basis Difference		Exposure
Partnership	Location	%	Units	to Date				Recognized to Date		to Date		to Loss
350 8th	San Francisco, CA	50.01%	410	$	46,061			$	560	$	1,656	$	47,735

950 East Third	Los Angeles, CA	50.0%	472	30,000		⁽¹	⁾	500		618		11,661

Total			882	$	76,061			$	1,060	$	2,274	$	59,396


(1)	Land valued at $30.0 million was contributed by our partner, Legendary Investors Group No. 1 LLC ("Legendary"), to the partnership.

Table of Contents

350 8th

On February 3, 2014, we entered into a partnership agreement with AIG, an unrelated third-party, for the development and operation of 350 8th, an apartment community with 40,000 square feet of commercial space and underground parking located in San Francisco, California. The land upon which the partnership is developing was purchased by us for $46.6 million on May 28, 2013. Upon the formation of our partnership with AIG, the land and improvements to date, with a carrying value of $50.3 million, were deconsolidated. Any future equity capital needs will be funded according to the partners' percentage interests in the partnership. On April 25, 2014, the partnership entered into a construction loan agreement for $143.6 million with a five-year term. There were borrowings of $6.5 million on this loan at June 30, 2015, of which our pro rata share was $3.2 million. We have guaranteed the payment of all current and future borrowings from this loan and the completion of construction in connection with the partnership's development. See Note 4 for more information related to this loan and Note 13 for more information related to the guarantees.

950 East Third

During the year ended December 31, 2013, we entered into a partnership agreement with Legendary, an unrelated third-party, for the development and operation of 950 East Third, an apartment community with 19,700 square feet of commercial space located in Los Angeles, California. We expect to fund the remaining portion of our capital contribution during the development and construction process.

Investment in Unconsolidated Entities

As the 350 8th and 950 East Third partnerships are not sufficiently funded to finance the activities of the entities, and not all of the capital will be funded up front, the partnerships are not deemed to have sufficient equity, and have therefore been determined to be VIEs. We have equal voting rights with respect to all major decisions in both partnerships, and all such decisions must be unanimous, including, among other things, development planning, budgeting and operational budgets. It has also been determined that we do not control the decisions that most significantly affect the economics of either entity, and that we do not hold a controlling financial interest in either entity. As such, our investments in the entities are accounted for in our consolidated financial statements using the equity method.

We perform construction management and property management services for both partnerships in accordance with the approved budgets for which we receive fees.

The cumulative basis differences in the partnerships are due to capitalization of interest on our investment and internal payroll and overhead costs directly related to the development of the properties. This excess of our investment over our equity in the underlying net assets of the joint ventures is included in "Investment in unconsolidated entities" in our Consolidated Balance Sheets, and will be amortized as a reduction to earnings on a straight-line basis over the lives of the related assets.

Our maximum exposure to loss, as a result of our involvement in these entities, is the carrying value of our investment. See Note 3 for more information related to these unconsolidated development projects.