INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES

Listed below are the unconsolidated joint ventures in which the Company has a noncontrolling interest. The Company receives fees from these joint ventures for services it provides. These services include property management, leasing, development and administration. These fees are generally included in interest and other income in the accompanying consolidated statements of comprehensive income. For the three months ended December 31, 2016, the Company began including development-related fees in development service income in the consolidated statements of comprehensive income. The Company may also receive a promoted interest if certain return thresholds are met. The accounting policies for the unconsolidated joint ventures in which the Company has a noncontrolling interest are the same as those for the Company.

On a periodic basis, management assesses whether there are any indicators that the value of the properties owned by the unconsolidated joint ventures may be impaired. As detailed below, management has determined that certain assets are impaired as the unconsolidated joint ventures dispose of and anticipate the potential disposition of certain properties prior to the end of their remaining useful lives.

Liberty Venture I, LP

As of December 31, 2017, the Company had a 25% interest in Liberty Venture I, LP, an entity engaged in the ownership of industrial properties in New Jersey. This joint venture is part of the Company's New Jersey reportable segment.

As of December 31, 2017, the joint venture owned 28 industrial properties totaling 4.5 million square feet. The joint venture also had one property under development, which is expected to comprise, upon completion, 302,000 square feet and is expected to represent a Total Investment of $21.1 million.

During the year ended December 31, 2015, the joint venture realized gross proceeds of $8.5 million from the sale of one property totaling 198,000 square feet.

The Company had a receivable from Liberty Venture I, LP for $223,000 and $250,000 as of December 31, 2017 and 2016, respectively. This related party receivable is reflected as prepaid expenses and other assets in the Company's consolidated balance sheets.

The Company recognized $1.6 million, $2.3 million and $1.6 million in fees for services during the years ended December 31, 2017, 2016 and 2015, respectively.

Kings Hill Unit Trust

As of December 31, 2017, the Company had a 20% interest in Kings Hill Unit Trust, an entity engaged in the ownership of office properties in the County of Kent, United Kingdom. This joint venture is part of the Company's United Kingdom reportable segment.

As of December 31, 2017, the joint venture owned 14 office properties totaling 489,000 square feet. A cash sweep of net cash flow is required to be implemented under the mortgage loan encumbering such properties until such time as a loan-to-value milestone is satisfied. In lieu thereof, the joint venture and the bank have agreed to a partial pay down of the mortgage loan in 2018.

The Company had notes receivable from Kings Hill Unit Trust for an aggregate of $4.7 million and $4.1 million as of December 31, 2017 and 2016, respectively. The note receivable bears interest at a rate of 10% and is due in November 2020. These related party receivables are reflected in investments in and advances to unconsolidated joint ventures in the Company's consolidated balance sheets.

The Company had a receivable from Kings Hill Unit Trust for $122,000 and $121,000 as of December 31, 2017 and 2016, respectively. This related party receivable is reflected as prepaid expenses and other assets in the Company's consolidated balance sheets.

The Company recognized $302,000, $293,000 and $304,000 in fees for services during the years ended December 31, 2017, 2016 and 2015, respectively.

Liberty Illinois, LP

As of December 31, 2017, the Company had a 25% interest in Liberty Illinois, LP, an entity primarily engaged in the ownership of industrial properties in Illinois. This joint venture is part of the Company's Chicago/Minneapolis reportable segment.

As of December 31, 2017, the joint venture owned 12 industrial properties totaling 4.9 million square feet and 248 acres of developable land.

During the year ended December 31, 2016, the joint venture sold four properties containing 636,000 square feet for $32.5 million. The Company's share of gain on property dispositions was $1.0 million and is included in equity in earnings of unconsolidated joint ventures in the accompanying consolidated statements of comprehensive income.

The Company had a receivable from Liberty Illinois, LP for $5,000 and $132,000 as of December 31, 2017 and 2016, respectively. This related party receivable is reflected as prepaid expenses and other assets in the Company's consolidated balance sheets.

The Company recognized $0.9 million, $1.0 million and $1.3 million in fees for services during the years ended December 31, 2017, 2016 and 2015, respectively.

Liberty Washington, LP

As of December 31, 2017, the Company had a 25% interest in Liberty Washington, LP, an entity engaged in the ownership of office properties in Washington, D.C (and formerly Northern Virginia). This joint venture's properties are part of the Company's DC Metro reportable segment. During the year ended December 31, 2016, the Company divested itself of properties in this joint venture that were located in Northern Virginia (see below). These properties had been part of a reportable segment classified as Other.

As of December 31, 2017, the joint venture owned two office properties totaling 451,000 square feet.

During the year ended December 31, 2017, the Company concluded that a property owned by this joint venture had an indicator of impairment as it anticipated a shortened hold period, major lease expiration and significant capital investment. The joint venture recognized impairment charges of $15.9 million. The Company's share of this impairment charge was $4.0 million. The impairment charges were related to the Company's DC Metro reportable segment and the Company's share was included in equity in earnings of unconsolidated joint ventures in the accompanying consolidated statements of comprehensive income. The Company determined these impairments based on estimated future discounted cash flows. This is a Level 3 fair value calculation.

During the year ended December 31, 2016, the joint venture sold 12 properties located in Northern Virginia containing 1.2 million square feet and 6.0 acres of land for $187.2 million.

During the year ended December 31, 2016, due to adverse conditions in the Northern Virginia office market, six properties containing 698,000 square feet were transferred to mortgage lenders in satisfaction of an aggregate of $112.5 million in nonrecourse mortgage loans that were secured by the properties. The book values of these properties had been written down to fair value in prior periods.

Because these loans were nonrecourse, the Company believes that the transfers described above will not have an ongoing effect on its operating results or financial condition.

The Company's share of gain from property dispositions and extinguishment of debt is included in equity in earnings of unconsolidated joint ventures in the accompanying consolidated statements of comprehensive income. During the year ended December 31, 2016, the Company's share of gain from extinguishment of debt was $4.2 million. The Company's share of gain on property dispositions for the year ended December 31, 2016 was $6.0 million.

During the year ended December 31, 2015, the joint venture realized gross proceeds of $5.0 million from the sale of one property totaling 80,000 square feet.

The Company had a receivable from Liberty Washington, LP for $316,000 and $322,000 as of December 31, 2017 and 2016, respectively. This related party receivable is reflected as prepaid expenses and other assets in the Company's consolidated balance sheets.

During the year ended December 31, 2015, the Company concluded that certain of the properties owned by this joint venture were impaired and the joint venture recognized impairment charges of $56.8 million. The Company's share of this impairment charge was $11.5 million. The impairment charges were related to the Company's Northern Virginia reportable segment and the Company's share was included in equity in earnings of unconsolidated joint ventures in the accompanying consolidated statements of comprehensive income. The Company determined these impairments based on third party offer prices. This is a Level 2 fair value calculation.

The Company recognized $1.1 million, $2.0 million and $4.8 million in fees for services during the years ended December 31, 2017, 2016 and 2015, respectively.

Liberty/Comcast 1701 JFK Boulevard, LP

As of December 31, 2017, the Company had a 20% interest in Liberty/Comcast 1701 JFK Boulevard LP ("Liberty/Comcast"), formerly known as Liberty/Commerz 1701 JFK Boulevard, LP, an entity engaged in the ownership of a 1.25 million square foot office tower in Philadelphia, Pennsylvania. During the year ended December 31, 2015, the limited partnership agreement was amended to replace the general partner and admit a new general partner. As a result of this amendment the Company determined that this joint venture is a VIE. Because the Company and its third party partner share control of the joint venture as both parties have the power to direct its activities, the Company determined that it is not the primary beneficiary and that the equity method of accounting is appropriate. This joint venture is part of the Company's Philadelphia reportable segment.

The Company had a payable to this joint venture for $59,000 as of both December 31, 2017 and 2016. This related party payable is reflected in investments in and advances to unconsolidated joint ventures in the Company's consolidated balance sheets.

The Company had a receivable from this joint venture for $272,000 and $401,000 as of December 31, 2017 and 2016, respectively. This related party receivable is reflected in prepaid expenses and other assets in the Company's consolidated balance sheets.

The Company recognized $2.7 million, $2.7 million and $2.7 million in fees for services during the years ended December 31, 2017, 2016 and 2015, respectively.

Subsequent to December 31, 2017, the joint venture paid in full the $305.2 million mortgage loan on the office building. This was funded through loans from the joint venture partners in proportion to their ownership interests.

Liberty Property 18th & Arch LP and Liberty Property 18th & Arch Hotel, LP

On June 30, 2014, the Company entered into two joint ventures for the purpose of developing and owning the Comcast Technology Center (the "Project") located in Philadelphia, Pennsylvania as part of a mixed-use development. The 60-story building will include 1.3 million square feet of leasable office space (the "Office") and a 217-room Four Seasons Hotel (the "Hotel") (collectively, "Liberty Property 18th and Arch"). Project costs for the development of the Project, exclusive of tenant-funded interior improvements, are anticipated to be approximately $953.7 million. The Company's investment in the project is expected to be approximately $190.7 million with 20% ownership interests in both joint ventures. As of December 31, 2017, the Company's investment in these joint ventures was $177.8 million and is reflected in investments in and advances to unconsolidated joint ventures in the Company's consolidated balance sheet. These joint ventures are part of the Company's Philadelphia reportable segment.

During the year ended December 31, 2017, the joint venture for Liberty Property 18th & Arch brought into service 1.1 million square feet of office space representing a Total Investment of $599.6 million. The remaining 250,000 square feet of office space and the 217-room Four Seasons hotel representing an aggregate Total Investment of $354.1 million continued to be developed by the joint ventures as of December 31, 2017.

The two joint ventures have engaged the Company as the developer of the Project pursuant to a Development Agreement by which the Company agrees, in consideration for a development fee, to be responsible for all aspects of the development of the Project and to guarantee the timely lien-free completion of construction of the Project as well as the payment, subject to certain exceptions, of any cost overruns incurred in the development of the Project. To mitigate its risk, the Company entered into guaranteed maximum price contracts with a third party contractor to construct the Project. The Company is accounting for the development of the Project using the percentage of completion method. The Company recognized a loss of $3.5 million for the year ended December 31, 2017, and income of $0.6 million and $1.6 million for the years ended December 31, 2016 and 2015, respectively, in developer service fee income, net of developer service fee expense and other related expenses. The Company believes it has applied reasonable estimates and judgments in determining the amount of estimated development costs for the Project. The Company has recently been notified, however, that there are additional construction costs in connection with the Project. Until such time as the Company receives appropriate information concerning the amount and nature of these additional costs and has an opportunity to investigate them, it is not possible to estimate the amount of possible additional costs, if any, that the Company may incur in connection with its guarantee beyond the obligations of the contractor under its guaranteed maximum price contracts.

The Company had a receivable from this joint venture of $466,000 and $1.3 million as of December 31, 2017 and 2016, respectively. This receivable is included in prepaid expenses and other assets in the Company's consolidated balance sheets.

During the year ended December 31, 2016, the joint venture sold three residential condominium units located on the 45^th floor containing 14,700 square feet for $14.3 million. The Company's share of gain on property dispositions was $0.3 million and is included in equity in earnings of unconsolidated joint ventures in the accompanying consolidated statements of comprehensive income.

The Company will manage and lease the Office and Four Seasons Hotels Limited will manage the Hotel. The Company recognized $230,000, $75,000 and $75,000 in related fee income during the years ended December 31, 2017, 2016 and 2015, respectively.

Other Joint Ventures

As of December 31, 2017, the Company had a 50% ownership interest in three additional unconsolidated joint ventures. One of these joint ventures has seven operating properties and an investment in land held for development and is part of the Company's Florida reportable segment. One of these joint ventures sold its real estate assets in 2016 and was part of the Company's United Kingdom reportable segment. The sales price was $13.7 million and the Company's share of the loss on sale was $6,000. This amount is included in equity in earnings of unconsolidated joint ventures in the accompanying consolidated statements of comprehensive income.

One joint venture has a leasehold interest and does not operate or own operating properties and is part of the Company's United Kingdom reportable segment. The Company had a note payable due to this joint venture of $2.5 million and $2.3 million as of December 31, 2017 and 2016, respectively. The note payable is interest free and is due upon written notice from the joint venture. This related party payable is reflected in investments in and advances to unconsolidated joint ventures in the Company's consolidated balance sheets.

Additionally, as of December 31, 2017, the Company had a 20% ownership interest in an unconsolidated joint venture that acquired one redevelopment property comprising 48,000 square feet for $15.0 million. This joint venture also owns one acre of developable land and is part of the Company's Philadelphia reportable segment.

The Company's share of each of the joint venture's earnings is included in equity in earnings of unconsolidated joint ventures in the accompanying consolidated statements of comprehensive income.

Summary Financial Data

The condensed balance sheets as of December 31, 2017 and 2016 and condensed statements of operations for the years ended December 31, 2017, 2016 and 2015 for Liberty Venture I LP, Kings Hill Unit Trust, Liberty Illinois, LP, Liberty Washington LP, Liberty/Comcast, Liberty Property 18th & Arch, and the other unconsolidated joint ventures are as follows (in thousands):

Condensed Balance Sheets:



	December 31, 2017
	Liberty			Kings Hill			Liberty			Liberty			Liberty/			Liberty Property
	Venture I, LP			Unit Trust			Illinois, LP			Washington, LP			Comcast			18th & Arch⁽²⁾			Other			Total
Real estate assets	$	229,600		$	152,998		$	252,593		$	274,847		$	496,210		$	551,874		$	98,589		$	2,056,711
Accumulated depreciation	(48,629		)	(30,028		)	(57,444		)	(49,106		)	(138,943		)	(4,070		)	(10,995		)	(339,215		)
Real estate assets, net	180,971			122,970			195,149			225,741			357,267			547,804			87,594			1,717,496
Development in progress	18,337			—			—			—			—			289,767			—			308,104
Land held for development	—			—			33,500			—			—			—			41,075			74,575
Other assets	20,722			10,957			16,337			18,566			49,755			98,191			24,263			238,791
Total assets	$	220,030		$	133,927		$	244,986		$	244,307		$	407,022		$	935,762		$	152,932		$	2,338,966

Debt	$	166,295		$	92,131		$	138,869		$	102,624		$	305,223		$	—		$	63,999		$	869,141
Other liabilities	4,117			28,056			7,548			4,954			9,488			102,982			8,420			165,565
Equity	49,618			13,740			98,569			136,729			92,311			832,780			80,513			1,304,260
Total liabilities and equity	$	220,030		$	133,927		$	244,986		$	244,307		$	407,022		$	935,762		$	152,932		$	2,338,966

Company's net investment in unconsolidated joint ventures⁽¹⁾	$	10,425		$	6,100		$	14,980		$	34,107		$	17,307		$	177,843		$	27,694		$	288,456



	December 31, 2016
	Liberty			Kings Hill			Liberty			Liberty			Liberty/			Liberty Property
	Venture I, LP			Unit Trust			Illinois, LP			Washington, LP			Comcast			18th and Arch ⁽²⁾		Other			Total
Real estate assets	$	226,313		$	137,960		$	251,765		$	289,627		$	495,842		$	—	$	71,722		$	1,473,229
Accumulated depreciation	(42,779		)	(26,872		)	(51,901		)	(44,235		)	(125,014		)	—		(9,702		)	(300,503		)
Real estate assets, net	183,534			111,088			199,864			245,392			370,828			—		62,020			1,172,726
Development in progress	6,886			—			—			—			—			671,032		—			677,918
Land held for development	—			—			31,567			—			—			—		42,259			73,826
Other assets	23,494			9,603			19,036			18,749			48,074			52,053		29,654			200,663
Total assets	$	213,914		$	120,691		$	250,467		$	264,141		$	418,902		$	723,085	$	133,933		$	2,125,133

Debt	$	154,386		$	83,846		$	137,294		$	103,667		$	309,475		$	—	$	57,660		$	846,328
Other liabilities	6,673			24,513			8,433			4,385			9,964			95,574		17,155			166,697
Equity	52,855			12,332			104,740			156,089			99,463			627,511		59,118			1,112,108
Total liabilities and equity	$	213,914		$	120,691		$	250,467		$	264,141		$	418,902		$	723,085	$	133,933		$	2,125,133

Company's net investment in unconsolidated joint ventures ⁽¹⁾	$	11,175		$	5,349		$	15,339		$	38,863		$	18,688		$	132,952	$	22,712		$	245,078

Condensed Statements of Operations:



	Year Ended December 31, 2017
	Liberty			Kings Hill Unit			Liberty			Liberty			Liberty/			Liberty Property
	Venture I, LP			Trust			Illinois, LP			Washington, LP			Comcast			18th & Arch⁽²⁾			Other ⁽³⁾			Total
Total revenue	$	31,079		$	12,976		$	23,711		$	25,439		$	65,372		$	16,544		$	11,118		$	186,239
Operating expense	8,101			4,756			7,989			9,147			26,474			3,417			3,365			63,249
Net operating income	22,978			8,220			15,722			16,292			38,898			13,127			7,753			122,990

Interest	(5,801		)	(2,329		)	(5,882		)	(4,065		)	(19,411		)	—			(2,807		)	(40,295		)
Depreciation and amortization	(7,598		)	(3,238		)	(6,918		)	(5,926		)	(14,485		)	(4,077		)	(2,124		)	(44,366		)
Other income (expense)	(100		)	(4		)	(71		)	(65		)	(325		)	(547		)	15,549			14,437
Gain (loss) on sale/impairment	—			—			—			(15,910		)	—			30			—			(15,880		)
Net income (loss)	$	9,479		$	2,649		$	2,851		$	(9,674	)	$	4,677		$	8,533		$	18,371		$	36,886

Company's equity in earnings (loss) of unconsolidated joint ventures	$	2,914		$	660		$	2,118		$	(1,941	)	$	1,659		$	1,782		$	9,963		$	17,155



	Year Ended December 31, 2016
	Liberty			Kings Hill Unit			Liberty			Liberty			Liberty/			Liberty Property
	Venture I, LP			Trust			Illinois, LP			Washington, LP			Comcast			18th & Arch ⁽²⁾			Other ⁽³⁾			Total
Total revenue	$	25,149		$	11,926		$	26,599		$	39,727		$	65,587		$	—		$	9,888		$	178,876
Operating expense	6,835			4,854			9,961			15,935			26,761			280			2,801			67,427
Net operating income	18,314			7,072			16,638			23,792			38,826			(280		)	7,087			111,449

Interest	(4,182		)	(2,554		)	(7,243		)	(10,866		)	(19,737		)	—			(2,462		)	(47,044		)
Depreciation and amortization	(6,375		)	(3,557		)	(7,589		)	(10,750		)	(14,513		)	—			(1,925		)	(44,709		)
Other income (expense)	50			(77		)	64			257			(213		)	1,270			7,123			8,474
Gain (loss) on sale/impairment	—			—			4,068			40,943			—			—			(11		)	45,000
Net income	$	7,807		$	884		$	5,938		$	43,376		$	4,363		$	990		$	9,812		$	73,170

Company's equity in earnings (loss) of unconsolidated joint ventures	$	2,332		$	275		$	2,065		$	10,857		$	1,594		$	213		$	4,634		$	21,970



	Year Ended December 31, 2015
	Liberty			Kings Hill Unit			Liberty			Liberty			Liberty/			Liberty Property
	Venture I, LP			Trust			Illinois, LP			Washington, LP			Comcast			18th & Arch⁽²⁾			Other ⁽³⁾			Total
Total revenue	$	23,708		$	12,602		$	26,085		$	71,101		$	68,444		$	—		$	9,387		$	211,327
Operating expense	7,977			5,261			9,303			27,384			29,692			221			2,727			82,565
Net operating income	15,731			7,341			16,782			43,717			38,752			(221		)	6,660			128,762

Interest	(5,415		)	(6,116		)	(8,441		)	(17,353		)	(19,936		)	—			(2,248		)	(59,509		)
Depreciation and amortization	(6,399		)	(3,954		)	(7,406		)	(20,725		)	(14,442		)	—			(1,840		)	(54,766		)
Other income (expense)	68			45,604			29			531			(227		)	30			9,925			55,960
Income (loss) from discontinued operations	760			—			—			(56,792		)	—			—			—			(56,032		)
Net income (loss)	$	4,745		$	42,875		$	964		$	(50,622	)	$	4,147		$	(191	)	$	12,497		$	14,415

Company's equity in earnings (loss) of unconsolidated joint ventures	$	1,540		$	(425	)	$	807		$	(7,314	)	$	2,053		$	(29	)	$	6,517		$	3,149

(1)

Differences between the Company's net investment in unconsolidated joint ventures and its underlying equity in the net assets of the venture are primarily a result of impairments related to the Company's investment in unconsolidated joint ventures, the deferral of gains associated with the sales of properties to joint ventures in which the Company retains an ownership interest and loans made to the joint ventures by the Company. These adjustments have resulted in an aggregate difference reducing the Company's investments in unconsolidated joint ventures by $3.0 million and $1.4 million as of December 31, 2017 and 2016, respectively. Differences between historical cost basis and the basis reflected at the joint venture level (other than loans) are typically depreciated over the life of the related asset.


(2)	Represents the combined results of two joint ventures related to the property at 18th and Arch Streets, Philadelphia.


(3)	Other income/(expense) for this group of joint ventures reflects gains related to the sales of land leasehold interests totaling $16.0 million, $7.1 million and $9.9 million for the years ended December 31, 2017, 2016 and 2015, respectively.