INVESTMENT IN UNCONSOLIDATED AND CONSOLIDATED JOINT VENTURES

The Company maintains investments in joint ventures. The Company accounts for its investments in unconsolidated joint ventures using the equity method of accounting unless the venture is a variable interest entity, or VIE, and meets the requirements for consolidation. The Company’s investment in its unconsolidated joint ventures at December 31, 2019 was $38,240,000. The equity in the income of the unconsolidated joint ventures was $16,575,000 for the twelve months ended December 31, 2019. The unconsolidated joint ventures have not been consolidated as of December 31, 2019, because the Company does not control the investments. The Company’s current joint ventures are as follows:

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Petro Travel Plaza Holdings LLC – TA/Petro is an unconsolidated joint venture with TravelCenters of America, LLC for the development and management of travel plazas and convenience stores. The Company has 50% voting rights and shares 60% of profit and losses in this joint venture. It houses multiple commercial eating establishments as well as diesel and gasoline operations in TRCC. The Company does not control the investment due to it having only 50% voting rights, and because our partner in the joint venture is the managing partner and performs all of the day-to-day operations and has significant decision-making authority regarding key business components such as fuel inventory and pricing at the facility. At December 31, 2019, the Company had an equity investment balance of $23,636,000 in this joint venture. In December 2019, the Company completed the shell and core of a new 4,900 square foot multi-tenant building at TRCC-East, with a fair value of $2,805,000, and contributed the building and land to TA/Petro. The contribution met the criteria of a sale under ASC Topic 606, "Revenue from Contracts with Customers." As such, the Company recognized profit of $334,000 and deferred $501,000 of profit in accordance with ASC Topic 323, "Investment - Equity Method and Joint Ventures" on the date the assets were contributed.

•

Majestic Realty Co. – Majestic Realty Co., or Majestic, is a privately-held developer and owner of master planned business parks in the United States. The Company partnered with Majestic to form three 50/50 joint ventures to acquire, develop, manage, and operate industrial real estate at TRCC. The partners have equal voting rights and equally share in the profit and loss of the joint venture. The Company and Majestic guarantee the performance of all outstanding debt. At December 31, 2019, the Company's investment in these joint ventures was $5,953,000, which includes our outside basis.

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On November 2018, TRC-MRC 3, LLC was formed to pursue the development, construction, leasing, and management of a 579,040 square foot industrial building on the Company's property at TRCC-East. TRC-MRC 3, LLC qualified as a VIE from inception, but the Company is not the primary beneficiary therefore does not consolidate TRC-MRC 3, LLC in its financial statements. The construction of the building was completed in the fourth quarter of 2019 and the Company has delivered the space to a tenant that has leased 67% of the rentable space. In March 2019, the joint venture entered into a promissory note with a financial institution to finance the construction of the building. The note matures on May 1, 2030 and had an outstanding principal balance of $28,061,000 as of December 31, 2019. On April 1, 2019, the Company contributed land with a fair value of $5,854,000 to TRC-MRC 3, LLC in accordance with the limited liability agreement. The land contribution met the criteria of a land sale under ASC Topic 606, "Revenue from Contracts with Customers." As such, the Company recognized profit of $1,537,000 and deferred $1,537,000 of profit in accordance with ASC Topic 323, "Investment - Equity Method and Joint Ventures" on the date the land was contributed. The Company's investment in this joint venture was $5,953,000 as of December 31, 2019.

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In August 2016, we partnered with Majestic to form TRC-MRC 2, LLC to acquire, lease, and maintain a fully occupied warehouse at TRCC-West. The partnership acquired the 651,909 square foot building for $24,773,000 and was largely financed through a promissory note guaranteed by both partners. The promissory note was refinanced on June 1, 2018 with a $25,240,000 promissory note. The note matures on July 1, 2028, and currently has an outstanding principal balance of $24,455,000. Since inception, we have received excess distributions resulting in a deficit balance of $2,471,000. In accordance with the applicable accounting guidance, these excess distributions are reclassified to the liabilities section of our consolidated balance sheet. We will continue to record our equity in the net income as a debit to the investment account, and if it becomes positive, it will again be shown as an asset on our consolidated balance sheet. If it becomes obvious that any excess distribution may not be returned (upon joint venture liquidation or otherwise), we will recognize any balance classified as a liability as income.

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In September 2016, TRC-MRC 1, LLC was formed to develop and operate an approximately 480,480 square foot industrial building at TRCC-East. The joint venture completed construction of the building during the third quarter of 2017. Since inception of the joint venture, we have received excess distributions resulting in a deficit balance of $462,000. In accordance with the applicable accounting guidance, these excess distributions are reclassified to the liabilities section of our consolidated balance sheet. We will continue to record our equity in the net income as a debit to the investment account, and if it becomes positive, it will again be shown as an asset on our consolidated balance sheet. If it becomes obvious that any excess distribution may not be returned (upon joint venture liquidation or otherwise), we will recognize any balance classified as a liability as income. The joint venture refinanced its construction loan in December 2018 with a mortgage loan. The original principal balance of the mortgage loan was $25,030,000, of which $24,542,000 was outstanding at December 31, 2019.


•	Rockefeller Joint Ventures – The Company has three joint ventures with Rockefeller Group Development Corporation or Rockefeller. At December 31, 2019, the Company’s combined equity investment balance in these three joint ventures was $8,651,000.


◦	Two joint ventures are for the development of buildings on approximately 91 acres and are part of an agreement for the potential development of up to 500 acres of land in TRCC that are tied to Foreign Trade Zone designation. The Company owns a 50% interest in each of the joint ventures.


▪	The Five West Parcel LLC joint venture owned and leased a 606,000 square foot building, the joint venture's primary asset, to Dollar General. The building was sold to a third party in November 2019 for a purchase price of $29,088,000, realizing a gain of $17,537,000. The outstanding term loan of the joint venture was paid off upon the sale.


▪	The second of these joint ventures, 18-19 West LLC, was formed in August 2009 through the contribution of 61.5 acres of land by the Company, which is being held for future development. Both of these joint ventures are being accounted for under the equity method due to both members having significant participating rights in the management of the ventures.

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The third joint venture is the TRCC/Rock Outlet Center LLC joint venture that was formed during the second quarter of 2013 to develop, own, and manage a net leasable 326,000 square foot outlet center on land at TRCC-East. The cost of the outlet center was approximately $87,000,000 and was funded through a construction loan for up to 60% of the costs and the remaining 40% was through equity contributions from the two members. The Company controls 50% of the voting interests of TRCC/Rock Outlet Center LLC; thus, it does not control by voting interest alone. The Company is the named managing member. The managing member's responsibilities relate to the routine day-to-day activities of TRCC/Rock Outlet Center LLC. However, all operating decisions during the development period and ongoing operations, including the setting and monitoring of the budget, leasing, marketing, financing and selection of the contractor for any construction, are jointly made by both members of the joint venture. Therefore, the Company concluded that both members have significant participating rights that are sufficient to overcome the presumption of the Company controlling the joint venture through it being named the managing member. Therefore, the investment in TRCC/Rock Outlet Center LLC is being accounted for under the equity method. The TRCC/Rock Outlet Center LLC joint venture has a term note with a financial institution that matures on September 5, 2021. As of December 31, 2019, the outstanding balance of the term note was $38,909,000. The Company and Rockefeller guarantee the performance of the debt.

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Centennial Founders, LLC – Centennial Founders, LLC, or CFL, is a joint venture that was initially formed with TRI Pointe Homes, Lewis Investment Company and CalAtlantic to pursue the entitlement and development of land that the Company owns in Los Angeles County. Based on the Second Amended and Restated Limited Company Agreement of CFL and the change in control and funding that resulted from the amended agreement, CFL qualified as a VIE, beginning in the third quarter of 2009, and the Company was determined to be the primary beneficiary. As a result, CFL has been consolidated into our financial statements beginning in that quarter. Our partners retained a noncontrolling interest in the joint venture. On November 30, 2016, CFL and Lewis entered a Redemption and Withdrawal Agreement, whereby Lewis irrevocably and unconditionally withdrew as a member of CFL, and CFL redeemed Lewis' entire interest for no consideration. As a result, our noncontrolling interest balance was reduced by $11,039,000. On December 31, 2018, CFL and CalAtlantic entered a Redemption and Withdrawal Agreement, whereby CalAtlantic irrevocably and unconditionally withdrew as a member of CFL, and CFL redeemed CalAtlantic's entire interest for no consideration. As a result, our noncontrolling interest balance was reduced by $13,172,000. At December 31, 2019, the Company owned 92.57% of CFL.

The Company’s investment balance in its unconsolidated joint ventures differs from its respective capital accounts in the respective joint ventures. The differential represents the difference between the cost basis of assets contributed by the Company and the agreed upon contribution value of the assets contributed.

Condensed balance sheet information and statement of operations of the Company’s unconsolidated joint ventures are as follows:

Balance Sheet Information as of December 31:



	Joint Venture																TRC
	Assets				Borrowings						Equity						Investment In
	2019		2018		2019			2018			2019			2018			2019		2018
Petro Travel Plaza Holdings, LLC	$	77,835	$	69,096	$	(15,287	)	$	(15,283	)	$	60,061		$	51,377		$	23,636	$	18,426
Five West Parcel, LLC	694		15,157		—			(9,173		)	648			5,751			140		2,691
18-19 West, LLC	4,849		4,654		—			—			4,600			4,654			1,730		1,783
TRCC/Rock Outlet Center, LLC	69,459		75,194		(38,909		)	(46,826		)	29,688			27,531			6,781		5,702
TRC-MRC 1, LLC	28,673		29,692		(24,542		)	(25,030		)	3,623			4,018			—		—
TRC-MRC 2, LLC	20,026		20,362		(24,455		)	(25,014		)	(7,094		)	(5,763		)	—		—
TRC-MRC 3, LLC	37,292		—		(28,061		)	—			6,052			—			5,953		—
Total	$	238,828	$	214,155	$	(131,254	)	$	(121,326	)	$	97,578		$	87,568		$	38,240	$	28,602

Centennial Founders, LLC	$	96,415	$	93,840	$	—		$	—		$	96,143		$	93,188		Consolidated

Condensed Statement of Operations Information as of December 31:



	Joint Venture															TRC
	Revenues						Earnings(Loss)									Equity in Earnings (Loss)
	2019		2018		2017		2019			2018			2017			2019			2018			2017
Petro Travel Plaza Holdings, LLC	$	117,708	$	119,083	$	105,507	$	14,684		$	9,672		$	10,418		$	8,810		$	5,803		$	6,251
Five West Parcel, LLC	2,648		2,731		2,824		18,239			778			905			9,119			389			452
18-19 West, LLC	15		13		11		(107		)	(102		)	(97		)	(53		)	(51		)	(48		)
TRCC/Rock Outlet Center, LLC¹	6,278		6,418		9,615		(3,843		)	(4,645		)	(2,347		)	(1,921		)	(2,323		)	(1,173		)
TRC-MRC 1, LLC	3,067		1,323		—		91			(498		)	(3		)	46			(249		)	(2		)
TRC-MRC 2, LLC²	4,023		3,981		3,655		1,151			529			(2,505		)	575			265			(1,253		)
TRC-MRC 3, LLC	$	—	$	—	$	—	$	(2	)	$	—		$	—		$	(1	)	$	—		$	—
	$	133,739	$	133,549	$	121,612	$	30,213		$	5,734		$	6,371		$	16,575		$	3,834		$	4,227

Centennial Founders, LLC	$	469	$	297	$	456	$	(20	)	$	(249	)	$	(144	)	Consolidated

(1) Revenues for TRCC/Rock Outlet Center are presented net of non-cash tenant allowance amortization of $1.7 million, $1.7 million, and $1.8 million for the years ended December 31, 2019, 2018 and 2017, respectively.
(2) Earnings for TRC-MRC2, LLC include non-cash amortization of purchase accounting adjustments related to in-place leases of $0.2 million, $0.8 million and $4.0 million for the years ended December 31, 2019, 2018 and 2017, respectively.