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Investment in Unconsolidated and Consolidated Joint Ventures
 6 Months Ended
Jun. 30, 2020
Equity Method Investments and Joint Ventures [Abstract]  
Investment in Unconsolidated and Consolidated Joint Ventures 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 as of June 30, 2020 was $41,246,000. Equity in earnings from unconsolidated joint ventures was $2,536,000 for the six months ended June 30, 2020. The unconsolidated joint ventures have not been consolidated as of June 30, 2020, because the Company does not control the investments. The Company’s current joint ventures are as follows:
•
Petro Travel Plaza Holdings LLC – Petro Travel Plaza Holdings LLC, Petro, is an unconsolidated joint venture with TravelCenters of America that develops and manages travel plazas, gas stations, convenience stores, and fast food restaurants throughout TRCC. The Company has 50% of the voting rights but participates in 60% of all profits and losses. The Company does not control the investment due to having only 50% of the voting rights. The Company's partner is the managing partner and performs all of the day-to-day operations and has significant decision-making authority over key business components such as fuel inventory and pricing at the facilities. The Company's investment in this joint venture was $26,618,000 as of June 30, 2020.
◦
On April 17, 2020, the Company sold the land and a building formerly leased to a tenant operating a fast food restaurant, to Petro. The Company received cash proceeds of $2,000,000 from Petro, and realized a gain of $1,333,000 under ASC 610-20, "Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets."
•
Majestic Realty Co. – Majestic Realty Co. (Majestic) is a privately-held developer and owner of master planned business parks throughout the United States. The Company has formed three 50/50 joint ventures with Majestic 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 ventures. The Company and Majestic guarantee the performance of all outstanding debt.
◦
In November 2018, TRC-MRC 3, LLC was formed to pursue the development, construction, leasing, and management of a 579,040 square foot industrial building located within TRCC-East. TRC-MRC 3, LLC qualified as a VIE from inception, but the Company is not the primary beneficiary; therefore, it 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 leased 100% of the rentable space to two tenants. 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 $35,785,000 as of June 30, 2020. 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 Company's investment in this joint venture was $6,081,000 as of June 30, 2020.
◦
In August 2016, the Company 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, which 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 has an outstanding principal balance of $24,165,000 as of June 30, 2020. Since its inception, the Company has received excess distributions resulting in a deficit balance of $2,210,000. In accordance with the applicable accounting guidance, the Company reclassified excess distributions to Other Liabilities within the Consolidated Balance Sheets. The Company will continue to record equity in earnings as a debit to the investment account and if it were to become positive, the Company would reclassify the liability to an asset. If it becomes obvious that any excess distribution may not be returned (upon joint venture liquidation or otherwise), the Company will immediately recognize the liability as income.
◦
In September 2016, TRC-MRC 1, LLC was formed to develop and operate an approximately 480,480 square foot industrial building at TRCC-East that is 100% leased. Since its inception, the Company has received excess distributions resulting in a deficit balance of $474,000. In accordance with the applicable accounting guidance, the Company reclassified excess distributions to Other Liabilities within the Consolidated Balance Sheets. The Company will continue to record equity in earnings as a debit to the investment account and if it were to become positive, the Company will reclassify the liability to an asset. If it becomes obvious that any excess distribution may not be returned (upon joint venture liquidation or otherwise), the Company will immediately recognize the liability as income. The joint venture refinanced its construction loan in December 2018 with a mortgage loan. The original balance of the mortgage loan was $25,030,000, of which $24,267,000 was outstanding as of June 30, 2020.

•
Rockefeller Joint Ventures – The Company has three joint ventures with Rockefeller Group Development Corporation, or Rockefeller. At June 30, 2020, the Company’s combined equity investment balance in these three joint ventures was $8,547,000.
◦
Two joint ventures are for the development of buildings on approximately 91 acres of land and are part of an agreement for the potential development of up to 500 acres of land in TRCC. 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 until 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 that is being held for future development. The Company's 18-19 West LLC joint venture is contracted with the third-party who purchased the Five West building and land (noted above), to purchase lots 18 and 19 at a price of $13.8 million through the option period ending May 21, 2021. If the option is extended to November 21, 2021, the price increases to $15.2 million. The land option expires in the fourth quarter of 2021. 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.
◦
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% 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 the joint venture 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 June 30, 2020, the outstanding balance of the term note was $38,027,000. The Company and Rockefeller guarantee the performance of the debt.
•
Centennial Founders, LLC – Centennial Founders, LLC, CFL, is a joint venture that was initially formed with TRI Pointe Homes, Lewis Investment Company, Lewis), 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 2009, and the Company was determined to be the primary beneficiary. As a result, CFL is consolidated into the Company's financial statements. The Company's partners retained a noncontrolling interest in the joint venture. At June 30, 2020, the Company owned 92.67% of CFL.
The Company’s investment balance in its unconsolidated joint ventures differs from its respective capital accounts in the respective joint ventures. The difference represents the difference between the cost basis of assets contributed by the Company and the agreed upon fair value of the assets contributed.
Unaudited condensed statement of operations for the three months ended June 30, 2020 and condensed balance sheet information of the Company’s unconsolidated joint ventures as of June 30, 2020 and December 31, 2019 are as follows:

 
Three Months Ended June 30,
 
2020
 
2019
 
2020
 
2019
 
2020
 
2019
 
Joint Venture
 
TRC
($ in thousands)
Revenues
 
Earnings(Loss)
 
Equity in Earnings(Loss)
Petro Travel Plaza Holdings, LLC
$
16,701

 
$
31,394

 
$
2,430

 
$
3,923

 
$
1,458

 
$
2,354

Five West Parcel, LLC
—

 
736

 
19

 
240

 
10

 
120

18-19 West, LLC
1

 
4

 
(34
)
 
(26
)
 
(17
)
 
(13
)
TRCC/Rock Outlet Center, LLC1
929

 
1,313

 
(1,028
)
 
(1,334
)
 
(514
)
 
(667
)
TRC-MRC 1, LLC
786

 
766

 
29

 
26

 
15

 
13

TRC-MRC 2, LLC
1,003

 
996

 
327

 
328

 
163

 
164

TRC-MRC 3, LLC
731

 
—

 
131

 
—

 
66

 
—

Equity in earnings of unconsolidated joint ventures, net
$
20,151

 
$
35,209

 
$
1,874

 
$
3,157

 
$
1,181

 
$
1,971

 
 
 
 
 
 
 
 
 
 
 
 
Centennial Founders, LLC
$
185

 
$
114

 
$
94

 
$
28

 
Consolidated
 
 
 
 
 
 
 
 
 
 
 
 
(1) Revenues for TRCC/Rock Outlet Center are presented net of non-cash tenant allowance amortization of $0.3 million and $0.4 million as of June 30, 2020 and June 30, 2019, respectively.
 
Six Months Ended June 30,
 
2020
 
2019
 
2020
 
2019
 
2020
 
2019
 
Joint Venture
 
TRC
($ in thousands)
Revenues
 
Earnings(Loss)
 
Equity in Earnings(Loss)
Petro Travel Plaza Holdings, LLC
$
39,914

 
$
56,800

 
$
4,969

 
$
5,793

 
$
2,981

 
$
3,476

Five West Parcel, LLC
—

 
1,420

 
18

 
411

 
9

 
206

18-19 West, LLC
4

 
7

 
(64
)
 
(54
)
 
(32
)
 
(27
)
TRCC/Rock Outlet Center, LLC1
2,792

 
3,211

 
(1,840
)
 
(2,119
)
 
(920
)
 
(1,060
)
TRC-MRC 1, LLC
1,573

 
1,502

 
69

 
21

 
35

 
11

TRC-MRC 2, LLC
2,023

 
1,980

 
670

 
482

 
335

 
241

TRC-MRC 3, LLC
1,356

 
—

 
256

 
—

 
128

 
—

Equity in earnings of unconsolidated joint ventures, net
$
47,662

 
$
64,920

 
$
4,078

 
$
4,534

 
$
2,536

 
$
2,847

 
 
 
 
 
 
 
 
 
 
 
 
Centennial Founders, LLC
$
232

 
$
236

 
$
67

 
$
92

 
Consolidated
 
 
 
 
 
 
 
 
 
 
 
 
(1) Revenues for TRCC/Rock Outlet Center are presented net of non-cash tenant allowance amortization of $0.6 million and $0.9 million as of June 30, 2020 and June 30, 2019, respectively.

 
June 30, 2020
 
December 31, 2019
 
Joint Venture
TRC
 
Joint Venture
TRC
($ in thousands)
Assets
Debt
Equity
Equity
 
Assets
Debt
Equity
Equity
Petro Travel Plaza Holdings, LLC
$
81,774

$
(15,225
)
$
65,030

$
26,618

 
$
77,835

$
(15,287
)
$
60,061

$
23,636

Five West Parcel, LLC
666

—

666

149

 
694

—

648

140

18-19 West, LLC
4,665

—

4,415

1,637

 
4,849

—

4,600

1,730

TRCC/Rock Outlet Center, LLC
68,244

(38,027
)
29,649

6,761

 
69,459

(38,909
)
29,688

6,781

TRC-MRC 1, LLC
28,589

(24,267
)
3,599

—

 
28,673

(24,542
)
3,623

—

TRC-MRC 2, LLC
20,171

(24,165
)
(8,776
)
—

 
20,026

(24,455
)
(7,094
)
—

TRC-MRC 3, LLC
42,625

(35,785
)
6,308

6,081

 
37,292

(28,061
)
6,052

5,953

Total
$
246,734

$
(137,469
)
$
100,891

$
41,246

 
$
238,828

$
(131,254
)
$
97,578

$
38,240

 
 
 
 
 
 
 
 
 
 
Centennial Founders, LLC
$
97,529

$
—

$
97,135

***

 
$
96,415

$
—

$
96,143

***

 
 
 
 
 
 
 
 
 
 
*** Centennial Founders, LLC is consolidated within the Company's financial statements.