COPT Defense Properties Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Real Estate Joint Ventures

Real Estate Joint Ventures

6 Months Ended

Jun. 30, 2021

Equity Method Investments and Joint Ventures [Abstract]

Consolidated Real Estate Joint Ventures

The table below sets forth information pertaining to our investments in consolidated real estate joint ventures as of June 30, 2021 (dollars in thousands):


				June 30, 2021 (1)
	Date Acquired	Nominal Ownership %		Total Assets		Encumbered Assets		Total Liabilities
Entity			Location
LW Redstone Company, LLC (2)	3/23/2010	85%	Huntsville, Alabama	$	429,103	$	90,985	$	89,943
Stevens Investors, LLC	8/11/2015	95%	Washington, DC	163,349		162,141		89,142
M Square Associates, LLC	6/26/2007	50%	College Park, Maryland	101,228		61,395		52,767
				$	693,680	$	314,521	$	231,852

(1)Excludes amounts eliminated in consolidation.

(2)While net cash flow distributions to the partners vary depending on the source of the funds distributed, cash flows are generally distributed as follows: (1) cumulative preferred returns of 13.5% on our partner’s $9.0 million in invested capital; (2) cumulative preferred returns of 13.5% on our invested capital; (3) return of our invested capital; (4) return of our partner’s invested capital; and (5) any remaining residual 85% to us and 15% to our partner.

Unconsolidated Real Estate Joint Ventures

The table below sets forth information pertaining to our investments in unconsolidated real estate joint ventures accounted for using the equity method of accounting (dollars in thousands):


	Date Acquired	Nominal Ownership %	Number of Properties	Carrying Value of Investment (1)
Entity				June 30, 2021		December 31, 2020
B RE COPT DC JV II LLC (2)	10/30/2020	10%	8	$	15,877	$	15,988
BREIT COPT DC JV LLC	6/20/2019	10%	9	12,840		13,315
B RE COPT DC JV III LLC	6/2/2021	10%	2	11,869		—
			19	$	40,586	$	29,303

(1)Included in the line entitled “investment in unconsolidated real estate joint ventures” on our consolidated balance sheets.

(2)Our investment in B RE COPT DC JV II LLC was lower than our share of the joint venture’s equity by $7.3 million as of June 30, 2021 and $7.4 million as of December 31, 2020 due to a difference between our cost basis and our share of the joint venture’s underlying equity in its net assets. We recognize adjustments to our share of the joint venture’s earnings and losses resulting from this basis difference in the underlying assets of the joint venture.

As described further in Note 4, on June 2, 2021, we sold a 90% interest in two data center shell properties in Northern Virginia and retained a 10% interest in the properties through B RE COPT DC JV III LLC, a newly-formed joint venture. We concluded that the joint venture is a variable interest entity. Under the terms of the joint venture agreement, we and our partner receive returns in proportion to our investments, and our maximum exposure to losses is limited to our investment, subject to certain indemnification obligations with respect to any nonrecourse debt secured by the properties. The nature of our involvement in the activities of the joint venture does not give us power over decisions that significantly affect its economic performance.