SL Green Realty Corp.
RECKSON OPERATING PARTNERSHIP LP (Form: 10-Q, Received: 05/12/2017 16:42:18)
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________________________________  
FORM 10-Q
_________________________________________________________ 
 
      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  
For the quarterly period ended March 31, 2017
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  
For the transition period from                to              
 
Commission File Number: 033-84580  
_________________________________________________________ 
RECKSON OPERATING PARTNERSHIP, L.P.
(Exact name of registrant as specified in its charter)
_________________________________________________________  
Delaware
11-3233647
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
 
420 Lexington Avenue, New York, New York 10170
(Address of principal executive offices) (Zip Code)

(212) 594-2700
(Registrant’s telephone number, including area code)
 _________________________________________________________
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  YES ý      NO o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES ý     NO o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company.  See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
 
Accelerated filer
o
Non-accelerated filer
x
 (Do not check if a smaller reporting company)
 
Smaller Reporting Company
o
 
Emerging Growth Company
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  YES o   NO ý
 
As of May 12, 2017 , no common units of limited partnership interest of the Registrant were held by non-affiliates of the Registrant.  There is no established trading market for such units.
 



Reckson Operating Partnership, L.P.
TABLE OF CONTENTS

 
 
 
Consolidated Balance Sheets as of March 31, 2017 (unaudited) and December 31, 2016
 
Consolidated Statements of Operations for the three months ended March 31, 2017 and 2016 (unaudited)
 
Consolidated Statements of Comprehensive Income for the three months ended March 31, 2017 and 2016 (unaudited)
 
Consolidated Statement of Capital for the three months ended March 31, 2017 (unaudited)
 
Consolidated Statements of Cash Flows for the three months ended March 31, 2017 and 2016 (unaudited)
 
 
 


1

Table of Contents

PART I. FINANCIAL INFORMATION
ITEM 1.   FINANCIAL STATEMENTS
Reckson Operating Partnership, L.P.
Consolidated Balance Sheets
(in thousands)
 
March 31, 2017
 
December 31, 2016
 
(unaudited)
 
 
Assets
 
 
 
Commercial real estate properties, at cost:
 
 
 
Land and land interests
$
1,790,388

 
$
1,805,198

Building and improvements
4,577,417

 
4,629,994

Building leasehold and improvements
1,073,703

 
1,073,678

 
7,441,508

 
7,508,870

Less: accumulated depreciation
(1,512,514
)
 
(1,437,222
)
 
5,928,994

 
6,071,648

Assets held for sale
54,694

 

Cash and cash equivalents
61,410

 
59,930

Restricted cash
44,304

 
43,489

Tenant and other receivables, net of allowance of $5,113 and $4,879 in 2017 and 2016, respectively
28,907

 
30,999

Deferred rents receivable, net of allowance of $16,688 and $17,798 in 2017 and 2016, respectively
242,114

 
238,447

Debt and preferred equity investments, net of discounts and deferred origination fees of $16,316 and $16,705 in 2017 and 2016, respectively
1,627,836

 
1,640,412

Investments in unconsolidated joint ventures
174,678

 
174,127

Deferred costs, net of accumulated amortization of $74,815 and $73,673 in 2017 and 2016, respectively
118,365

 
121,470

Other assets
343,468

 
374,091

Total assets
$
8,624,770

 
$
8,754,613

Liabilities
 
 
 
Mortgages and other loans payable, net
$
920,602

 
$
676,068

Unsecured term loan, net
1,179,861

 
1,179,521

Unsecured notes, net
795,602

 
795,260

Accrued interest payable
12,158

 
15,781

Other liabilities
119,086

 
160,982

Accounts payable and accrued expenses
61,354

 
60,855

Related party payables
23,808

 
23,808

Deferred revenue
159,899

 
161,772

Deferred land leases payable
1,818

 
1,795

Dividends payable
807

 
754

Security deposits
40,176

 
40,033

Liabilities related to assets held for sale
43

 

Total liabilities
3,315,214

 
3,116,629

Commitments and contingencies

 

Preferred units
109,161

 
109,161

Capital
 
 
 
General partner capital
4,811,515

 
5,139,842

Accumulated other comprehensive loss
(1,528
)
 
(1,618
)
Total ROP partner's capital
4,809,987

 
5,138,224

Noncontrolling interests in other partnerships
390,408

 
390,599

Total capital
5,200,395

 
5,528,823

Total liabilities and capital
$
8,624,770

 
$
8,754,613

The accompanying notes are an integral part of these consolidated financial statements.

2

Table of Contents

Reckson Operating Partnership, L.P.
Consolidated Statements of Operations
(unaudited, in thousands)
 
 
Three Months Ended March 31,
 
 
2017
 
2016
Revenues
 
 
 
 
Rental revenue, net
 
$
167,972

 
$
159,618

Escalation and reimbursement
 
24,545

 
24,316

Investment income
 
40,554

 
55,180

Other (loss) income
 
(716
)
 
550

Total revenues
 
232,355

 
239,664

Expenses
 
 
 
 
Operating expenses, including related party expenses of $6,529 and $5,763 in 2017 and 2016
 
41,725

 
41,961

Real estate taxes
 
38,796

 
37,224

Ground rent
 
5,235

 
5,235

Interest expense, net of interest income
 
29,467

 
32,201

Amortization of deferred financing costs
 
2,087

 
2,140

Depreciation and amortization
 
51,784

 
50,798

Transaction related costs
 

 
178

Marketing, general and administrative
 
112

 
184

Total expenses
 
169,206

 
169,921

Income before equity in net income from unconsolidated joint ventures, equity in net gain on sale of interest in unconsolidated joint venture/real estate, and depreciable real estate reserves
 
63,149

 
69,743

Equity in net income from unconsolidated joint ventures
 
4,255

 
2,457

Equity in net gain on sale of interest in unconsolidated joint venture/real estate
 
3

 

Depreciable real estate reserves
 
(56,265
)
 

Net income
 
11,142

 
72,200

Net income attributable to noncontrolling interests in other partnerships
 
(14
)
 
(12
)
Preferred units dividend
 
(953
)
 
(955
)
Net income attributable to ROP common unitholder
 
$
10,175

 
$
71,233



The accompanying notes are an integral part of these consolidated financial statements.

3

Table of Contents

Reckson Operating Partnership, L.P.
Consolidated Statements of Comprehensive Income
(unaudited, in thousands)
 
Three Months Ended March 31,
 
2017
 
2016
Net income attributable to ROP common unitholder
$
10,175

 
$
71,233

Other comprehensive income:
 
 
 
Change in net unrealized gain on derivative instruments
90

 
220

Comprehensive income attributable to ROP common unitholder
$
10,265


$
71,453



The accompanying notes are an integral part of these consolidated financial statements.

4

Table of Contents

Reckson Operating Partnership, L.P.
Consolidated Statement of Capital
(unaudited, in thousands)
 
General
Partner's
Capital
Class A
Common
Units
 
Limited Partner's Capital
 
Noncontrolling
Interests
In Other
Partnerships
 
Accumulated
Other
Comprehensive
(Loss) Income
 
Total
Capital
Balance at December 31, 2016
$
5,139,842

 
$

 
$
390,599

 
$
(1,618
)
 
$
5,528,823

Contributions
629,146

 

 

 

 
629,146

Distributions
(967,648
)
 

 
(205
)
 

 
(967,853
)
Net income
10,175

 

 
14

 

 
10,189

Other comprehensive income

 

 

 
90

 
90

Balance at March 31, 2017
$
4,811,515

 
$

 
$
390,408

 
$
(1,528
)
 
$
5,200,395



The accompanying notes are an integral part of these consolidated financial statements.


5

Table of Contents
Reckson Operating Partnership, L.P.
Consolidated Statements of Cash Flows
(unaudited, in thousands)

 
Three Months Ended March 31,
 
2017
 
2016
Operating Activities
 
 
 
Net income
$
11,142

 
$
72,200

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
53,871

 
52,938

Equity in net income from unconsolidated joint venture
(4,255
)
 
(2,457
)
Distributions of cumulative earnings from unconsolidated joint ventures
3,606

 
2,128

Equity in net gain on sale of interest in unconsolidated joint venture interest/real estate
(3
)
 

Depreciable real estate reserve
56,265

 

Deferred rents receivable
(3,835
)
 
(6,070
)
Other non-cash adjustments
(7,959
)
 
(8,714
)
Changes in operating assets and liabilities:
 
 
 
Restricted cash—operations
(815
)
 
(2,022
)
Tenant and other receivables
961

 
4,616

Deferred lease costs
(2,769
)
 
(6,743
)
Other assets
(42,414
)
 
(37,394
)
Accounts payable, accrued expenses and other liabilities
269

 
(6,626
)
Deferred revenue and land leases payable
4,408

 
3,181

Net cash provided by operating activities
68,472

 
65,037

Investing Activities
 
 
 
Additions to land, buildings and improvements
(13,086
)
 
(16,157
)
Escrowed cash—capital improvements

 
368

Investments in unconsolidated joint venture
(7
)
 

Distributions in excess of cumulative earnings from unconsolidated joint ventures
392

 
345

Net proceeds from disposition of real estate/joint venture interest

 
22,316

Other investments
32,057

 
7,922

Origination of debt and preferred equity investments
(402,453
)
 
(117,119
)
Repayments or redemption of debt and preferred equity investments
411,969

 
272,253

Net cash provided by investing activities
28,872

 
169,928

Financing Activities
 
 
 
Proceeds from mortgages and other loans payable
$
250,000

 
$

Repayments of mortgages and other loans payable

 
(67,526
)
Proceeds from credit facility and senior unsecured notes
277,800

 
520,000

Repayments of credit facility and senior unsecured notes
(277,800
)
 
(994,308
)
Distributions to noncontrolling interests in other partnerships
(205
)
 

Contributions from common unitholder
625,842

 
1,750,905

Distributions to common and preferred unitholders
(968,601
)
 
(1,507,017
)
Other obligations related to loan participations

 
76,500

Deferred loan costs and capitalized lease obligation
(2,900
)
 
(1,102
)
Net cash used in financing activities
(95,864
)
 
(222,548
)
Net increase in cash and cash equivalents
1,480

 
12,417

Cash and cash equivalents at beginning of period
59,930

 
50,026

Cash and cash equivalents at end of period
$
61,410

 
$
62,443

 
 
 
 
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
 
 
 
Tenant improvements and capital expenditures payable
$
3,503

 
$
8,745

Deferred leasing payable
103

 
79

Change in fair value of hedge
2

 

Transfer to assets held for sale
54,694

 

Transfer to liabilities related to assets held for sale
43

 

Contributions from a noncontrolling interest in other partnerships

 
68,581

Exchange of debt investment for equity in joint venture

 

Removal of fully depreciated commercial real estate properties
643

 
3,799

Contributions from Common Unitholder
3,304

 



The accompanying notes are an integral part of these consolidated financial statements.

6

Table of Contents

Reckson Operating Partnership, L.P.
Notes to Consolidated Financial Statements
March 31, 2017
(unaudited)
1. Organization and Basis of Presentation
Reckson Operating Partnership, L.P., or ROP, commenced operations on June 2, 1995. The sole general partner of ROP is Wyoming Acquisition GP LLC., or WAGP, a wholly-owned subsidiary of SL Green Operating Partnership, L.P., or the Operating Partnership. The sole limited partner of ROP is the Operating Partnership. The Operating Partnership is 95.67%  owned by SL Green Realty Corp., or SL Green, as of March 31, 2017 . SL Green is a self-administered and self-managed real estate investment trust, and is the sole managing general partner of the Operating Partnership. Unless the context requires otherwise, all references to "we," "our," "us" and the "Company" means ROP and all entities owned or controlled by ROP.
ROP is engaged in the acquisition, ownership, management and operation of commercial and residential real estate properties, principally office properties, and also owns land for future development, located in New York City, Westchester County, Connecticut and New Jersey, which collectively is also known as the New York Metropolitan area.
As of March 31, 2017 , we owned the following interests in properties in the New York Metropolitan area, primarily in midtown Manhattan. Our investments in the New York Metropolitan area also include investments in Brooklyn, Westchester County, Connecticut and New Jersey, which are collectively known as the Suburban properties:
Location
 
Type
 
Number of
Properties
 
Approximate Square Feet (unaudited)
 
Weighted Average
Occupancy
(1)  (unaudited)
Commercial:
 
 
 
 
 
 
 
 
Manhattan
 
Office
 
16

 
8,463,245

 
96.4
%
 
 
Retail (2)(3)(4)
 
6

 
374,016

 
95.8
%
 
 
Fee Interest
 
1

 
176,530

 
100.0
%
 
 
 
 
23

 
9,013,791

 
96.4
%
Suburban
 
Office (5)
 
18

 
3,251,000

 
83.0
%
 
 
Retail
 
1

 
52,000

 
100.0
%
 
 
 
 
19

 
3,303,000

 
83.3
%
Total commercial properties
 
 
 
42

 
12,316,791

 
92.9
%
Residential:
 
 
 
 
 
 
 
 
Manhattan
 
Residential (2)
 

 
222,855

 
94.0
%
Total portfolio
 
 
 
42

 
12,539,646

 
92.9
%

(1)
The weighted average occupancy for commercial properties represents the total occupied square feet divided by total square footage at acquisition. The weighted average occupancy for residential properties represents the total occupied units divided by total available units.
(2)
As of March 31, 2017 , we owned a building that was comprised of approximately 270,132 square feet of retail space and approximately 222,855 square feet of residential space. For the purpose of this report, we have included the building in the number of retail properties we own. However, we have included only the retail square footage in the retail approximate square footage, and have listed the balance of the square footage as residential square footage.
(3)
Includes two unconsolidated joint venture retail properties at 131-137 Spring Street comprised of approximately 68,342 square feet.
(4)
Includes the property at 102 Greene Street, which is classified as held for sale at March 31, 2017.
(5)
Includes the property at 520 White Plains Road, which is classified as held for sale at March 31, 2017.

As of March 31, 2017 , we held debt and preferred equity investments with a book value of $1.9 billion , including $0.3 billion of debt and preferred equity investments and other financing receivables that are included in other balance sheet line items.
Basis of Quarterly Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for the fair presentation of the financial position of the Company at March 31, 2017 and the results of operations for the periods presented have been included. The operating results for the period presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2017 . These financial statements should be read in conjunction with the financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2016 .

7

Reckson Operation Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2017
(unaudited)

The consolidated balance sheet at December 31, 2016 has been derived from the audited financial statements as of that date but do not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.
2. Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include our accounts and those of our subsidiaries, which are wholly-owned or controlled by us. Entities which we do not control through our voting interest and entities which are variable interest entities, but where we are not the primary beneficiary, are accounted for under the equity method. See Note 5, "Debt and Preferred Equity Investments" and Note 6, "Investments in Unconsolidated Joint Ventures." All significant intercompany balances and transactions have been eliminated.
We consolidate a variable interest entity, or VIE, in which we are considered the primary beneficiary. The primary beneficiary is the entity that has (i) the power to direct the activities that most significantly impact the entity's economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE. Included in commercial real estate properties on our consolidated balance sheets as of March 31, 2017 and December 31, 2016 are $1.4 billion and $1.4 billion , respectively, related to our consolidated VIEs. Included in mortgages and other loans payable on our consolidated balance sheets as of March 31, 2017 and December 31, 2016 are $494.3 million and $494.1 million, respectively, related to our consolidated VIEs.
Investment in Commercial Real Estate Properties
On a periodic basis, we assess whether there are any indications that the value of our real estate properties may be other than temporarily impaired or that their carrying value may not be recoverable. A property's value is considered impaired if management's estimate of the aggregate future cash flows (undiscounted) to be generated by the property is less than the carrying value of the property. To the extent impairment has occurred, the loss will be measured as the excess of the carrying amount of the property over the calculated fair value of the property. We also evaluate our real estate properties for potential impairment when a real estate property has been classified as held for sale. Real estate assets held for sale are valued at the lower of either their carrying value or fair value less costs to sell. We do not believe that there were any indicators of impairment at any of our consolidated properties at March 31, 2017 except for 520 White Plains Road in Tarrytown, New York, and 680/750 Washington Boulevard in Stamford, Connecticut, for which we recorded a $56.3 million depreciable real estate reserve during the three months ended March 31, 2017 .
We allocate the purchase price of real estate to land and building (inclusive of tenant improvements) and, if determined to be material, intangibles, such as the value of above- and below-market leases and origination costs associated with the in-place leases. We depreciate the amount allocated to building (inclusive of tenant improvements) over their estimated useful lives, which generally range from three to 40 years . We amortize the amount allocated to the above- and below-market leases over the remaining term of the associated lease, which generally range from one to 14 years , and record it as either an increase (in the case of below-market leases) or a decrease (in the case of above-market leases) to rental income. We amortize the amount allocated to the values associated with in-place leases over the expected term of the associated lease, which generally ranges from one to 14 years . If a tenant vacates its space prior to the contractual termination of the lease and no rental payments are being made on the lease, any unamortized balance of the related intangible will be written off. The tenant improvements and origination costs are amortized as an expense over the remaining life of the lease (or charged against earnings if the lease is terminated prior to its contractual expiration date). We assess fair value of the leases based on estimated cash flow projections that utilize appropriate discount and capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including the historical operating results, known trends, and market/economic conditions that may affect the property. To the extent acquired leases contain fixed rate renewal options that are below-market and determined to be material, we amortize such below-market lease value into rental income over the renewal period.
We recognized $4.2 million and $4.0 million of rental revenue for the three months ended March 31, 2017 and 2016 , respectively, for the amortization of aggregate below-market leases in excess of above-market leases and a reduction in lease origination costs, resulting from the allocation of the purchase price of the applicable properties.
The following summarizes our identified intangible assets (acquired above-market leases and in-place leases) and intangible liabilities (acquired below-market leases) as of March 31, 2017 and December 31, 2016 (in thousands):

8

Reckson Operation Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2017
(unaudited)

 
March 31, 2017
 
December 31, 2016
Identified intangible assets (included in other assets):
 
 
 
Gross amount
$
309,678

 
$
311,830

Accumulated amortization
(254,821
)
 
(253,064
)
Net (1)
$
54,857

 
$
58,766

Identified intangible liabilities (included in deferred revenue):
 
 
 
Gross amount
$
521,873

 
$
524,793

Accumulated amortization
(372,100
)
 
(368,738
)
Net (1)
$
149,773

 
$
156,055

(1)
As of March 31, 2017 and December 31, 2016, $0.1 million and none , respectively and $0.1 million and none , respectively, of net intangible assets and net intangible liabilities, were reclassified to assets held for sale and liabilities related to assets held for sale.
Fair Value Measurements
See Note 12, "Fair Value Measurements."
Investments in Unconsolidated Joint Ventures
We assess our investments in unconsolidated joint ventures for recoverability, and if it is determined that a loss in value of the investment is other than temporary, we write down the investment to its fair value. We evaluate our equity investments for impairment based on the joint ventures' projected discounted cash flows. We do not believe that the values of any of our equity investments were impaired at March 31, 2017 .
Reserve for Possible Credit Losses
The expense for possible credit losses in connection with debt and preferred equity investments is the charge to earnings to increase the allowance for possible credit losses to the level that we estimate to be adequate, based on Level 3 data, considering delinquencies, loss experience and collateral quality. Other factors considered include geographic trends, product diversification, the size of the portfolio and current economic conditions. Based upon these factors, we establish a provision for possible credit loss on each individual investment. When it is probable that we will be unable to collect all amounts contractually due, the investment is considered impaired.
Where impairment is indicated on an investment that is held to maturity, a valuation allowance is measured based upon the excess of the recorded investment amount over the net fair value of the collateral. Any deficiency between the carrying amount of an asset and the calculated value of the collateral is charged to expense. We continue to assess or adjust our estimates based on circumstances of a loan and the underlying collateral. If additional information reflects increased recovery of our investment, we will adjust our reserves accordingly. There were no loan reserves recorded during three months ended March 31, 2017 and 2016 .
Income Taxes
ROP is a disregarded entity of SL Green Operating Partnership, L.P. for federal income tax purposes, and, as a result, all income and losses of ROP are considered income and losses of SL Green Operating Partnership, L. P. No provision has been made for income taxes in the consolidated financial statements since such taxes, if any, are the responsibility of the individual partners of SL Green Operating Partnership, L.P.
Shares Contributed by Parent Company
We present shares of SL Green common stock as a contra-equity account in our financial statements.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Concentrations of Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash investments, debt and preferred equity investments and accounts receivable. We place our cash investments in excess of insured amounts with high quality financial institutions. The collateral securing our debt and preferred equity investments is located in New York City. See Note 5, "Debt and Preferred Equity Investments." We perform ongoing credit evaluations of our tenants and require most tenants

9

Reckson Operation Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2017
(unaudited)

to provide security deposits or letters of credit. Though these security deposits and letters of credit are insufficient to meet the total value of a tenant's lease obligation, they are a measure of good faith and a source of funds to offset the economic costs associated with lost revenue and the costs associated with re-tenanting a space. The properties in our real estate portfolio are primarily located in Manhattan. We also have properties located in Brooklyn, Westchester County, Connecticut and New Jersey. The tenants located in our buildings operate in various industries. No tenant in our portfolio accounted for more than 5.0% of our share of annualized cash rent, including our share of joint venture annualized rent, at March 31, 2017 . For the three months ended March 31, 2017 , 13.6% , 8.8% , 7.4% , 7.1% , 6.7% , 6.0% , 6.0% , and 6.0% of our share of cash rent, including our share of joint venture annualized rent was attributable to 1185 Avenue of the Americas, 625 Madison Avenue, 919 Third Avenue, 750 Third Avenue, 810 Seventh Avenue, 1350 Avenue of the Americas, 555 West 57th Street, and 125 Park Avenue, respectively. Our share of annualized cash rent for all other properties was below 5.0%
Reclassification
Certain prior year balances have been reclassified to conform to our current year presentation.
Accounting Standards Updates
In February 2017, the FASB issued guidance to clarify the scope of Subtopic 610-20 as well as provide guidance on accounting for partial sales of nonfinancial assets. Subtopic 610-20 was issued in May 2014 as part of ASU 2014-09. The Company anticipates adopting this guidance January 1, 2018, and applying the cumulative-effect adoption method. The Company is currently evaluating the impact of adopting this new accounting standard on the Company’s consolidated financial statements.
In January, 2017, the FASB issued Accounting Standards Update (ASU) No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business The guidance clarifies the definition of a business and provides guidance to assist with determining whether transactions should be accounted for as acquisitions of assets or businesses. The main provision is that an acquiree is not a business if substantially all of the fair value of the gross assets is concentrated in a single identifiable asset or group of assets. The Company adopted the guidance on the issuance date effective January 5, 2017. The Company expects that most of our real estate acquisitions will be considered asset acquisitions under the new guidance and that transaction costs will be capitalized to the investment basis which is then subject to a purchase price allocation based on relative fair value.
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The guidance will require entities to show the changes on the total cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. As a result, entities will not longer present transfers between these items on the statement of cash flows. The guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The Company has not yet adopted this new guidance and is currently evaluating the impact of adopting this new accounting standard on the Company’s consolidated financial statements.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The ASU provides final guidance on eight cash flow issues, including debt prepayment or debt extinguishment costs, contingent consideration payments made after a business combination, distributions received from equity method investees, separately identifiable cash flows and application of the predominance principle, and others. The amendments in the ASU are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company adopted the guidance effective January 1, 2017 and there was no impact on the Company’s consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The guidance changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The guidance replaces the current ‘incurred loss’ model with an ‘expected loss’ approach. The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted after December 2018. The Company has not yet adopted this new guidance and is currently evaluating the impact of adopting this new accounting standard on the Company’s consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The guidance simplifies the accounting for share-based payment award transactions including: income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. The guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted. The Company adopted the guidance effective January 1, 2017 and there was no material impact on the Company’s consolidated financial statements.

10

Reckson Operation Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2017
(unaudited)

In March 2016, the FASB issued ASU 2016-07, Investments Equity Method and Joint Ventures (Topic 323). The guidance eliminates the requirement that an entity retroactively adopt the equity method of accounting if an investment qualifies for use of the equity method as a result of an increase in the level of ownership or degree of influence. The amendments require that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. The Company adopted the guidance effective January 1, 2017 and there was no impact on the Company’s consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases. The guidance requires lessees to recognize lease assets and lease liabilities for those leases classified as operating leases under the previous standard. Depending on the lease classification, lessees will recognize expense based on the effective interest method for finance leases or on a straight-line basis for operating leases. The accounting applied by a lessor is largely unchanged from that applied under the previous standard. One of the impacts on the Company will be the presentation and disclosure in the financial statements of non-lease components such as charges to tenants for a building’s operating expenses. The non-lease components will be presented separately from the lease components in both the Consolidated Statements of Operations and Consolidated Balance Sheets. Another impact is the measurement and presentation of ground leases under which the Company is lessee. The Company is required to record a liability for the obligation to make payments under the lease and an asset for the right to use the underlying asset during the lease term and will also apply the new expense recognition requirements given the lease classification. The Company is currently quantifying these impacts. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company anticipates adopting this guidance January 1, 2019 and will apply the modified retrospective approach.
In January 2016, the FASB issued ASU 2016-01 (ASU 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities. The guidance requires entities to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and to record changes in instruments-specific credit risk for financial liabilities measured under the fair value option in other comprehensive income. The guidance is effective for fiscal years beginning after December 15, 2017, and for interim periods therein. The Company has not yet adopted this new guidance and is currently evaluating the impact of adopting this new accounting standard on the Company’s consolidated financial statements.
In May 2014, the FASB issued a new comprehensive revenue recognition guidance which requires us to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods and services (ASU 2014-09). The guidance also requires enhanced disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized.
In March 2016, the FASB issued implementation guidance which clarifies principal versus agent considerations in reporting revenue gross versus net (ASU 2016-08).
In April 2016, the FASB issued implementation guidance which clarifies the identification of performance obligations (ASU 2016-10).
In April 2016, the FASB amended its new revenue recognition guidance on identifying performance obligations to allow entities to disregard items that are immaterial and clarify when a good or service is separately identifiable (ASU 2016-10).
In May 2016, the FASB issued implementation guidance relating to transition, collectability, noncash consideration and presentation matters (ASU 2016-12).
These ASUs are effective for annual and interim periods beginning after December 15, 2017. Early adoption is permitted but not before interim and annual reporting periods beginning after December 15, 2016. The new guidance can be applied either retrospectively to each prior reporting period presented, or as a cumulative-effect adjustment as of the date of adoption. The Company anticipates adopting this guidance January 1, 2018, and applying the cumulative-effect adoption method. Since the Company’s revenue is related to leasing activities, the adoption of this guidance will not have a material impact on the consolidated financial statements.
3. Property Acquisitions
During the three months ended March 31, 2017 , we did not acquire any properties from a third party.
4. Properties Held for Sale and Property Dispositions
Properties Held for Sale
During the three months ended March 31, 2017 , we entered into agreements to sell a 90% interest in 102 Greene Street and to sell the property at 520 White Plains Road in Tarrytown, New York. We recorded a $14.2 million depreciable real estate reserve

11

Reckson Operation Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2017
(unaudited)

in connection with the sale of 520 White Plains Road. In April 2017, we closed on the sale of 520 White Plains Road and the 90% interest in 102 Greene Street.
5. Debt and Preferred Equity Investments
During the three months ended March 31, 2017 and 2016 , our debt and preferred equity investments, net of discounts and deferred origination fees, increased by $403.9 million and $128.8 million , respectively, due to originations, purchases, advances under future funding obligations, discount and fee amortization, and paid-in-kind interest, net of premium amortization. We recorded repayments, participations and sales of $416.5 million and $420.2 million during the three months ended March 31, 2017 and 2016 , respectively, which offset the increases in debt and preferred equity investments.
Certain participations in debt investments that were sold or syndicated did not meet the conditions for sale accounting are included in other assets and other liabilities on the consolidated balance sheets.
Debt Investments
As of March 31, 2017 and December 31, 2016 , we held the following debt investments, with an aggregate weighted average current yield of 9.42% at March 31, 2017 (in thousands):
Loan Type
 
March 31, 2017
Future Funding
Obligations
 
March 31, 2017 Senior
Financing
 
March 31, 2017
Carrying Value
(1)
 
December 31, 2016
Carrying Value (1)
 
Maturity
Date (2)
Fixed Rate Investments:
 
 
 
 
 
 
 
 
 
 
Mezzanine Loan (3a)
 

 
502,100

 
66,197

 
66,129

 
June 2017
Mortgage Loan (4)
 

 

 
26,324

 
26,311

 
February 2019
Mortgage Loan
 

 

 
346

 
380

 
August 2019
Mezzanine Loan
 

 
1,160,000

 
197,358

 

 
March 2020
Mezzanine Loan
 

 
15,000

 
3,500

 
3,500

 
September 2021
Mezzanine Loan
 

 
87,891

 
12,694

 
12,692

 
November 2023
Mezzanine Loan (3b)
 

 
115,000

 
12,926

 
12,925

 
June 2024
Mezzanine Loan
 

 
95,000

 
30,000

 
30,000

 
January 2025
Mezzanine Loan
 

 
340,000

 
15,000

 
15,000

 
November 2026
Jr. Mortgage Participation/Mezzanine Loan (5)
 

 

 

 
193,422

 
 
Total fixed rate
 
$

 
$
2,314,991

 
$
364,345

 
$
360,359

 
 
Floating Rate Investments:
 


 

 

 

 
 
Mezzanine Loan (3c)
 

 
40,000

 
15,446

 
15,369

 
June 2017
Mortgage/ Mezzanine Loan
 

 

 
32,929

 
32,847

 
June 2017
Mortgage/Mezzanine Loan
 

 

 
22,978

 
22,959

 
July 2017
Mortgage/Mezzanine Loan
 

 

 
16,975

 
16,960

 
September 2017
Mortgage/Mezzanine Loan
 
2,302

 

 
21,630

 
20,423

 
October 2017
Mezzanine Loan
 

 
60,000

 
14,970

 
14,957

 
November 2017
Mezzanine Loan (3d)
 

 
85,000

 
15,206

 
15,141

 
December 2017
Mezzanine Loan (3e)
 

 
65,000

 
14,714

 
14,656

 
December 2017
Mortgage/Mezzanine Loan (3f)
 
795

 

 
15,078

 
15,051

 
December 2017
Mortgage/Mezzanine Loan (6)
 

 
125,000

 
29,902

 
29,998

 
January 2018
Mezzanine Loan
 

 
40,000

 
19,930

 
19,913

 
April 2018
Jr. Mortgage Participation
 

 
175,000

 
34,873

 
34,844

 
April 2018
Mezzanine Loan
 
523

 
20,523

 
10,880

 
10,863

 
August 2018
Mortgage/Mezzanine Loan
 

 

 
19,864

 
19,840

 
August 2018
Mortgage Loan
 

 
65,000

 
14,898

 
14,880

 
August 2018
Mezzanine Loan
 

 
37,500

 
14,698

 
14,648

 
September 2018

12

Reckson Operation Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2017
(unaudited)

Loan Type
 
March 31, 2017
Future Funding
Obligations
 
March 31, 2017 Senior
Financing
 
March 31, 2017
Carrying Value
(1)
 
December 31, 2016
Carrying Value (1)
 
Maturity
Date (2)
Mezzanine Loan
 
2,325

 
45,025

 
34,593

 
34,502

 
October 2018
Mezzanine Loan
 

 
335,000

 
74,543

 
74,476

 
November 2018
Mezzanine Loan
 

 
33,000

 
26,868

 
26,850

 
December 2018
Mezzanine Loan
 
2,005

 
169,152

 
57,496

 
56,114

 
December 2018
Mezzanine Loan
 
14,191

 
265,704

 
64,870

 
63,137

 
December 2018
Mezzanine Loan
 
11,177

 
210,770

 
68,136

 
64,505

 
December 2018
Mezzanine Loan
 

 
45,000

 
12,120

 
12,104

 
January 2019
Mortgage/Mezzanine Loan
 
42,548

 

 
171,352

 

 
January 2019
Mezzanine Loan
 
6,383

 
16,383

 
5,434

 
5,410

 
January 2019
Mezzanine Loan
 

 
38,000

 
21,903

 
21,891

 
March 2019
Mezzanine Loan
 

 
265,000

 
24,736

 
24,707

 
April 2019
Mortgage/Jr. Mortgage Participation Loan
 
32,721

 
185,649

 
66,484

 
65,554

 
August 2019
Mezzanine Loan
 
2,500

 
187,500

 
37,337

 
37,322

 
September 2019
Mortgage/Mezzanine Loan
 
75,310

 

 
119,422

 
111,819

 
September 2019
Mortgage/Mezzanine Loan
 
35,630

 

 
33,714

 
33,682

 
January 2020
Mezzanine Loan (7)
 
13,273

 
502,066

 
65,993

 
125,911

 
January 2020
Jr. Mortgage Participation/Mezzanine Loan
 

 
60,000

 
15,613

 
15,606

 
July 2021
Mortgage/Mezzanine Loan (8)
 

 

 

 
145,239

 
 
Total floating rate
 
$
241,683

 
$
3,071,272

 
$
1,215,585

 
$
1,232,178

 
 
Total
 
$
241,683

 
$
5,386,263

 
$
1,579,930

 
$
1,592,537

 
 
(1)
Carrying value is net of discounts, premiums, original issue discounts and deferred origination fees.
(2)
Represents contractual maturity, excluding any unexercised extension options.
(3)
Carrying value is net of the following amounts that were sold or syndicated, which are included in other assets and other liabilities on the consolidated balance sheets as a result of the transfers not meeting the conditions for sale accounting: (a) $41.3 million , (b) $12.0 million , (c) $14.5 million , (d) $14.6 million , (e) $14.1 million , and (f) $5.1 million .
(4)
In September 2014, we acquired a $26.4 million mortgage loan at a $0.2 million discount and a $5.7 million junior mortgage participation at a $5.7 million discount. The junior mortgage participation was a nonperforming loan at acquisition, is currently on non-accrual status and has no carrying value.
(5)
This loan was repaid in March 2017.
(6)
This loan was extended in January 2017.
(7)
$66.1 million of outstanding principal was syndicated in February 2017.
(8)
This loan was repaid in January 2017.



Preferred Equity Investments
As of March 31, 2017 and December 31, 2016 , we held the following preferred equity investments with an aggregate weighted average current yield of 8.36% at March 31, 2017 (in thousands):
Type
 
March 31, 2017
Future Funding
Obligations
 
March 31, 2017
Senior
Financing
 
March 31, 2017
Carrying Value
(1)
 
December 31, 2016
Carrying Value
(1)
 

Mandatory
Redemption (2)
Preferred Equity
 
$

 
$
73,448

 
$
9,986

 
$
9,982

 
March 2018
Preferred Equity
 

 
58,617

 
37,920

 
37,893

 
November 2018
Total
 
$

 
$
132,065

 
$
47,906

 
$
47,875

 
 

(1)
Carrying value is net of deferred origination fees.
(2)
Represents contractual maturity, excluding any unexercised extension options.

13

Reckson Operation Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2017
(unaudited)

At March 31, 2017 and December 31, 2016 , all debt and preferred equity investments were performing in accordance with the terms of the relevant investments, with the exception of a junior mortgage participation acquired in September 2014, which was acquired for zero and has a carrying value of zero , as further discussed in subnote 4 of the Debt Investments table above.
We have determined that we have one portfolio segment of financing receivables at March 31, 2017 and 2016 comprising commercial real estate which is primarily recorded in debt and preferred equity investments. Included in other assets is an additional amount of financing receivables totaling $119.4 million and $144.5 million at March 31, 2017 and December 31, 2016 , respectively. No financing receivables were 90 days past due at March 31, 2017 .
6. Investments in Unconsolidated Joint Ventures
We have investments in several real estate joint ventures with various partners. As of March 31, 2017 none of our investments in unconsolidated joint ventures are VIEs. The table below provides general information on each of our joint ventures as of March 31, 2017 :
Property
Partner
Ownership
Interest (1)
Economic
Interest (1)
Approximate Square Feet
Acquisition Date (2)
Acquisition
Price (2)
(in thousands)
131-137 Spring Street
Invesco Real Estate
20.00%
20.00%
68,342

August 2015
$
277,750

76 11th Avenue (3)
Oxford/Vornado
33.33%
35.09%
764,000

March 2016
138,240


(1)
Ownership interest and economic interest represent the Company's interests in the joint venture as of March 31, 2017 . Changes in ownership or economic interests, if any, within the current year are disclosed in the notes below.
(2)
Acquisition date and price represent the date on which the Company initially acquired an interest in the joint venture and the actual or implied gross purchase price for the joint venture on that date. Acquisition date and price are not adjusted for subsequent acquisitions or dispositions of interest.
(3)
The joint venture owns two mezzanine notes secured by interests in the entity that owns 76 11th Avenue. The difference between our ownership interest and our economic interest results from our right to 50% of the total exit fee while each of our partners is entitled to receive 25% of the total exit fee and our right to 38% of the total extension fee while each of our partners is entitled to receive 31% of the total extension fee.
Acquisition, Development and Construction Arrangements
Based on the characteristics of the following arrangements, which are similar to those of an investment, combined with the expected residual profit of not greater than 50% , we have accounted for these debt and preferred equity investments under the equity method. As of March 31, 2017 and December 31, 2016 , the carrying value for acquisition, development and construction arrangements were as follows (in thousands):
Loan Type
 
March 31, 2017
 
December 31, 2016
 
Maturity Date
Mezzanine Loan and Preferred Equity (1)
 
$
100,000

 
$
100,000

 
March 2018
Mezzanine Loan (2)
 
24,965

 
24,542

 
July 2036
 
 
$
124,965

 
$
124,542

 
 
(1)
These loans were extended in February 2017.
(2)
The Company has the ability to convert this loan into an equity position starting in 2021 and the borrower is able to force this conversion in 2024.
Sale of Joint Venture Interests or Properties
We did not sell any joint venture interest or property during the three months ended March 31, 2017 .
Joint Venture Mortgages and Other Loans Payable
We generally finance our joint ventures with non-recourse debt. In certain cases we may provide guarantees or master leases for tenant space, which terminate upon the satisfaction of specified circumstances or repayment of the underlying loans. The first mortgage notes and other loans payable collateralized by the respective joint venture properties and assignment of leases at March 31, 2017 and December 31, 2016 , respectively, are as follows (amounts in thousands):
Property
 
Maturity Date
 
Interest
Rate (1)
 
March 31, 2017
 
December 31, 2016
Floating Rate Debt:
 
 
 
 
 
 
 
 
131-137 Spring Street
 
August 2020
 
2.33
%
 
$
141,000

 
$
141,000

Total joint venture mortgages and other loans payable
 
 
 
$
141,000

 
$
141,000


14

Reckson Operation Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2017
(unaudited)

Property
 
Maturity Date
 
Interest
Rate (1)
 
March 31, 2017
 
December 31, 2016
Deferred financing costs, net
 
 
 
 
 
(3,693
)
 
(3,970
)
Total joint venture mortgages and other loans payable, net
 
 
 
$
137,307

 
$
137,030


(1)
Effective weighted average interest rate for the three months ended March 31, 2017 , taking into account interest rate hedges in effect during the period.
The combined balance sheets for the unconsolidated joint ventures, at March 31, 2017 and December 31, 2016 are as follows (in thousands):
 
March 31, 2017
 
December 31, 2016
Assets
 
 
 
Commercial real estate property, net
$
277,866

 
$
279,451

Debt and preferred equity investments, net
274,741

 
273,749

Other assets
18,005

 
18,922

Total assets
$
570,612

 
$
572,122

Liabilities and members' equity
 
 
 
Mortgages and other loans payable, net
$
137,307

 
$
137,030

Other liabilities
20,973

 
22,185

Members' equity
412,332

 
412,907

Total liabilities and members' equity
$
570,612

 
$
572,122

Company's investments in unconsolidated joint ventures
$
174,678

 
$
174,127

The combined statements of operations for the unconsolidated joint ventures for the three months ended March 31, 2017 and 2016 , are as follows (in thousands):
 
Three Months Ended March 31,
 
2017
 
2016
Total revenues
$
11,249

 
$
6,937

Operating expenses
211

 
374

Real estate taxes
313

 
283

Interest expense, net of interest income
825

 
698

Amortization of deferred financing costs
277

 
277

Transaction related costs

 

Depreciation and amortization
2,101

 
2,101

Total expenses
$
3,727

 
$
3,733

Net income
$
7,522

 
$
3,204

Company's equity in net income from unconsolidated joint ventures
4,255

 
2,457


15

Reckson Operation Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2017
(unaudited)

7. Mortgages and Other Loans Payable
The first mortgages and other loans payable collateralized by the respective properties and assignment of leases or debt investments at March 31, 2017 and December 31, 2016 , respectively, were as follows (amounts in thousands):
Property
 
Maturity Date
 
Interest Rate (1)
 
March 31, 2017
 
December 31, 2016
Fixed Rate Debt:
 
 
 
 
 
 
 
 
919 Third Avenue (2)
 
June 2023
 
5.12
%
 
$
500,000

 
$
500,000

315 West 33rd Street
 
February 2027
 
4.24
%
 
250,000

 

Floating Rate Debt:
 
 
 
 
 
 
 
 
Master Repurchase Agreement
 
July 2018
 
3.28
%
 
$
184,642

 
$
184,642

Total mortgages and other loans payable
 
 
 
 
 
$
934,642

 
$
684,642

Deferred financing costs, net of amortization
 
 
 
 
 
(14,040
)
 
(8,574
)
Total mortgages and other loans payable, net
 
 
 
 

 
$
920,602

 
$
676,068


(1)
Effective weighted average interest rate for the three months ended March 31, 2017 .
(2)
We own a 51.0% controlling interest in the joint venture that is the borrower on this loan.
Master Repurchase Agreement
In July 2016, we entered into a restated Master Repurchase Agreement, or MRA, which provides us with the ability to sell certain debt investments with a simultaneous agreement to repurchase the same at a certain date or on demand. The MRA has a maximum facility capacity of $300.0 million and bears interest ranging from 225 and 400 basis points over 30-day LIBOR depending on the pledged collateral. Since December 6, 2015, we have been required to pay monthly in arrears a 25 basis point fee on the excess of $150.0 million over the average daily balance during the period if the average daily balance is less than $150.0 million . We seek to mitigate risks associated with our repurchase agreement by managing the credit quality of our assets, early repayments, interest rate volatility, liquidity, and market value. The margin call provisions under our repurchase facility permit valuation adjustments based on capital markets activity, and are not limited to collateral-specific credit marks. To monitor credit risk associated with our debt investments, our asset management team regularly reviews our investment portfolio and is in contact with our borrowers in order to monitor the collateral and enforce our rights as necessary. The risk associated with potential margin calls is further mitigated by our ability to recollateralize the facility with additional assets from our portfolio of debt investments, our ability to satisfy margin calls with cash or cash equivalents and our access to additional liquidity through the 2012 credit facility, as defined below.
At March 31, 2017 and December 31, 2016 , the gross book value of the properties and debt and preferred equity investments collateralizing the mortgages and other loans payable, not including assets held for sale, was approximately $2.3 billion and $1.7 billion , respectively.
8. Corporate Indebtedness
2012 Credit Facility
In August 2016, we entered into an amendment to the credit facility that was originally entered into by the Company in November 2012, referred to as the 2012 credit facility. As of March 31, 2017 , the 2012 credit facility, as amended, consisted of a $1.6 billion revolving credit facility and a $1.2 billion term loan, with a maturity date of March 29, 2019 and June 30, 2019, respectively. The revolving credit facility has an as-of-right extension to March 29, 2020. We also have an option, subject to customary conditions, to increase the capacity under the revolving credit facility to $3.0 billion at any time prior to the maturity date for the revolving credit facility without the consent of existing lenders, by obtaining additional commitments from our existing lenders and other financial institutions.
As of March 31, 2017 , the 2012 credit facility bore interest at a spread over LIBOR ranging from (i) 87.5 basis points to 155 basis points for loans under the revolving credit facility and (ii) 95 basis points to 190 basis points for loans under the term loan facility, in each case based on the credit rating assigned to the senior unsecured long term indebtedness of ROP.
At March 31, 2017 , the applicable spread was 125 basis points for the revolving credit facility and 140 basis points for the term loan facility. At March 31, 2017 , the effective interest rate was 2.03% for the revolving credit facility and 2.18% for the term loan facility. We are required to pay quarterly in arrears a 12.5 to 30 basis point facility fee on the total commitments under the

16

Reckson Operation Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2017
(unaudited)

revolving credit facility based on the credit rating assigned to the senior unsecured long term indebtedness of ROP. As of March 31, 2017 , the facility fee was 25 basis points.
As of March 31, 2017 , we had $84.8 million of outstanding letters of credit, zero drawn under the revolving credit facility and $1.2 billion outstanding under the term loan facility, with total undrawn capacity of $1.5 billion under the 2012 credit facility. At March 31, 2017 and December 31, 2016 , the revolving credit facility had a carrying value of $(5.6) million , representing deferred financing costs presented within other liabilities, and $(6.3) million , respectively, net of deferred financing costs. At March 31, 2017 and December 31, 2016 , the term loan facility had a carrying value of $1.2 billion and $1.2 billion , respectively, net of deferred financing costs.
We, SL Green and the Operating Partnership are all borrowers jointly and severally obligated under the 2012 credit facility. None of SL Green's other subsidiaries are obligors under the 2012 credit facility.
The 2012 credit facility includes certain restrictions and covenants (see Restrictive Covenants below).
Senior Unsecured Notes
The following table sets forth our senior unsecured notes and other related disclosures as of March 31, 2017 and December 31, 2016 , respectively, by scheduled maturity date (dollars in thousands):
Issuance
 
March 31,
2017
Unpaid
Principal
Balance
 
March 31,
2017
Accreted
Balance
 
December 31,
2016
Accreted
Balance
 
Coupon
Rate
(1)
 
Effective
Rate
 
Term
(in Years)
 
Maturity Date
August 5, 2011 (2)
 
$
250,000

 
$
249,898

 
$
249,880

 
5.00
%
 
5.00
%
 
7
 
August 2018
March 16, 2010 (2)
 
250,000

 
250,000

 
250,000

 
7.75
%
 
7.75
%
 
10
 
March 2020
November 15, 2012 (2)
 
200,000

 
200,000

 
200,000

 
4.50
%
 
4.50
%
 
10
 
December 2022
December 17, 2015 (2)
 
100,000

 
100,000

 
100,000

 
4.27
%
 
4.27
%
 
10
 
December 2025
 
 
$
800,000

 
$
799,898

 
$
799,880

 
 
 
 
 
 
 
 
Deferred financing costs, net
 
 
 
(4,296
)
 
(4,620
)
 
 
 
 
 
 
 
 
 
 
$
800,000

 
$
795,602

 
$
795,260

 
 
 
 
 
 
 
 

(1)
Interest on the senior unsecured notes is payable semi-annually with principal and unpaid interest due on the scheduled maturity dates.
(2)
Issued by SL Green, the Operating Partnership and ROP, as co-obligors.
ROP also provides a guaranty of the Operating Partnership's obligations under its 3.00% Exchangeable Senior Notes due 2017.
Restrictive Covenants
The terms of the 2012 credit facility, as amended, and certain of our senior unsecured notes include certain restrictions and covenants which may limit, among other things, SL Green's ability to pay dividends, make certain types of investments, incur additional indebtedness, incur liens and enter into negative pledge agreements and dispose of assets, and which require compliance with financial ratios relating to the maximum ratio of total indebtedness to total asset value, a minimum ratio of EBITDA to fixed charges, a maximum ratio of secured indebtedness to total asset value and a maximum ratio of unsecured indebtedness to unencumbered asset value. The dividend restriction referred to above provides that SL Green will not during any time when a default is continuing, make distributions with respect to SL Green's common stock or other equity interests, except to enable SL Green to continue to qualify as a REIT for Federal income tax purposes. As of March 31, 2017 and 2016 , we were in compliance with all such covenants.
Principal Maturities
Combined aggregate principal maturities of our mortgage and other loans payable, 2012 credit facility and senior unsecured notes as of March 31, 2017 , including as-of-right extension options and put options, were as follows (in thousands):

17

Reckson Operation Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2017
(unaudited)

 
Scheduled
Amortization
 
Principal
Repayments
 
Revolving
Credit
Facility
 
Unsecured Term Loan
 
Senior Unsecured Notes
 
Total
Remaining 2017
$

 
$

 
$

 
$

 
$

 
$

2018

 
184,642

 

 

 
250,000

 
434,642

2019

 

 

 
1,183,000

 

 
1,183,000

2020

 

 

 

 
250,000

 
250,000

2021

 

 

 

 

 

Thereafter

 
750,000

 

 

 
300,000

 
1,050,000

 
$

 
$
934,642

 
$

 
$
1,183,000

 
$
800,000

 
$
2,917,642

              
Consolidated interest expense, excluding capitalized interest, was comprised of the following (in thousands):
 
Three Months Ended March 31,
 
2017
 
2016
Interest expense before capitalized interest
$
29,851

 
$
32,314

Interest capitalized
(380
)
 
(109
)
Interest income
(4
)
 
(4
)
Interest expense, net
$
29,467

 
$
32,201

9. Related Party Transactions
Cleaning/ Security/ Messenger and Restoration Services
Alliance Building Services, or Alliance, and its affiliates are partially owned by Gary Green, a son of Stephen L. Green, the chairman of SL Green's board of directors, and provide services to certain properties owned by us. Alliance’s affiliates include First Quality Maintenance, L.P., or First Quality, Classic Security LLC, Bright Star Couriers LLC and Onyx Restoration Works, and provide cleaning, extermination, security, messenger, and restoration services, respectively. In addition, First Quality has the non-exclusive opportunity to provide cleaning and related services to individual tenants at our properties on a basis separately negotiated with any tenant seeking such additional services. The Service Corporation has entered into an arrangement with Alliance whereby it will receive a profit participation above a certain threshold for services provided by Alliance to certain tenants at certain buildings above the base services specified in their lease agreements.
Income earned from profit participation, which is included in other income on the consolidated statements of operations, was $0.8 million and $0.8 million for the three months ended March 31, 2017 and 2016 , respectively. We also recorded expenses for these services, inclusive of capitalized expenses, of $2.0 million and $1.7 million for the three months ended March 31, 2017 and 2016 , respectively, for these services (excluding services provided directly to tenants).
Allocated Expenses from SL Green
Property operating expenses include an allocation of salary and other operating costs from SL Green based on square footage of the related properties. Such amount was approximately $3.2 million and $2.6 million for the three months ended March 31, 2017 and 2016 , respectively.
Insurance
We obtained insurance coverage through an insurance program administered by SL Green. In connection with this program, we incurred insurance expense of approximately $1.4 million and $1.6 million for the three months ended March 31, 2017 and 2016 , respectively.

18

Reckson Operation Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2017
(unaudited)

10. Preferred Units
Through a consolidated subsidiary, we have authorized up to  109,161   3.5%  Series A Preferred Units of limited partnership interest, or the Greene Series A Preferred Units, with a liquidation preference of  $1,000.00  per unit. In August 2015, the Company issued  109,161  Greene Series A Preferred Units in conjunction with an acquisition. The Greene Series A Preferred unitholders receive annual dividends of  $35.00  per unit paid on a quarterly basis and dividends are cumulative, subject to certain provisions. The Greene Series A Preferred Units can be redeemed at any time, at the option of the unitholder, either for cash or are convertible on a one-for-one basis, into the Series B Preferred Units of limited partnership interest, or the Greene Series B Preferred Units. The Greene Series B Preferred Units can be converted at any time, at the option of the unitholder, into a number of common stock equal to  6.71348  shares of SL Green common stock for each Greene Series B Preferred Unit. As of March 31, 2017 , no Greene Series B Preferred Units have been issued.
ASC 815 Derivatives and Hedging requires bifurcation of certain embedded derivative instruments, such as conversion features in convertible equity instruments, and their measurement at fair value for accounting purposes. The conversion feature embedded in the Subsidiary Series A Preferred Units was evaluated, and it was determined that the conversion feature should be bifurcated from its host instrument and accounted for as a freestanding derivative. The derivative is reported as a derivative liability in accrued interest and other liabilities on the accompanying consolidated balance sheet and is adjusted to its fair value at each reporting date, with a corresponding adjustment to interest expense, net of interest income. The embedded derivative for the Subsidiary Series A Preferred Units was initially recorded at a fair value of zero on July 22, 2015, the date of issuance. At December 31, 2016, the carrying amount of the derivative was adjusted to its fair value of zero , with a corresponding adjustment to preferred units and interest expense, net of interest income. At March 31, 2017 the carrying amount and fair value of the derivative remained at zero .
11. Partners' Capital
Since consummation of the Merger on January 25, 2007, the Operating Partnership has owned all the economic interests in ROP either by direct ownership or by indirect ownership through our general partner, which is its wholly-owned subsidiary.
Intercompany transactions between SL Green and ROP are generally recorded as contributions and distributions.
12. Fair Value Measurements
We are required to disclose fair value information with regard to our financial instruments, whether or not recognized in the consolidated balance sheets, for which it is practical to estimate fair value. The FASB guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. We measure and/or disclose the estimated fair value of financial assets and liabilities based on a hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptions. This hierarchy consists of three broad levels: Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date; Level 2 - inputs other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and Level 3 - unobservable inputs for the asset or liability that are used when little or no market data is available. We follow this hierarchy for our assets and liabilities measured at fair value on a recurring and nonrecurring basis. In instances in which the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level of input that is significant to the fair value measurement in its entirety. Our assessment of the significance of the particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
We determine other than temporary impairment in real estate investments and debt and preferred equity investments, including intangibles primarily utilizing cash flow projections that apply, among other things, estimated revenue and expense growth rates, discount rates and capitalization rates, as well as sales comparison approach, which utilizes comparable sales, listings and sales contracts. All of which are classified as Level 3 inputs.
The fair value of derivative instruments is based on current market data received from financial sources that trade such instruments and are based on prevailing market data and derived from third party proprietary models based on well-recognized financial principles and reasonable estimates about relevant future market conditions, which are classified as Level 2 inputs.
The financial assets and liabilities that are not measured at fair value on our consolidated balance sheets include cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses, debt and preferred equity investments, mortgages and other loans payable and other secured and unsecured debt. The carrying amount of cash and cash equivalents, restricted cash, accounts receivable, and accounts payable and accrued expenses reported in our consolidated balance sheets approximates fair value due to the short term nature of these instruments. The fair value of debt and preferred equity investments, which is classified as Level 3, is estimated by discounting the future cash flows using current interest rates at which similar loans with the same maturities would be made to borrowers with similar credit ratings. The fair value of borrowings, which

19

Reckson Operation Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2017
(unaudited)

is classified as Level 3, is estimated by discounting the contractual cash flows of each debt instrument to their present value using adjusted market interest rates, which is provided by a third-party specialist.
The following table provides the carrying value and fair value of these financial instruments as of March 31, 2017 and December 31, 2016 (in thousands):
 
March 31, 2017
 
December 31, 2016
 
Carrying Value (1)
 
Fair Value
 
Carrying Value (1)
 
Fair Value
Debt and preferred equity investments (2)
$
1,627,836

 
(3)  
 
$
1,640,412

 
(3)  
 
 
 
 
 
 
 
 
Fixed rate debt
$
2,349,898

 
$
2,438,513

 
$
2,099,880

 
$
2,183,042

Variable rate debt  
567,642

 
578,410

 
567,642

 
580,083

 
$
2,917,540

 
$
3,016,923

 
$
2,667,522

 
$
2,763,125


(1)
Amounts exclude net deferred financing costs.
(2)
Excludes investments with a book value of $174.7 million and $174.1 million as of March 31, 2017 and December 31, 2016 , respectively, which we accounted for under the equity method accounting as a result of meeting criteria of a real estate investment under the guidance for Acquisition, Development and Construction arrangements, and other investments with a book value of $119.4 million and $144.5 million as of March 31, 2017 and December 31, 2016 , respectively.
(3)
At March 31, 2017 , debt and preferred equity investments had an estimated fair value ranging between $1.6 billion and $1.8 billion . At December 31, 2016 , debt and preferred equity investments had an estimated fair value ranging between $1.6 billion and $1.8 billion .
Disclosure about fair value of financial instruments was based on pertinent information available to us as of March 31, 2017 and December 31, 2016 . Although we are not aware of any factors that would significantly affect the reasonable fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date and current estimates of fair value may differ significantly from the amounts presented herein.
13. Financial Instruments: Derivatives and Hedging
In the normal course of business, we use a variety of commonly used derivative instruments, such as interest rate swaps, caps, collar and floors, to manage, or hedge interest rate risk. We hedge our exposure to variability in future cash flows for forecasted transactions in addition to anticipated future interest payments on existing debt. We recognize all derivatives on the balance sheets at fair value. Derivatives that are not hedges are adjusted to fair value through earnings. If a derivative is a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will either be offset against the change in fair value of the hedge asset, liability, or firm commitment through earnings, or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. Reported net income and equity may increase or decrease prospectively, depending on future levels of interest rates and other variables affecting the fair values of derivative instruments and hedged items, but will have no effect on cash flows. Currently, all of our designated derivative instruments are effective hedging instruments. As of March 31, 2017 , the Company had not designated any interest rate swap agreements on any debt investment.
Gains and losses on terminated hedges are included in accumulated other comprehensive loss, and are recognized into earnings over the term of the related senior unsecured notes. As of March 31, 2017 and December 31, 2016 , the deferred net losses from these terminated hedges, which are included in accumulated other comprehensive loss relating to net unrealized loss on derivative instruments, was approximately $1.5 million and $1.6 million , respectively.
Over time, the realized and unrealized gains and losses held in accumulated other comprehensive loss will be reclassified into earnings as an adjustment to interest expense in the same periods in which the hedged interest payments affect earnings. We estimate that approximately $0.4 million of the current balance held in accumulated other comprehensive loss will be reclassified into interest expense within the next 12 months.

20

Reckson Operation Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2017
(unaudited)

The following table presents the effect of our derivative financial instruments that are designated and qualify as hedging instruments on the consolidated statements of operations for the three months ended March 31, 2017 and 2016 , respectively (in thousands):
 
 
Amount of Loss
Recognized in
Other Comprehensive
Loss
(Effective Portion)
 
Location of Loss Reclassified from Accumulated Other Comprehensive Loss into Income
 
Amount of Loss
 Reclassified from
Accumulated Other
Comprehensive Loss  into Income
(Effective Portion)
 
Location of Gain Recognized in Income on Derivative
 
Amount of Gain
Recognized into Income
(Ineffective Portion)
 
 
Three Months Ended March 31,
 
 
Three Months Ended March 31,
 
 
Three Months Ended March 31,
Derivative
 
2017
 
2016
 
 
2017
 
2016
 
 
2017
 
2016
Interest Rate Swap
 
$

 
$
(12
)
 
Interest expense
 
$
90

 
$
232

 
Interest expense
 
$

 
$
2

14. Commitments and Contingencies
Legal Proceedings
As of March 31, 2017 , we were not involved in any material litigation nor, to management's knowledge, was any material litigation threatened against us or our portfolio which if adversely determined could have a material adverse impact on us.
Guarantees
During the year ended December 31, 2015 , Belmont Insurance Company, or Belmont, a New York licensed captive insurance company and an affiliate of SL Green, became a member of the Federal Home Loan Bank of New York, or FHLBNY. As a member, Belmont could borrow funds from the FHLBNY in the form of secured advances. As of December 31, 2016 , certain commercial real estate properties and debt and preferred equity investments of the Company were pledged as collateral to secure advances under the FHLBNY facility. Belmont's membership was terminated on February 20, 2017 and all funds borrowed from the FHLBNY were repaid in January 2017.
Environmental Matters
Our management believes that the properties are in compliance in all material respects with applicable Federal, state and local ordinances and regulations regarding environmental issues. Management is not aware of any environmental liability that it believes would have a materially adverse impact on our financial position, results of operations or cash flows. Management is unaware of any instances in which it would incur significant environmental cost if any of our properties were sold.
Ground Leases Arrangements
The following is a schedule of future minimum lease payments under non-cancellable operating leases with initial terms in excess of one year as of March 31, 2017 (in thousands):
 
 
Non-cancellable
operating leases
Remaining 2017
 
$
15,440

2018
 
20,586

2019
 
20,586

2020
 
20,586

2021
 
20,736

Thereafter
 
308,202

Total minimum lease payments
 
$
406,136

15. Segment Information
We are engaged in acquiring, owning, managing and leasing commercial properties in Manhattan, Brooklyn, Westchester County, Connecticut and New Jersey and have two reportable segments, real estate and debt and preferred equity investments. We evaluate real estate performance and allocate resources based on earnings contribution to income from continuing operations.

21

Reckson Operation Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2017
(unaudited)

The primary sources of revenue are generated from tenant rents and escalations and reimbursement revenue. Real estate property operating expenses consist primarily of security, maintenance, utility costs, real estate taxes and ground rent expense (at certain applicable properties). See Note 5, "Debt and Preferred Equity Investments," for additional details on our debt and preferred equity investments.
Selected consolidated results of operations for the three months ended March 31, 2017 and 2016 , and selected asset information as of March 31, 2017 and December 31, 2016 , regarding our operating segments are as follows (in thousands):
 
 
Real Estate
Segment
 
Debt and Preferred
Equity
Segment
 
Total
Company
Total revenues:
 
 
 
 
 
 
Three months ended:
 
 
 
 
 
 
March 31, 2017
 
$
185,019

 
$
47,336

 
$
232,355

March 31, 2016
 
178,783

 
60,881

 
239,664

(Loss) income from continuing operations before equity in net gain on sale of interest from unconsolidated joint venture/real estate and depreciable real estate reserves:
 
 
 
 
 
 
Three months ended:
 
 
 
 
 
 
March 31, 2017
 
$
(29,259
)
 
$
40,401

 
$
11,142

March 31, 2016
 
18,460

 
53,740

 
72,200

Total assets
 
 
 
 
 
 
As of:
 
 
 
 
 
 
March 31, 2017
 
$
6,692,595

 
$
1,932,175

 
$
8,624,770

December 31, 2016
 
6,786,479

 
1,968,134

 
8,754,613

Income from continuing operations represents total revenues less total expenses for the real estate segment and total investment income less allocated interest expense for the debt and preferred equity segment. Interest costs for the debt and preferred equity segment includes actual costs incurred for investments collateralizing the MRA. Interest is imputed on the remaining investments using our corporate borrowing cost. We also allocate loan loss reserves, net of recoveries and transaction related costs to the debt and preferred equity segment.
We do not allocate marketing, general and administrative expenses to the debt and preferred equity segment since the use of personnel and resources is dependent on transaction volume between the two segments and varies period over period. In addition, we base performance on the individual segments prior to allocating marketing, general and administrative expenses. For the three months ended March 31, 2017 , and 2016 , marketing, general and administrative expenses totaled $0.1 million and $0.2 million , respectively. All other expenses, except interest, relate entirely to the real estate assets.
There were no transactions between the above two segments.

22


ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Overview
Reckson Operating Partnership, L.P., or ROP, commenced operations on June 2, 1995. The sole general partner of ROP is Wyoming Acquisition GP LLC., or WAGP, a wholly-owned subsidiary of SL Green Operating Partnership, L.P., or the Operating Partnership. The sole limited partner of ROP is the Operating Partnership. SL Green Realty Corp., or SL Green, is the general partner of the Operating Partnership. Unless the context requires otherwise, all references to "we," "our," "us" and the "Company" means ROP and all entities owned or controlled by ROP.
ROP is engaged in the acquisition, ownership, management and operation of commercial and residential real estate properties, principally office properties, and also owns land for future development, located in New York City, Westchester County, Connecticut and New Jersey, which collectively is also known as the New York Metropolitan area.
As of March 31, 2017 , we owned the following interests in properties in the New York Metropolitan area, primarily in midtown Manhattan. Our investments in the New York Metropolitan area also include investments in Brooklyn, Westchester County, Connecticut and New Jersey, which are collectively known as the Suburban properties:
Location
 
Type
 
Number of
Properties
 
Approximate Square Feet (unaudited)
 
Weighted Average
Occupancy
(1)  (unaudited)
Commercial:
 
 
 
 
 
 
 
 
Manhattan
 
Office
 
16

 
8,463,245

 
96.4
%
 
 
Retail (2)(3)(4)
 
6

 
374,016

 
95.8
%
 
 
Fee Interest
 
1

 
176,530

 
100.0
%
 
 
 
 
23

 
9,013,791

 
96.4
%
Suburban
 
Office (5)
 
18

 
3,251,000

 
83.0
%
 
 
Retail
 
1

 
52,000

 
100.0
%
 
 
 
 
19

 
3,303,000

 
83.3
%
Total commercial properties
 
 
 
42

 
12,316,791

 
92.9
%
Residential:
 
 
 
 
 
 
 
 
Manhattan
 
Residential (2)
 

 
222,855

 
94.0
%
Total portfolio
 
 
 
42

 
12,539,646

 
92.9
%
____________________________________________________________________
(1)
The weighted average occupancy for commercial properties represents the total leased square feet divided by total acquisition square footage. The weighted average occupancy for residential properties represents the total occupied units divided by total available units.
(2)
As of March 31, 2017 , we owned a building that was comprised of approximately 270,132 square feet of retail space and approximately 222,855 square feet of residential space. For the purpose of this report, we have included the building in the number of retail properties we own. However, we have included only the retail square footage in the retail approximate square footage, and have listed the balance of the square footage as residential square footage.
(3)
Includes two unconsolidated joint venture retail properties at 131-137 Spring Street comprised of approximately 68,342 square feet (unaudited).
(4)
Includes the property at 102 Greene Street, which is classified as held for sale at March 31, 2017.
(5)
Includes the property at 520 White Plains Road, which is classified as held for sale at March 31, 2017.
Critical Accounting Policies
Refer to the 2016 Annual Report on Form 10-K of the Company and the Operating Partnership for a discussion of our critical accounting policies, which include investment in commercial real estate properties, investment in unconsolidated joint ventures, revenue recognition, allowance for doubtful accounts, reserve for possible credit losses and derivative instruments. There have been no changes to these accounting policies during the three months ended March 31, 2017 .

23

Table of Contents

Results of Operations
Comparison of the three months ended March 31, 2017 to the three months ended March 31, 2016
The following comparison for the three months ended March 31, 2017 , or 2017, to the three months ended March 31, 2016 , or 2016, makes reference to the effect of the following:
i.
“Same-Store Properties,” which represents all operating properties owned by us at January 1, 2016 and still owned by us in the same manner at March 31, 2017 (Same-Store Properties totale d 37 of our 40 consolidated operating properties),
ii.
“Acquisition Properties,” which represents all properties or interests in properties acquired in 2017 and 2016 and all non-Same-Store Properties, including properties that are under development, redevelopment or were deconsolidated during the period,
iii.
"Disposed Properties" which represents all properties or interests in properties sold or partially sold in 2017 and 2016, and
iv.
“Other,” which represents corporate level items not allocable to specific properties,
(in thousands)
 
2017
 
2016
 
$
Change
 
%
Change
 
 
 
 
 
 
 
 
 
Rental revenue, net
 
$
167,972

 
$
159,618

 
$
8,354

 
5.2
 %
Escalation and reimbursement
 
24,545

 
24,316

 
229

 
0.9
 %
Investment income
 
40,554

 
55,180

 
(14,626
)
 
(26.5
)%
Other (loss) income
 
(716
)
 
550

 
(1,266
)
 
(230.2
)%
Total revenues
 
232,355

 
239,664

 
(7,309
)
 
(3.0
)%
 
 
 
 
 
 
 
 
 
Property operating expenses
 
85,756

 
84,420

 
1,336

 
1.6
 %
Transaction related costs
 

 
178

 
(178
)
 
(100.0
)%
Marketing, general and administrative
 
112

 
184

 
(72
)
 
(39.1
)%