Company Quick10K Filing
Quick10K
Reckson Operating Partnership
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
8-K 2018-12-28 Enter Agreement, Other Events, Exhibits
8-K 2018-07-26 Enter Agreement, Off-BS Arrangement, Exhibits
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ROPL 2018-09-30
Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results Of
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 a18q310-qex311.htm
EX-31.2 a18q310-qex312.htm
EX-32.1 a18q310-qex321.htm
EX-32.2 a18q310-qex322.htm

Reckson Operating Partnership Earnings 2018-09-30

ROPL 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 a18q3rop10qdoc.htm 10-Q Document
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________________________________  
FORM 10-Q
_________________________________________________________ 
 
x      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
For the quarterly period ended September 30, 2018
 
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 x     NO o
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). YES x    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
 
 
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 x
 
As of November 13, 2018, 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

 
Item 1.
Financial Statements
 
 
 
 
 
Consolidated Balance Sheets as of September 30, 2018 (unaudited) and December 31, 2017
 
Consolidated Statements of Operations for the three and nine months ended September 30, 2018 and 2017 (unaudited)
 
Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2018 and 2017 (unaudited)
 
Consolidated Statements of Capital for the three and nine months ended September 30, 2018 (unaudited)
 
Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017 (unaudited)
 
Notes to Consolidated Financial Statements (unaudited)
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
Item 4.
Controls and Procedures
 
Item 1.
Legal Proceedings
Item 1A.
Risk Factors
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.
Defaults Upon Senior Securities
Item 4.
Mine Safety Disclosures
Item 5.
Other Information
Item 6.
Exhibits
 
Signatures


1


PART I. FINANCIAL INFORMATION
ITEM 1.   FINANCIAL STATEMENTS
Reckson Operating Partnership, L.P.
Consolidated Balance Sheets
(in thousands)
 
September 30, 2018
 
December 31, 2017
 
(unaudited)
 
 
Assets
 
 
 
Commercial real estate properties, at cost:
 
 
 
Land and land interests
$
1,274,981

 
$
1,704,142

Building and improvements
3,196,383

 
4,251,610

Building leasehold and improvements
1,073,703

 
1,073,703

 
5,545,067

 
7,029,455

Less: accumulated depreciation
(1,279,827
)
 
(1,492,603
)
 
4,265,240

 
5,536,852

Assets held for sale

 
67,228

Cash and cash equivalents
35,608

 
36,013

Restricted cash
39,570

 
41,117

Tenant and other receivables, net of allowance of $7,138 and $7,237 in 2018 and 2017, respectively
20,540

 
31,006

Deferred rents receivable, net of allowance of $9,553 and $11,189 in 2018 and 2017, respectively
181,900

 
233,300

Debt and preferred equity investments, net of discounts and deferred origination fees of $16,973 and $25,507 in 2018 and 2017, respectively
1,977,057

 
2,114,041

Investments in unconsolidated joint ventures
477,686

 
130,217

Deferred costs, net of accumulated amortization of $81,131 and $77,176 in 2018 and 2017, respectively
76,907

 
106,136

Other assets
230,040

 
245,598

Total assets(1)
$
7,304,548

 
$
8,541,508

Liabilities
 
 
 
Mortgages and other loans payable, net
$
607,061

 
$
829,648

Unsecured notes, net
651,340

 
901,067

Accrued interest payable
8,067

 
14,999

Other liabilities
58,231

 
92,514

Accounts payable and accrued expenses
50,534

 
60,819

Related party payables

 
23,808

Deferred revenue
28,666

 
134,650

Deferred land leases payable
1,958

 
1,888

Dividends payable
807

 
807

Security deposits
38,142

 
39,085

Liabilities related to assets held for sale

 
42

Total liabilities(1)
1,444,806

 
2,099,327

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2


Reckson Operating Partnership, L.P.
Consolidated Balance Sheets
(in thousands)


 
September 30, 2018
 
December 31, 2017
 
(unaudited)
 
 
Commitments and contingencies

 

Preferred units
109,161

 
109,161

 
 
 
 
Capital
 
 
 
General partner capital
5,725,638

 
6,012,134

Limited partner capital

 

Accumulated other comprehensive loss

 
(1,259
)
Total ROP partner's capital
5,725,638

 
6,010,875

Noncontrolling interests in other partnerships
24,943

 
322,145

Total capital
5,750,581

 
6,333,020

Total liabilities and capital
$
7,304,548

 
$
8,541,508

 
 
 
 
1) The Company's consolidated balance sheets include assets and liabilities of consolidated variable interest entities ("VIEs"). See Note 2. The consolidated balance sheets include the following amounts related to our consolidated VIEs: $45.1 million and $268.6 million of land, $0.2 billion and $1.3 billion of building and improvements, $20.7 million and $319.1 million of accumulated depreciation, $624.0 million and $143.9 million of other assets included in other line items, $0.0 million and $495.0 million of real estate debt, net, $0.0 million and $2.1 million of accrued interest payable, and $9.4 million and $48.8 million of other liabilities included in other line items as of September 30, 2018 and December 31, 2017, respectively.


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

3


Reckson Operating Partnership, L.P.
Consolidated Statements of Operations
(unaudited, in thousands)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,

 
2018
 
2017
 
2018
 
2017
Revenues
 
 
 
 
 
 
 
 
Rental revenue, net
 
$
128,726

 
$
167,346

 
$
401,846

 
$
502,376

Escalation and reimbursement
 
20,492

 
25,721

 
60,400

 
73,163

Investment income
 
49,125

 
47,946

 
143,087

 
148,924

Other income
 
244

 
895

 
10,531

 
1,612

Total revenues
 
198,587

 
241,908


615,864

 
726,075

Expenses
 
 
 
 
 
 
 
 
Operating expenses, including related party expenses of $6,021 and $18,178 in 2018, and $6,922 and $20,099 in 2017, respectively.
 
32,049

 
43,448

 
99,412

 
123,938

Real estate taxes
 
33,500

 
40,610

 
98,045

 
118,232

Ground rent
 
4,759

 
5,236

 
15,068

 
15,706

Interest expense, net of interest income
 
15,458

 
34,627

 
47,818

 
96,202

Amortization of deferred financing costs
 
721

 
2,580

 
3,777

 
6,706

Depreciation and amortization
 
41,867

 
53,549

 
125,163

 
156,106

Transaction related costs
 
2

 

 
283

 
2

Marketing, general and administrative
 
131

 
92

 
405

 
321

Total expenses
 
128,487

 
180,142

 
389,971

 
517,213

 
 
 
 
 
 
 
 
 
Equity in net (loss) income from unconsolidated joint ventures
 
(164
)
 
2,927

 
3,835

 
10,362

(Loss) gain on sale of real estate
 
(2,773
)
 
114

 
(17,636
)
 
5,047

Depreciable real estate reserves
 

 
(379
)
 

 
(85,707
)
Purchase price and other fair value adjustments
 




54,860



Equity in net gain on sale of interest in unconsolidated joint venture/real estate
 
6,345

 
282

 
5,982

 
285

Net income
 
73,508

 
64,710

 
272,934

 
138,849

Net (income) loss attributable to noncontrolling interests in other partnerships
 
(212
)
 
1,467

 
(716
)
 
19,587

Preferred units distributions
 
(955
)
 
(955
)
 
(2,865
)
 
(2,863
)
Net income attributable to ROP common unitholder
 
$
72,341

 
$
65,222

 
$
269,353

 
$
155,573



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

4


Reckson Operating Partnership, L.P.
Consolidated Statements of Comprehensive Income
(unaudited, in thousands)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Net income attributable to ROP common unitholder
$
72,341

 
$
65,222

 
$
269,353

 
$
155,573

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

 
89

 

 
269

Comprehensive income attributable to ROP common unitholder
$
72,341

 
$
65,311


$
269,353


$
155,842



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

5


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, 2017
$
6,012,134

 
$

 
$
322,145

 
$
(1,259
)
 
$
6,333,020

Contributions
1,113,642

 

 

 
1,259

 
1,114,901

Distributions
(1,542,579
)
 

 
(645
)
 

 
(1,543,224
)
Deconsolidation of partially owned entity

 

 
(297,140
)
 

 
(297,140
)
Net income
197,012

 

 
504

 

 
197,516

Other comprehensive income

 

 

 

 

Balance at June 30, 2018
5,780,209

 

 
24,864

 

 
5,805,073

Contributions
505,210

 

 

 

 
505,210

Distributions
(632,122
)
 

 
(133
)
 

 
(632,255
)
Deconsolidation of partially owned entity

 

 

 

 

Net income
72,341

 

 
212

 

 
72,553

Other comprehensive income

 

 

 

 

Balance at September 30, 2018
$
5,725,638

 
$

 
$
24,943

 
$

 
$
5,750,581


 
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
1,913,792

 

 

 

 
1,913,792

Distributions
(2,270,441
)
 

 
(221
)
 

 
(2,270,662
)
Deconsolidation of partially owned entity

 

 

 

 

Net income
90,351

 

 
(18,120
)
 

 
72,231

Other comprehensive income

 

 

 
180

 
180

Balance at June 30, 2017
4,873,544

 

 
372,258

 
(1,438
)
 
5,244,364

Contributions
546,482

 

 

 

 
546,482

Distributions
(727,833
)
 

 
(43,673
)
 

 
(771,506
)
Deconsolidation of partially owned entity

 

 

 

 

Net income
65,222

 

 
(1,467
)
 

 
63,755

Other comprehensive income

 

 

 
89

 
89

Balance at September 30, 2017
$
4,757,415

 
$

 
$
327,118

 
$
(1,349
)
 
$
5,083,184



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


6

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

 
Nine Months Ended September 30,
 
2018
 
2017
Operating Activities
 
 
 
Net income
$
272,934

 
$
138,849

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
128,940

 
162,812

Equity in net income from unconsolidated joint ventures
(3,835
)
 
(10,362
)
Distributions of cumulative earnings from unconsolidated joint ventures
3,850

 
12,032

Equity in net gain on sale of interest in unconsolidated joint venture interest/real estate
(5,982
)
 
(285
)
Purchase price and other fair value adjustments
(54,860
)
 

Loss (gain) on sale of real estate
17,636

 
(5,047
)
Depreciable real estate reserves

 
85,707

Deferred rents receivable
4,372

 
(9,063
)
Other non-cash adjustments
(30,017
)
 
(33,917
)
Changes in operating assets and liabilities:
 
 
 
Tenant and other receivables
389

 
(625
)
Deferred lease costs
(12,733
)
 
(9,589
)
Other assets
(35,840
)
 
(51,792
)
Accounts payable, accrued expenses, other liabilities and security deposits
(1,173
)
 
(2,460
)
Deferred revenue and land leases payable
8,891

 
9,356

Net cash provided by operating activities
292,572

 
285,616

Investing Activities
 
 
 
Acquisitions of real estate properties
224

 

Additions to land, buildings and improvements
(82,959
)
 
(98,460
)
Investments in unconsolidated joint ventures
(20,449
)
 
(84
)
Distributions in excess of cumulative earnings from unconsolidated joint ventures
114,178

 
49,038

Net proceeds from disposition of real estate/joint venture interest
243,488

 
157,251

Other investments
(16,328
)
 
57,785

Origination of debt and preferred equity investments
(652,309
)
 
(935,724
)
Repayments or redemption of debt and preferred equity investments
542,623

 
677,676

Net cash provided by (used in) investing activities
128,468

 
(92,518
)
Financing Activities
 
 
 
Proceeds from mortgages and other loans payable
$
274,741

 
$
250,000

Proceeds from revolving credit facility and senior unsecured notes

 
1,447,800

Repayments of revolving credit facility and senior unsecured notes
(250,000
)
 
(1,167,800
)
Distributions to noncontrolling interests in other partnerships
(778
)
 
(43,894
)
Contributions from common unitholder
1,461,354

 
2,321,970

Distributions to common and preferred unitholders
(1,904,482
)
 
(3,001,084
)
Other obligations related to loan participations
109

 
16,737

Deferred loan costs and capitalized lease obligation
(3,936
)
 
(4,481
)
Net cash used in financing activities
(422,992
)
 
(180,752
)
Net (decrease) increase in cash, cash equivalents, and restricted cash
(1,952
)
 
12,346

Cash, cash equivalents, and restricted cash at beginning of year
77,130

 
103,419

Cash, cash equivalents, and restricted cash at end of period
$
75,178

 
$
115,765

 
 
 
 
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
 
 
 
Tenant improvements and capital expenditures payable
$
9,112

 
$
6,447

Transfer of assets related to assets held for sale

 
273,455

Transfer of liabilities related to assets held for sale

 
1,290

Removal of fully depreciated commercial real estate properties
14,220

 
3,955

Contributions from common unitholder
157,498

 
138,304

Distributions to common unitholder
273,084

 

Deconsolidation of a subsidiary
280,718

 
3,520

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the statement of financial position that sum to the total of the same such amounts shown in the statement of cash flows.
 
September 30, 2018
 
2018
 
2017
Cash and cash equivalents
$
35,608

 
$
36,014

Restricted cash
39,570

 
79,751

Total cash, cash equivalents, and restricted cash
$
75,178

 
$
115,765



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

7


Reckson Operating Partnership, L.P.
Notes to Consolidated Financial Statements
September 30, 2018
(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 94.90% owned by SL Green Realty Corp., or SL Green, as of September 30, 2018. 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.
We are engaged in the acquisition, ownership, management and operation of commercial and residential real estate properties, principally office properties, and also own land for future development in the New York metropolitan area.
As of September 30, 2018, we owned the following interests in properties in the New York metropolitan area, primarily in midtown Manhattan. Our investments located outside of Manhattan are referred to as the Suburban properties:
Location
 
Type
 
Number of
Properties
 
Approximate Square Feet (unaudited)
 
Weighted Average
Occupancy
(1) (unaudited)
Commercial:
 
 
 
 
 
 
 
 
Manhattan
 
Office(2)(3)
 
15

 
8,303,245

 
93.6
%
 
 
Retail(4)(5)
 
5

 
364,816

 
98.9
%
 
 
Development/Redevelopment
 
1

 
160,000

 
%
 
 
 
 
21

 
8,828,061

 
92.2
%
Suburban
 
Office
 
6

 
1,432,400

 
93.8
%
 
 
Retail
 
1

 
52,000

 
100.0
%
 
 
 
 
7

 
1,484,400

 
94.0
%
Total commercial properties
 
 
 
28

 
10,312,461

 
92.4
%
Residential:
 
 
 
 
 
 
 
 
Manhattan
 
Residential(4)
 

 
222,855

 
95.8
%
Total portfolio
 
 
 
28

 
10,535,316

 
92.5
%
(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)
Includes one unconsolidated joint venture property at 919 Third Avenue comprised of approximately 1,454,000 square feet.
(3)
Includes one unconsolidated tenancy-in-common (or "TIC") interest at 2 Herald Square, which is under contract for sale as of September 30, 2018.
(4)
As of September 30, 2018, we owned a building at 315 West 33rd Street, also known as The Olivia, that was comprised of approximately 270,132 square feet (unaudited) of retail space and approximately 222,855 square feet (unaudited) of residential space. For the purpose of this report, we have included this 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.
(5)
Includes two unconsolidated joint venture retail properties at 131-137 Spring Street comprised of approximately 68,342 square feet.

As of September 30, 2018, we held debt and preferred equity investments with a book value of $2.0 billion.
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 September 30, 2018 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, 2018. These financial statements should be read in conjunction with the financial statements and accompanying notes included in the Annual Report on Form 10-K for the year ended December 31, 2017.
The consolidated balance sheet at December 31, 2017 has been derived from the audited financial statements as of that date but does not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

8

Reckson Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2018
(unaudited)

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 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.
Investment in Commercial Real Estate Properties
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.
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 impairment when a property has been classified as held for sale. Real estate assets held for sale are valued at the lower of their carrying value or fair value less costs to sell.
We recognized $1.3 million and $5.5 million of rental revenue for the three and nine months ended September 30, 2018, respectively, and $4.3 million and $12.7 million for the three and nine months ended September 30, 2017, 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 September 30, 2018 and December 31, 2017 (in thousands):
 
September 30, 2018
 
December 31, 2017
Identified intangible assets (included in other assets):
 
 
 
Gross amount
$
213,421

 
$
276,163

Accumulated amortization
(199,668
)
 
(236,737
)
Net(1)
$
13,753

 
$
39,426

Identified intangible liabilities (included in deferred revenue):
 
 
 
Gross amount
$
230,275

 
$
496,438

Accumulated amortization
(214,804
)
 
(366,091
)
Net(1)
$
15,471

 
$
130,347


9

Reckson Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2018
(unaudited)

(1)
As of September 30, 2018 and December 31, 2017, $0.0 million and $0.1 million, respectively and $0.0 million and $0.1 million, 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 September 30, 2018.
Reserve for Possible Credit Losses
The reserve 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 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 the three and nine months ended September 30, 2018 and 2017.
Debt and preferred equity investments held for sale are carried at the lower of cost or fair market value using available market information obtained through consultation with dealers or other originators of such investments as well as discounted cash flow models based on Level 3 data pursuant to ASC 820-10. As circumstances change, management may conclude not to sell an investment designated as held for sale. In such situations, the investment will be reclassified at its net carrying value to debt and preferred equity investments held to maturity. For these reclassified investments, the difference between the current carrying value and the expected cash to be collected at maturity will be accreted into income over the remaining term of the investment.
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 within general partner capital in our consolidated 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 with high quality financial institutions. The collateral securing our debt and preferred equity investments is located in the New York metropolitan area. See Note 5, "Debt and Preferred Equity Investments."
We perform ongoing credit evaluations of our tenants and require most tenants 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,

10

Reckson Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2018
(unaudited)

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 located in the New York metropolitan area. 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 September 30, 2018. For the three months ended September 30, 2018, 14.7%, 11.0%, 8.7%, 8.4%, 8.2%, 7.6%, 7.4%, 7.1% and 5.8% of our annualized cash rent was attributable to 1185 Avenue of the Americas, 625 Madison Avenue, 919 Third Avenue, 750 Third Avenue, 810 Seventh Avenue, 555 West 57th Street, 125 Park Avenue, 1350 Avenue of the Americas, and 711 Third Avenue, respectively. 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 August 2018, The Securities and Exchange Commission adopted a final rule that eliminated or amended disclosure requirements that were redundant or outdated in light of changes in its requirements, generally accepted accounting principles, or changes in the business environment. The commission also referred certain disclosure requirements to the Financial Accounting Standards Board for potential incorporation into generally accepted accounting principles. The Company assessed the impact of this rule and determined that the changes resulted in clarification or expansion of existing requirements. The Company adopted the rule on November 5, 2018 and it did not have a material impact on the Company’s consolidated financial statements.
In August 2018, the FASB issued Accounting Standard Update (ASU) No. 2018-15, Intangibles - Goodwill and Other- Internal-Use Software (Topic 350-40), Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. The amendments provide guidance on accounting for fees paid when the arrangement includes a software license and align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing costs to develop or obtain internal-use software. The guidance will be effective for the Company for fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company has not yet adopted this new guidance and does not expect it to have a material impact on the Company’s consolidated financial statements when the new standard is implemented.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. This amendment removed, modified and added the disclosure requirements under Topic 820. The changes are effective for the Company for fiscal years beginning after December 15, 2019. Early adoption is permitted for the removed or modified disclosures with adoption of the additional disclosures upon the effective date. The Company has not yet adopted this new guidance and does not expect it to have a material impact on the Company’s consolidated financial statements when the new standard is implemented.
In February 2018, the FASB issued ASU No. 2018-03, Technical Corrections and Improvements to Financial Instruments- Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities. These amendments provide additional guidance related to equity securities without a readily determinable fair value, forward contracts and options purchased on those equity securities and fair value option liabilities. The Company adopted the guidance on July 1, 2018, and it did not have a material impact on the Company’s consolidated financial statements.
In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities, and in July 2018, the FASB issued ASU No. 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes. The amendments in the new standards will permit more flexibility in hedging interest rate risk for both variable rate and fixed rate financial instruments. The standards will also enhance the presentation of hedge results in the financial statements. The guidance is effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. The Company has not yet adopted the guidance, and does not expect a material impact on the Company’s consolidated financial statements when the new standards are implemented.
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The guidance requires that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash. As a result, entities will no longer present transfers between these items on the statement of cash flows. The Company adopted the guidance on January 1, 2018 and has included the changes in restricted cash when reconciling the beginning-of-period and end-of-period total amounts on the statement of cash flows.

11

Reckson Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2018
(unaudited)

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 15, 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 February 2016, the FASB issued ASU No. 2016-02, Leases, and in July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases and ASU No. 2018-11, Leases (Topic 842): Targeted Improvements. This 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, inclusive of the effect of a practical expedient offered in ASU No. 2018-11 that allows lessors to not separate non-lease components from the related lease components under certain conditions, which the Company expects most of its leases to qualify for and to adopt, is largely unchanged from that applied under the previous standard. However, the Company will apply this guidance to the 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. While the Company is continuing to assess all potential impacts of the standard, we expect total liabilities and total assets to increase by $0.1 to $0.2 billion as of the date of adoption. This guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. The Company expects to adopt this guidance January 1, 2019 and will apply the modified retrospective approach, and anticipates electing the package of practical expedients that allows an entity to not reassess (i) whether any expired or existing contracts are or contain leases, (ii) lease classification for any expired or existing leases and (iii) initial direct costs for any expired or existing leases.
In January 2016, the FASB issued ASU 2016-01 (Subtopic 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 through earnings, to record changes in instrument-specific credit risk for financial liabilities measured under the fair value option in other comprehensive income, use the exit price notion when measuring an instrument’s fair value for disclosure and to separately present financial assets and liabilities by measurement category and form of instrument on the balance sheet or in the notes to the financial statements. The Company adopted the guidance effective January 1, 2018, and it had no impact 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 FASB also issued implementation guidance in March 2016, April 2016 and May 2016 - ASU’s 2016-08, 2016-10 and 2016-12, respectively. The Company adopted this guidance on January 1, 2018. Since the Company’s revenue is related to leasing activities, the adoption of this guidance did not have a material impact on the consolidated financial statements. The new guidance is applicable to service contracts with joint ventures for which the Company earns property management fees, leasing commissions and development and construction fees. The adoption of this new guidance did not change the accounting for these fees as the pattern of recognition of revenue does not change with the new guidance. We will continue to recognize revenue over time on these contracts because the customer simultaneously receives and consumes the benefits provided by our performance.
In February 2017, the FASB issued ASU No. 2017-05 to clarify the scope of asset derecognition guidance in Subtopic 610-20, which also provided 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 adopted this guidance on January 1, 2018, and applied the modified retrospective approach. The Company elected to adopt the practical expedient under ASC 606, Revenue from Contracts with Customers, which allows an entity to apply the guidance only to contracts with non-customers that are open based on ASU 360-20, Real Estate Sales, (i.e. failed sales) as of the adoption date. The adoption had no impact on the consolidated financial statements as the Company had no open contracts based on ASC 360-20 as of December 31, 2017.
3. Property Acquisitions
During the nine months ended September 30, 2018, we did not acquire any properties from a third party.

12

Reckson Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2018
(unaudited)

4. Properties Held for Sale and Property Dispositions
Properties Held for Sale
As of September 30, 2018, no properties were classified as held for sale.
Property Dispositions
The following table summarizes the properties sold during the nine months ended September 30, 2018:
Property
 
Disposition Date
 
Property Type
 
Approximate Square Feet
 
Sales Price(1)
(in millions)
 
Gain (loss)(2)
(in millions)
115-117 Stevens Avenue
 
May 2018
 
Fee Interest
 
178,000

 
$
12.0

 
$
(0.7
)
635 Madison Avenue
 
June 2018
 
Fee Interest
 
176,530

 
153.0

 
(14.1
)
1-6 International Drive
 
July 2018
 
Fee Interest
 
540,000

 
55.0

 
(2.6
)
(1)
Sales price represents the gross sales price for a property or the gross asset valuation for interests in a property.
(2)
Gain (loss) on sale amounts do not include adjustments for expenses recorded in subsequent periods.
5. Debt and Preferred Equity Investments
Below is a summary of the activity relating to our debt and preferred equity investments for the nine months ended September 30, 2018 and the twelve months ended December 31, 2017 (in thousands):
 
September 30, 2018
 
December 31, 2017
Balance at beginning of period (1)
$
2,114,041

 
$
1,640,412

Debt investment originations/accretion (2)
664,961

 
1,142,591

Preferred equity investment originations/accretion (2)
6,305

 
144,456

Redemptions/sales/syndications/amortization (3)
(808,250
)
 
(813,418
)
Balance at end of period (1)
$
1,977,057

 
$
2,114,041

(1)
Net of unamortized fees, discounts, and premiums.
(2)
Accretion includes amortization of fees and discounts and paid-in-kind investment income.
(3)
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 September 30, 2018 and December 31, 2017, we held the following debt investments with an aggregate weighted average current yield of 8.92% at September 30, 2018 (in thousands):
Loan Type
 
September 30, 2018
Future Funding
Obligations
 
September 30, 2018 Senior
Financing
 
September 30, 2018
Carrying Value
(1)
 
December 31, 2017
Carrying Value
(1)
 
Maturity
Date (2)
Fixed Rate Investments:
 
 
 
 
 
 
 
 
 
 
Mezzanine Loan(3a)
 
$

 
$
1,160,000

 
$
210,832

 
$
204,005

 
March 2020
Mezzanine Loan
 

 
15,000

 
3,500

 
3,500

 
September 2021
Mezzanine Loan
 

 
147,000

 
24,927

 
24,913

 
April 2022
Mezzanine Loan
 

 
280,000

 
36,069

 
34,600

 
August 2022
Mezzanine Loan
 

 
83,689

 
12,704

 
12,699

 
November 2023
Mezzanine Loan(3b)
 

 
115,000

 
12,939

 
12,932

 
June 2024
Mezzanine Loan
 

 
95,000

 
30,000

 
30,000

 
January 2025
Mezzanine Loan
 

 
340,000

 
15,000

 
15,000

 
November 2026
Mezzanine Loan
 

 
1,657,500

 
55,250

 
55,250

 
June 2027
Mortgage/Jr. Mortgage Loan(4)
 

 

 

 
250,464

 
 
Mortgage Loan(5)(6)
 

 

 

 
26,366

 
 

13

Reckson Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2018
(unaudited)

Loan Type
 
September 30, 2018
Future Funding
Obligations
 
September 30, 2018 Senior
Financing
 
September 30, 2018
Carrying Value
(1)
 
December 31, 2017
Carrying Value
(1)
 
Maturity
Date (2)
Mortgage Loan(7)
 

 

 

 
239

 
 
Total fixed rate
 
$

 
$
3,893,189

 
$
401,221

 
$
669,968

 
 
Floating Rate Investments:
 


 

 

 

 
 
Mezzanine Loan(8)
 

 
20,523

 
10,977

 
10,934

 
August 2018
Mezzanine Loan(9)
 
2,325

 
45,025

 
35,168

 
34,879

 
October 2018
Mezzanine Loan(3c)
 

 
150,000

 
15,368

 
15,381

 
December 2018
Mezzanine Loan(3d)
 

 

 
14,856

 
14,869

 
December 2018
Mezzanine Loan
 

 
33,000

 
26,987

 
26,927

 
December 2018
Mezzanine Loan
 
3,607

 
30,438

 
10,403

 
8,550

 
January 2019
Mezzanine Loan(3e)(10)
 
795

 

 
15,150

 
15,148

 
March 2019
Mezzanine Loan
 

 
38,000

 
21,977

 
21,939

 
March 2019
Mezzanine Loan(11)
 

 
40,000

 
19,972

 
19,982

 
April 2019
Mezzanine Loan(11)
 

 
37,891

 
18,380

 
34,947

 
April 2019
Mezzanine Loan
 

 
175,000

 
37,404

 
37,250

 
April 2019
Mezzanine Loan
 

 
265,000

 
24,928

 
24,830

 
April 2019
Mortgage/Jr. Mortgage Participation Loan
 
17,186

 
228,516

 
82,517

 
71,832

 
August 2019
Mortgage/Mezzanine Loan(12)
 

 

 
19,999

 
19,940

 
August 2019
Mezzanine Loan(13)
 

 
65,000

 
14,998

 
14,955

 
August 2019
Mortgage/Mezzanine Loan
 
5,905

 

 
180,339

 
143,919

 
September 2019
Mezzanine Loan
 

 
350,000

 
34,847

 
34,737

 
October 2019
Mortgage/Mezzanine Loan
 
387

 

 
39,338

 

 
December 2019
Mortgage/Mezzanine Loan
 
13,048

 

 
56,624

 
43,845

 
January 2020
Mezzanine Loan
 
812

 
574,120

 
78,841

 
75,834

 
January 2020
Mortgage Loan
 
13,579

 

 
86,058

 

 
February 2020
Mezzanine Loan
 
2,944

 
312,310

 
51,669

 

 
March 2020
Mortgage/Mezzanine Loan
 
27,776

 

 
288,811

 

 
April 2020
Mezzanine Loan
 
6,095

 
36,786

 
12,141

 
11,259

 
July 2020
Mezzanine Loan
 
41,309

 
355,148

 
85,955

 
75,428

 
November 2020
Mortgage and Mezzanine Loan
 
35,631

 

 
96,185

 
88,989

 
December 2020
Mortgage and Mezzanine Loan
 

 

 
35,236

 
35,152

 
December 2020
Jr. Mortgage Participation/Mezzanine Loan
 

 
60,000

 
15,657

 
15,635

 
July 2021
Mortgage/Mezzanine Loan(14)
 

 

 

 
162,553

 
 
Mortgage/Mezzanine Loan(14)
 

 

 

 
74,755

 
 
Mortgage/Mezzanine Loan (15)
 

 

 

 
23,609

 
 
Mezzanine Loan(16)
 

 

 

 
12,174

 
 
Mezzanine Loan(17)
 

 

 

 
37,851

 
 
Mezzanine Loan(17)
 

 

 

 
14,855

 
 
Mortgage/Mezzanine Loan(6)
 

 

 

 
16,969

 
 
Mezzanine Loan(7)
 

 

 

 
59,723

 
 
Total floating rate
 
$
171,399

 
$
2,816,757

 
$
1,430,785

 
$
1,299,650

 
 
Total
 
$
171,399

 
$
6,709,946

 
$
1,832,006

 
$
1,969,618

 
 

14

Reckson Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2018
(unaudited)

(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) $1.3 million, (b) $12.0 million, (c) $14.6 million, (d) $14.1 million, and (e) $5.1 million.
(4)
These loans were conveyed to SL Green in the form of a distribution in March 2018.
(5)
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 has been a nonperforming loan since acquisition, is currently on non-accrual status and has no carrying value.
(6)
This loan was repaid in August 2018.
(7)
This loan was repaid in September 2018.
(8)
This loan was conveyed to SL Green in the form of a distribution in October 2018.
(9)
This loan was extended in October 2018.
(10)
This loan was extended in March 2018.
(11)
This loan was extended in April 2018.
(12)
This loan was extended in August 2018.
(13)
This loan was extended in July 2018.
(14)
This loan was repaid in February 2018.
(15)
This loan was sold in May 2018.
(16)
This loan was conveyed to SL Green in the form of a distribution in July 2018.
(17)
This loan was repaid in July 2018.

Preferred Equity Investments
As of September 30, 2018 and December 31, 2017, we held the following preferred equity investments with an aggregate weighted average current yield of 5.73% at September 30, 2018 (in thousands):
Type
 
September 30, 2018
Future Funding
Obligations
 
September 30, 2018 Senior
Financing
 
September 30, 2018
Carrying Value
(1)
 
December 31, 2017
Carrying Value
(1)
 
Maturity
Date
(2)
Preferred Equity
 
$

 
$
272,000

 
$
145,051

 
$
144,423

 
April 2021
Total
 
$

 
$
272,000

 
$
145,051

 
$
144,423

 
 
(1)
Carrying value is net of deferred origination fees.
(2)
Represents contractual maturity, excluding any unexercised extension options.
At September 30, 2018, all debt and preferred equity investments were performing in accordance with the terms of the relevant investments, with the exception of one mezzanine loan which was in maturity default. The mezzanine note receivable was conveyed in the form of a distribution to SL Green in October 2018.
At December 31, 2017, 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 discussed in subnote 5 of the Debt Investments table above, and our investment in 2 Herald Square, which was purchased in maturity default and was subsequently conveyed to SL Green in the form of a distribution in the first quarter of 2018. In May 2018, SL Green was the successful bidder for the leasehold interest at the foreclosure of the asset and assigned the Company a 49.0% tenancy in common interest in the leasehold interest.
We have determined that we have one portfolio segment of financing receivables at September 30, 2018 and December 31, 2017, 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 $111.5 million and $93.4 million at September 30, 2018 and December 31, 2017, respectively. No financing receivables were 90 days past due at September 30, 2018.

15

Reckson Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2018
(unaudited)

6. Investments in Unconsolidated Joint Ventures
We have investments in several real estate joint ventures with various partners. As of September 30, 2018 and December 31, 2017, none of our investments in unconsolidated joint ventures were VIEs. All of the investments below are voting interest entities. As we do not control the joint ventures listed below, we account for them under the equity method of accounting.
The table below provides general information on each of our joint ventures as of September 30, 2018:
Property
Partner
Ownership
Interest(1)
Economic
Interest(1)
Unaudited Approximate Square Feet
Acquisition Date(2)
Acquisition
Price(2)
(in thousands)
919 Third Avenue(3)
New York State Teacher's Retirement System
51.00%
51.00%
1,454,000

January 2007
$
1,256,727

131-137 Spring Street
Invesco Real Estate
20.00%
20.00%
68,342

August 2015
277,750

2 Herald Square(4)
(4) 
49.00%
49.00%
369,000

May 2018
266,000

(1)
Ownership interest and economic interest represent the Company's interests in the joint venture as of September 30, 2018. Changes in ownership or economic interests 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)
In January 2018, the partnership agreement for our investment was modified resulting in the Company no longer having a controlling interest in this investment. As a result the investment was deconsolidated as of January 1, 2018. The Company recorded its non-controlling interest at fair value resulting in a $54.9 million fair value adjustment in the consolidated statement of operations. This fair value was allocated to the assets and liabilities, including identified intangibles of the property.
(4)
In May 2018, SL Green assigned the Company a 49.0% tenancy-in-common interest in the leasehold interest in 2 Herald Square and entered into an agreement to sell this investment. Consolidation of this investment is not required as such interest does not qualify as a VIE and does not meet the control requirement for consolidation. Accordingly, we account for this investment using the equity method of accounting. We use the equity method of accounting because the shared decision-making involved in a tenancy-in-common interest investment provides us with significant influence on the operating and financial decisions of this investment.
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 September 30, 2018 and December 31, 2017, the carrying value for acquisition, development and construction arrangements were as follows (in thousands):
Loan Type
 
September 30, 2018
 
December 31, 2017
 
Maturity Date
Mezzanine Loan(1)
 
$

 
$
26,716

 
 
Mezzanine Loan and Preferred Equity(2)
 

 
100,000

 
 
 
 
$

 
$
126,716

 
 
(1)
The Company was redeemed on this investment in July 2018.
(2)
The mezzanine loan was repaid and the preferred equity interest was redeemed in March 2018.

Disposition of Joint Venture Interests or Properties
The following table summarizes the investments in unconsolidated joint ventures disposed of during the nine months ended September 30, 2018:
Property
 
Ownership
Interest
 
Disposition Date
 
Type of Sale
 
Gross Asset
Valuation
(in thousands)(1)
 
Gain (Loss)
on Sale
(in thousands)(2)
Mezzanine Loan(3)
 
33.33%
 
August 2018
 
Repayment
 
$
15,000

 
N/A
(1)
Represents implied gross valuation for the joint venture or sales price of the property.

16

Reckson Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2018
(unaudited)

(2)
Represents the Company's share of the gain (loss).
(3)
Our investment in a joint venture that owned a mezzanine loan secured by a commercial property in midtown Manhattan was repaid after the joint venture received repayment of the underlying loan.

Joint Venture Mortgages and Other Loans Payable
We generally finance our joint ventures with non-recourse debt. In certain cases we have provided 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 September 30, 2018 and December 31, 2017, respectively, are as follows (amounts in thousands):
Property
 
Economic Interest (1)
 
Maturity Date
 
Interest
Rate (2)
 
September 30, 2018
 
December 31, 2017
Fixed Rate Debt:
 
 
 
 
 
 
 
 
 
 
 
919 Third Avenue
 
51.00
%
 
June 2023
 
 
5.12
%
 
$
500,000

 
$

Floating Rate Debt:
 
 
 
 
 
 
 
 
 
 
 
131-137 Spring Street
 
20.00
%
 
August 2020
 
L+
1.55
%
 
$
141,000

 
$
141,000

Total joint venture mortgages and other loans payable
 
 
 
 
$
641,000

 
$
141,000

Deferred financing costs, net
 
 
 
 
 
 
 
 
(2,031
)
 
(2,862
)
Total joint venture mortgages and other loans payable, net
 
 
 
 
$
638,969

 
$
138,138

(1)
Economic interest represents the Company's interests in the joint venture as of September 30, 2018. Changes in ownership or economic interests, if any, within the current year are disclosed in the notes to the investment in unconsolidated joint ventures table above.
(2)
Interest rates as of September 30, 2018. Floating rate debt is presented with the stated interest rate spread over 30-day LIBOR, unless otherwise specified.
The combined balance sheets for the unconsolidated joint ventures at September 30, 2018 and December 31, 2017 are as follows (in thousands):
 
September 30, 2018
 
December 31, 2017
Assets (1)
 
 
 
Commercial real estate property, net
$
1,860,269

 
$
273,116

Debt and preferred equity investments, net

 
141,716

Other assets
773,530

 
15,735

Total assets
$
2,633,799

 
$
430,567

Liabilities and members' equity (1)
 
 
 
Mortgages and other loans payable, net
$
638,969

 
$
138,138

Other liabilities
895,127

 
18,908

Members' equity
1,099,703

 
273,521

Total liabilities and members' equity
$
2,633,799

 
$
430,567

Company's investments in unconsolidated joint ventures
$
477,686

 
$
130,217

(1)
The combined assets, liabilities and equity for the unconsolidated joint ventures reflects the effect of step ups in basis on the retained non-controlling interests in deconsolidated investments as a result of the adoption of ASC 610-20 in January 2018.

17

Reckson Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2018
(unaudited)

The combined statements of operations for the unconsolidated joint ventures for the three and nine months ended September 30, 2018 and 2017 are as follows (in thousands):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Total revenues
$
42,037

 
$
7,340

 
$
112,399

 
$
26,934

Operating expenses
6,659

 
182

 
18,925

 
636

Real estate taxes
9,178

 
381

 
22,674

 
1,013

Ground rent
3,106

 

 
3,106

 

Interest expense, net of interest income
10,377

 
1,025

 
24,174

 
2,759

Amortization of deferred financing costs
277

 
283

 
831

 
837

Depreciation and amortization
12,607

 
2,102

 
37,701

 
6,304

Total expenses
$
42,204

 
$
3,973

 
$
107,411

 
$
11,549

Net (loss) income (1)
$
(167
)
 
$
3,367

 
$
4,988

 
$
15,385

Company's equity in net income from unconsolidated joint ventures (1)
$
(164
)
 
$
2,927

 
$
3,835

 
$
10,362

(1)
The combined statements of operation and the Company's equity in net income for the unconsolidated joint ventures reflects the effect of step ups in basis on the retained non-controlling interests in deconsolidated investments as a result of the adoption of ASC 610-20 in January 2018.
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 September 30, 2018 and December 31, 2017, respectively, were as follows (amounts in thousands):
Property
 
Maturity Date
 
Interest Rate (1)
 
September 30, 2018
 
December 31, 2017
Fixed Rate Debt:
 
 
 
 
 
 
 
 
 
315 West 33rd Street
 
February 2027
 
 
4.24
%
 
$
250,000

 
$
250,000

919 Third Avenue (2)
 
 
 
 
 
 

 
500,000

Floating Rate Debt:
 
 
 
 
 
 
 
 
 
2017 Master Repurchase Agreement
 
June 2019
 
L+
2.34
%
 
$
300,000

 
$
90,809

115 Spring Street
 
September 2023
 
L+
3.40
%
 
65,550

 

Total mortgages and other loans payable
 
 
 
 
 
 
$
615,550

 
$
840,809

Deferred financing costs, net of amortization
 
 
 
 
 
 
(8,489
)
 
(11,161
)
Total mortgages and other loans payable, net
 
 
 
 
 

 
$
607,061

 
$
829,648

(1)
Interest rate as of September 30, 2018. Floating rate debt is presented with the stated interest rate spread over 30-day LIBOR, unless otherwise specified.
(2)
Our investment in the property was deconsolidated as of January 1, 2018. See Note 6, "Investments in Unconsolidated Joint Ventures".
At September 30, 2018 and December 31, 2017, 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 $1.0 billion and $1.9 billion, respectively.
Master Repurchase Agreements
The Company has entered into two Master Repurchase Agreements, or MRAs, known as the 2016 MRA and 2017 MRA, which provide us with the ability to sell certain debt investments with a simultaneous agreement to repurchase the same at a certain date or on demand. 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 facilities 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 and our ability to satisfy margin calls with cash or cash equivalents.

18

Reckson Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2018
(unaudited)

In June 2017, we entered into the 2017 MRA, with a maximum facility capacity of $300.0 million. In April 2018, we increased the maximum facility capacity to $400.0 million. The facility bears interest on a floating rate basis at a spread to 30-day LIBOR based on the pledged collateral and advance rate and has an initial one year term, with two one year extension options. In June 2018, we exercised a one year extension option. At September 30, 2018, the facility had an outstanding balance of $299.4 million, net of deferred financing costs.
In July 2016, we entered into the 2016 MRA, with a maximum facility capacity of $300.0 million. In June 2018, we terminated the 2016 MRA. The facility bore interest ranging from 225 and 400 basis points over 30-day LIBOR depending on the pledged collateral and had an initial two-year term, with a one year extension option. Since December 6, 2015, we had 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 when the average daily balance was less than $150.0 million.
8. Corporate Indebtedness
2017 Credit Facility
In November 2017, the Company, SL Green and the Operating Partnership entered into an amendment to the credit facility, referred to as the 2017 credit facility, that was originally entered into in November 2012, or the 2012 credit facility. The amendment resulted in the Company no longer being a borrower and instead is providing a guarantee of the facility. The 2012 credit facility had a carrying value of $1.2 billion, net of deferred financing costs, as of the amendment date and was removed from our consolidated balance sheet and shown as a non-cash capital contribution. SL Green and the Operating Partnership remain borrowers, jointly and severally obligated, under the 2017 credit facility. As of September 30, 2018, the 2017 credit facility consisted of a $1.5 billion revolving credit facility, a $1.3 billion term loan (or "Term Loan A"), and a $200.0 million term loan (or "Term Loan B") with maturity dates of March 31, 2022, March 31, 2023, and November 21, 2024, respectively. The revolving credit facility has two six-month as-of-right extension options to March 31, 2023. SL Green and the Operating Partnership also have an option, subject to customary conditions, to increase the capacity of the credit facility to $4.5 billion at any time prior to the maturity dates for the revolving credit facility and term loans without the consent of existing lenders, by obtaining additional commitments from the existing lenders and other financial institutions.
As of September 30, 2018, SL Green and the Operating Partnership had $11.8 million of outstanding letters of credit, $145.0 million drawn under the revolving credit facility and $1.5 billion outstanding under the term loan facilities, with total undrawn capacity of $1.3 billion under the 2017 credit facility. At September 30, 2018 and December 31, 2017, the revolving credit facility had a carrying value of $136.7 million and $30.3 million, respectively, net of deferred financing costs. At September 30, 2018 and December 31, 2017, the term loan facilities had a carrying value of $1.5 billion and $1.5 billion, respectively, net of deferred financing costs.
The 2017 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 September 30, 2018 and December 31, 2017, respectively, by scheduled maturity date (amounts in thousands):
Issuance
 
September 30,
2018
Unpaid
Principal
Balance
 
September 30,
2018
Accreted
Balance
 
December 31,
2017
Accreted
Balance
 
Coupon
Rate
(1)
 
Initial
Term
(in Years)
 
Maturity Date
March 16, 2010 (2)
 
$
250,000

 
$
250,000

 
$
250,000

 
7.75
%
 
10
 
March 2020
November 15, 2012 (3)
 
300,000

 
304,421

 
305,163

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

 
100,000

 
100,000

 
4.27
%
 
10
 
December 2025
August 5, 2011 (2) (4)
 

 

 
249,953

 
 
 
 
 
 
 
 
$
650,000

 
$
654,421

 
$
905,116

 
 
 
 
 
 
Deferred financing costs, net
 
 
 
(3,081
)
 
(4,049
)
 
 
 
 
 
 
 
 
$
650,000

 
$
651,340

 
$
901,067

 
 
 
 
 
 
(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.

19

Reckson Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2018
(unaudited)

(3)
In October 2017, SL Green, the Operating Partnership, and ROP, as co-obligors, issued an additional $100.0 million of 4.50% senior unsecured notes due December 2022. The notes were priced at 105.334%.
(4)
Balance was repaid in August 2018.
We provide a guaranty of the Operating Partnership's obligations under its 3.25% Senior Notes due 2022, which were issued in October 2017 and will mature in October 2022. As of September 30, 2018, the 3.25% Senior Notes due 2022 had a carrying value of $499.6 million.
We also provide a guaranty of the Operating Partnership's obligations under its $350.0 million Senior Notes due 2021, which were issued in August 2018. The notes bear interest at a floating rate, reset quarterly, equal to three-month LIBOR plus 98 basis points. The notes will mature in August 2021 and can be redeemed at par beginning in August 2019.
Restrictive Covenants
The terms of the 2017 credit facility 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 September 30, 2018 and December 31, 2017, we were in compliance with all such covenants.
Principal Maturities
Combined aggregate principal maturities of mortgages and other loans payable, and senior unsecured notes as of September 30, 2018, including as-of-right extension options and put options, were as follows (in thousands):
 
Scheduled
Amortization
 
Principal
 
Senior Unsecured Notes
 
Total
Remaining 2018
$

 
$

 
$

 
$

2019

 

 

 

2020

 
300,000

 
250,000

 
550,000

2021

 

 

 

2022

 

 
300,000

 
300,000

Thereafter

 
315,550

 
100,000

 
415,550

 
$

 
$
615,550

 
$
650,000

 
$
1,265,550

Consolidated interest expense, excluding capitalized interest, was comprised of the following (in thousands):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Interest expense before capitalized interest
$
17,052

 
$
34,658

 
$
51,729

 
$
96,740

Interest capitalized
(1,594
)
 
(31
)
 
(3,908
)
 
(533
)
Interest income

 

 
(3
)
 
(5
)
Interest expense, net
$
15,458

 
$
34,627

 
$
47,818

 
$
96,202

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

20

Reckson Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2018
(unaudited)

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 the profit participation, which is included in other income on the consolidated statements of operations, was $0.9 million and $2.6 million for the three and nine months ended September 30, 2018, respectively, and was $0.8 million and $2.5 million for the three and nine months ended September 30, 2017, respectively.
We also recorded expenses, inclusive of capitalized expenses, of $2.4 million and $7.0 million for the three and nine months ended September 30, 2018, respectively, for these services (excluding services provided directly to tenants), and $2.6 million and $7.1 million for the three and nine months ended September 30, 2017, respectively.
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 $2.6 million and $8.2 million for the three and nine months ended September 30, 2018, respectively. The amount was $3.0 million and $9.2 million for the three and nine months ended September 30, 2017, respectively.
Insurance
We obtain insurance coverage through an insurance program administered by SL Green. In connection with this program, we incurred insurance expense of approximately $1.0 million and $3.2 million for the three and nine months ended September 30, 2018, respectively. We incurred insurance expense of approximately $1.3 million and $4.1 million for the three and nine months ended September 30, 2017, respectively.
Related Party Payable to SL Green
On August 22, 2016, we issued a promissory note to our parent company in the amount of $23.8 million which bears interest at an annual rate of 6.0%, compounded quarterly. This note matured on August 22, 2018.
10. Preferred Units
Through a consolidated subsidiary, we have authorized up to 109,161 3.50% Series A Preferred Units of limited partnership interest, or the Subsidiary Series A Preferred Units, with a liquidation preference of $1,000.00 per unit. In August 2015, the Company issued 109,161 Subsidiary Series A Preferred Units in conjunction with an acquisition. The Subsidiary 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 Subsidiary 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 Subsidiary Series B Preferred Units. The Subsidiary 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 Subsidiary Series B Preferred Unit. As of September 30, 2018, no Subsidiary Series B Preferred Units have been issued.