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Section 1: 10-Q (FORM 10-Q)

Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q 
ý
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the quarterly period ended March 31, 2017
or
 
¨
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the transition period from . to .
Commission File No. 1-35933

2000385551_gramcerylinkedin.jpg
(Exact name of registrant as specified in its charter)
 
Maryland
 
56-2466617
(State or other jurisdiction
incorporation or organization)
 
(I.R.S. Employer of
Identification No.)
 
 
 
90 Park Avenue, 32nd Floor, New York, NY 10016
(Address of principal executive offices – zip code)
 
 
 
(212) 297-1000
(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 ¨
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 x      No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the 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 x
Accelerated filer ¨
Non-accelerated filer ¨
Smaller reporting company ¨
Emerging growth company ¨
(Do not check if a smaller reporting company)

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. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 
Yes ¨     No x
The number of shares outstanding of the registrant’s common shares of beneficial interest, $0.01 par value, was 151,873,041 as of April 28, 2017.



GRAMERCY PROPERTY TRUST
FORM 10-Q
TABLE OF CONTENTS
 
 
 
Page
PART I.
 
 
ITEM 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ITEM 2.
 
ITEM 3.
 
ITEM 4.
 
PART II.
 
ITEM 1.
 
ITEM 1A.
 
ITEM 2.
 
ITEM 3.
 
ITEM 4.
 
ITEM 5.
 
ITEM 6.
 
 



Gramercy Property Trust
Condensed Consolidated Balance Sheets
(Unaudited, amounts in thousands, except share and per share data)

PART I.
FINANCIAL INFORMATION
ITEM I.
FINANCIAL STATEMENTS
 
March 31, 2017
 
December 31, 2016
Assets:
 

 
 

Real estate investments, at cost:
 

 
 

Land
$
804,044

 
$
805,264

Building and improvements
4,108,891

 
4,053,125

Less: accumulated depreciation
(235,318
)
 
(201,525
)
Total real estate investments, net
4,677,617

 
4,656,864

Cash and cash equivalents
56,256

 
67,529

Restricted cash
13,101

 
12,904

Investment in unconsolidated equity investments
105,187

 
101,807

Assets held for sale, net
8,962

 

Tenant and other receivables, net
75,730

 
72,795

Acquired lease assets, net of accumulated amortization of $154,753 and $133,710
596,811

 
618,680

Other assets
73,196

 
72,948

Total assets
$
5,606,860

 
$
5,603,527

Liabilities and Equity:
 
 
 
Liabilities:
 
 
 
Senior unsecured revolving credit facility
$
121,759

 
$
65,837

Exchangeable senior notes, net
109,488

 
108,832

Mortgage notes payable, net
549,924

 
558,642

Senior unsecured notes, net
496,524

 
496,464

Senior unsecured term loans
1,225,000

 
1,225,000

Total long-term debt, net
2,502,695

 
2,454,775

Accounts payable and accrued expenses
42,381

 
58,380

Dividends payable
53,677

 
53,074

Below market lease liabilities, net of accumulated amortization of $28,350 and $26,416
216,401

 
230,183

Liabilities related to assets held for sale
3,128

 

Other liabilities
49,409

 
46,081

Total liabilities
$
2,867,691

 
$
2,842,493

Commitments and contingencies

 

Noncontrolling interest in the Operating Partnership
6,129

 
8,643

Equity:
 
 
 
Common shares, par value $0.01, 141,522,527 and 140,647,971 issued and outstanding at March 31, 2017 and December 31, 2016, respectively
1,415

 
1,406

Series A cumulative redeemable preferred shares, par value $0.01, liquidation preference $87,500, and 3,500,000 shares authorized, issued and outstanding at March 31, 2017 and December 31, 2016
84,394

 
84,394

Additional paid-in-capital
3,911,889

 
3,887,793

Accumulated other comprehensive loss
(1,611
)
 
(4,128
)
Accumulated deficit
(1,262,842
)
 
(1,216,753
)
Total shareholders' equity
2,733,245

 
2,752,712

Noncontrolling interest in other partnerships
(205
)
 
(321
)
Total equity
$
2,733,040

 
$
2,752,391

Total liabilities and equity
$
5,606,860

 
$
5,603,527


The accompanying notes are an integral part of these financial statements.
1

Gramercy Property Trust
Condensed Consolidated Statements of Operations
(Unaudited, amounts in thousands, except share and per share data)


 
Three Months Ended March 31,
 
2017
 
2016
Revenues
 

 
 

Rental revenue
$
103,282

 
$
92,095

Third-party management fees
4,592

 
5,046

Operating expense reimbursements
20,368

 
22,582

Other income
1,752

 
822

Total revenues
129,994

 
120,545

Operating Expenses
 

 
 

Property operating expenses
23,186

 
24,169

Property management expenses
3,084

 
4,521

Depreciation and amortization
62,217

 
58,248

General and administrative expenses
8,756

 
7,722

Acquisition expenses

 
410

Total operating expenses
97,243

 
95,070

Operating Income
32,751

 
25,475

Other Expenses:
 
 
 
Interest expense
(23,056
)
 
(21,953
)
Other-than-temporary impairment
(4,081
)
 

Portion of impairment recognized in other comprehensive loss
(809
)
 

Net impairment recognized in earnings
(4,890
)
 

Equity in net loss of unconsolidated equity investments
(94
)
 
(2,755
)
Loss on extinguishment of debt
(208
)
 
(5,757
)
Impairment of real estate investments
(12,771
)
 

Loss from continuing operations before provision for taxes
(8,268
)
 
(4,990
)
Provision for taxes
196

 
(703
)
Loss from continuing operations
(8,072
)
 
(5,693
)
Income (loss) from discontinued operations before gain on extinguishment of debt
(24
)
 
2,710

Gain on extinguishment of debt

 
1,930

Income (loss) from discontinued operations
(24
)
 
4,640

Loss before net gain on disposals
(8,096
)
 
(1,053
)
Net gain on disposals
17,377

 

Net income (loss)
9,281

 
(1,053
)
Net (income) loss attributable to noncontrolling interest
(154
)
 
120

Net income (loss) attributable to Gramercy Property Trust
9,127

 
(933
)
Preferred share dividends
(1,559
)
 
(1,559
)
Net income (loss) available to common shareholders
$
7,568

 
$
(2,492
)
Basic earnings per share:
 

 
 

Net income (loss) from continuing operations, after preferred dividends
$
0.05

 
$
(0.05
)
Net income (loss) from discontinued operations

 
0.03

Net income (loss) available to common shareholders
$
0.05

 
$
(0.02
)
Diluted earnings per share:
 

 
 

Net income (loss) from continuing operations, after preferred dividends
$
0.05

 
$
(0.05
)
Net income (loss) from discontinued operations

 
0.03

Net income (loss) available to common shareholders
$
0.05

 
$
(0.02
)
Basic weighted average common shares outstanding
140,907,399

 
140,060,405

Diluted weighted average common shares outstanding
141,875,619

 
140,060,405

 

The accompanying notes are an integral part of these financial statements.
2

Gramercy Property Trust
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited, amounts in thousands)


 
Three Months Ended March 31,
 
2017
 
2016
Net income (loss)
$
9,281

 
$
(1,053
)
Other comprehensive income (loss):
 
 
 
Unrealized gain (loss) on available for sale debt securities
(2,820
)
 
934

Unrealized gain (loss) on derivative instruments
4,378

 
(22,189
)
Foreign currency translation adjustments
691

 
6,119

Reclassification of unrealized loss on terminated derivative instruments into earnings
268

 
360

Other comprehensive income (loss)
2,517

 
(14,776
)
Comprehensive income (loss)
$
11,798

 
$
(15,829
)
Net (income) loss attributable to noncontrolling interest
(154
)
 
120

Other comprehensive (income) loss attributable to noncontrolling interest
(11
)
 
48

Comprehensive income (loss) attributable to Gramercy Property Trust
$
11,633

 
$
(15,661
)
 


The accompanying notes are an integral part of these financial statements.
3


Gramercy Property Trust
Condensed Consolidated Statements of Shareholders’ Equity (Deficit) and Noncontrolling Interests
(Unaudited, amounts in thousands, except share data)

 
Common Shares
 
Preferred Shares
 
Additional Paid-In-Capital
 
Accumulated Other Comprehensive Income (Loss)
 
Retained Earnings / (Accumulated Deficit)
 
Total Gramercy Property Trust
 
Noncontrolling Interest
 
 
 
Shares
 
Par Value
 
 
 
 
 
 
 
Total
Balance at December 31, 2016
140,647,971

 
$
1,406

 
$
84,394

 
$
3,887,793

 
$
(4,128
)
 
$
(1,216,753
)
 
$
2,752,712

 
$
(321
)
 
$
2,752,391

Net income

 

 

 

 

 
9,127

 
9,127

 
120

 
9,247

Change in net unrealized loss on derivative instruments

 

 

 

 
4,378

 

 
4,378

 

 
4,378

Change in net unrealized gain on debt securities

 

 

 

 
(2,820
)
 

 
(2,820
)
 

 
(2,820
)
Reclassification of unrealized gain on terminated derivative instruments into earnings

 

 

 

 
268

 

 
268

 

 
268

Offering costs

 

 

 
(606
)
 

 

 
(606
)
 

 
(606
)
Issuance of shares
731,453

 
7

 

 
19,993

 

 

 
20,000

 

 
20,000

Share based compensation - fair value
59,311

 
1

 

 
2,169

 

 

 
2,170

 

 
2,170

Dividend reinvestment program proceeds
2,976

 

 

 
81

 

 

 
81

 

 
81

Conversion of OP Units to common shares
80,816

 
1

 

 
2,163

 

 

 
2,164

 

 
2,164

Reallocation of noncontrolling interest in the Operating Partnership

 

 

 
296

 

 

 
296

 

 
296

Foreign currency translation adjustment

 

 

 

 
691

 

 
691

 
(4
)
 
687

Dividends on preferred shares

 

 

 

 

 
(1,559
)
 
(1,559
)
 

 
(1,559
)
Dividends on common shares

 

 

 

 

 
(53,657
)
 
(53,657
)
 

 
(53,657
)
Balance at March 31, 2017
141,522,527

 
$
1,415

 
$
84,394

 
$
3,911,889

 
$
(1,611
)
 
$
(1,262,842
)
 
$
2,733,245

 
$
(205
)
 
$
2,733,040



The accompanying notes are an integral part of these financial statements.
4


Gramercy Property Trust
Condensed Consolidated Statements of Cash Flows
(Unaudited, amounts in thousands)

 
Three Months Ended March 31,
 
2017
 
2016
Operating Activities:
 

 
 

Net income (loss)
$
9,281

 
$
(1,053
)
Adjustments to net cash provided by operating activities:
 
 
 
Depreciation and amortization
62,217

 
58,248

Amortization of acquired leases to rental revenue and expense
(633
)
 
(163
)
Amortization of deferred costs
615

 
2,675

Amortization of discounts and other fees
(409
)
 
(1,109
)
Amortization of lease inducement costs
86

 
86

Straight-line rent adjustment
(7,260
)
 
(6,761
)
Other-than-temporary impairment on retained bonds
4,890

 

Non-cash impairment charges
12,771

 

Net gain on sale of properties
(17,377
)
 

Distributions received from unconsolidated equity investments
352

 
9,961

Equity in net loss of unconsolidated equity investments
94

 
2,755

Loss on extinguishment of debt
208

 
3,827

Amortization of share-based compensation
2,054

 
1,150

Changes in operating assets and liabilities:
 
 
 
Restricted cash
(235
)
 
5,598

Payment of capitalized leasing costs
(3,790
)
 
(3,973
)
Tenant and other receivables
11,707

 
(2,151
)
Other assets
(4,368
)
 
(10,519
)
Accounts payable and accrued expenses
(9,755
)
 
(33,738
)
Other liabilities
(2,204
)
 
(3,085
)
Net cash provided by operating activities
58,244

 
21,748

Investing Activities:
 
 
 
Capital expenditures
(18,429
)
 
(6,416
)
Distributions from investing activities received from unconsolidated equity investments

 
47,408

Proceeds from sale of real estate
33,053

 
416,094

Return of restricted cash held in escrow for 1031 exchange
31

 
(145,500
)
Unconsolidated equity investments
(2,650
)
 
(4,790
)
Acquisition of real estate
(99,613
)
 
(52,874
)
Restricted cash for tenant improvements
917

 
198

Proceeds from servicing advances receivable

 
1,390

Net cash provided by (used in) investing activities
(86,691
)
 
255,510

Financing Activities:
 
 
 
Proceeds from unsecured term loan and credit facility
60,000

 
75,000

Proceeds from senior unsecured notes

 
50,000

Repayment of unsecured term loans and credit facility
(5,000
)
 
(250,000
)
Proceeds from mortgage notes payable
2,582

 
9,550

Repayment of mortgage notes payable
(3,915
)
 
(198,189
)
Offering costs
(606
)
 

Proceeds from sale of common shares
20,081

 

Payment of deferred financing costs
(252
)
 
(551
)
Payment of debt extinguishment costs

 
(13,803
)
Preferred share dividends paid
(1,559
)
 
(1,559
)
Common share dividends paid
(53,025
)
 
(8,736
)
Proceeds from exercise of share options and purchases under the employee share purchase plan

 
167

Distribution to noncontrolling interest in the Operating Partnership
(118
)
 
(29
)
Change in restricted cash from financing activities
(909
)
 
(12
)
Net cash provided by (used in) financing activities
17,279

 
(338,162
)
Net decrease in cash and cash equivalents
(11,168
)
 
(60,904
)
Decrease in cash and cash equivalents related to foreign currency translation
(105
)
 
(3
)
Cash and cash equivalents at beginning of period
67,529

 
128,031

Cash and cash equivalents at end of period
$
56,256

 
$
67,124


The accompanying notes are an integral part of these financial statements.
5

Gramercy Property Trust
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share, per share and property data)
March 31, 2017


1. Business and Organization
Gramercy Property Trust, or the Company or Gramercy, a Maryland real estate investment trust, or REIT, is a leading global investor and asset manager of commercial real estate. Gramercy specializes in acquiring and managing high quality, income producing commercial real estate leased to high quality tenants in major markets in the United States and Europe.
Gramercy earns revenues primarily through rental revenues on properties that it owns in the United States and asset management revenues on properties owned by third parties in the United States and Europe. The Company also owns unconsolidated equity investments in the United States, Europe, and Asia.
As of March 31, 2017, the Company’s wholly-owned portfolio consists of 318 properties comprising 66,732,561 rentable square feet with 98.4% occupancy. As of March 31, 2017, the Company has ownership interests in 48 industrial and office properties which are held in unconsolidated equity investments in the United States and Europe and two properties held through the investment in CBRE Strategic Partners Asia. As of March 31, 2017, the Company’s asset management business manages approximately $1,147,000 of commercial real estate assets, primarily on behalf of its joint venture partners, including approximately $918,000 of assets in Europe.
During the three months ended March 31, 2017, the Company acquired seven properties aggregating 2,257,311 square feet for a total purchase price of approximately $124,672, including the acquisition of a previously consolidated variable interest entity, or VIE, for $29,605 and the acquisition of a vacant property for $2,400. During the three months ended March 31, 2017, the Company sold seven properties aggregating 487,872 square feet for total gross proceeds of approximately $51,683.
Prior to December 17, 2015, the Company was known as Chambers Street Properties, or Chambers. On December 17, 2015, Chambers completed a merger, or the Merger, with Gramercy Property Trust Inc. While Chambers was the surviving legal entity, immediately following consummation of the Merger, the Company changed its name to “Gramercy Property Trust” and its New York Stock Exchange, or NYSE, trading symbol to “GPT.”
The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, or IRC, and generally will not be subject to U.S. federal income taxes to the extent it distributes its taxable income, if any, to its shareholders. The Company has in the past established, and may in the future establish taxable REIT subsidiaries, or TRSs, to effect various taxable transactions. Those TRSs would incur U.S. federal, state and local taxes on the taxable income from their activities.
The Company’s operating partnership, GPT Operating Partnership LP, or the Operating Partnership, is the 100.0% owner of all of its direct and indirect subsidiaries. As of March 31, 2017, third-party holders of limited partnership interests in the Operating Partnership owned approximately 0.40% of the beneficial interest of the Company. These interests are referred to as the noncontrolling interests in the Operating Partnership. See Note 12 for more information on the Company’s noncontrolling interests.

6

Gramercy Property Trust
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share, per share and property data)
March 31, 2017

2. Significant Accounting Policies
Basis of Quarterly Presentation
The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP, 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 footnotes required by GAAP for complete financial statements. In management’s opinion, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. The 2017 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 Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. The Condensed Consolidated Balance Sheet at December 31, 2016 was derived from the audited Consolidated Financial Statements at that date.
Reclassifications
Certain prior year balances have been reclassified to conform with the current year presentation. These reclassifications had no effect on the previously reported net income (loss). On the Condensed Consolidated Statements of Operations, the Company reclassified investment income of $443 for the three months ended March 31, 2016 into other income.
Principles of Consolidation
The Condensed Consolidated Financial Statements include the Company’s accounts and those of the Company’s subsidiaries which are wholly-owned or controlled by the Company, or entities which are VIEs in which the Company is the primary beneficiary. The primary beneficiary is the party that absorbs a majority of the VIE’s anticipated losses and/or a majority of the expected returns. The Company has evaluated its investments for potential classification as variable interests by evaluating the sufficiency of each entity’s equity investment at risk to absorb losses.
Entities which the Company does not control and are considered VIEs, but where the Company is not the primary beneficiary, are accounted for under the equity method. All significant intercompany balances and transactions have been eliminated. The equity interests of other limited partners in the Company’s Operating Partnership are reflected as noncontrolling interests.
Real Estate Investments
Real Estate Acquisitions
In January 2017, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2017-01, Amendments to Business Combinations, which clarifies the framework for determining whether an integrated set of assets and activities meets the definition of a business. The revised framework narrows the definition of a business, which is expected to result in fewer transactions being accounted for as business combinations. Acquisitions of integrated sets of assets and activities that do not meet the definition of a business are accounted for as asset acquisitions. Although the Company is not required to implement ASU 2017-01 until annual periods beginning after December 15, 2017, including interim periods within those periods, the Company early adopted the new standard in the

7

Gramercy Property Trust
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share, per share and property data)
March 31, 2017

first quarter of 2017. As a result, the Company evaluated its real estate acquisitions during the first quarter of 2017 under the new framework and determined the properties acquired did not meet the definition of a business, thus the transactions were accounted for as asset acquisitions. Refer to the "Recently Issued Accounting Pronouncements" section below for more information on the new guidance and refer to Note 4 for more information on the transactions during the first quarter of 2017.
The Company evaluates its acquisitions of real estate, including equity interests in entities that predominantly hold real estate assets, to determine if the acquired assets meet the definition of a business and need to be accounted for as a business combination, or alternatively, should be accounted for as an asset acquisition. An integrated set of assets and activities acquired does not meet the definition of a business if either (i) substantially all the fair value of the gross assets acquired is concentrated in either a single identifiable asset or a group of similar identifiable assets, or (ii) the asset and activities acquired do not contain at least an input and a substantive process that together significantly contribute to the ability to create outputs. The Company expects that its acquisitions of real estate will continue to not meet the revised definition of a business.
Acquisitions of real estate that do not meet the definition of a business, including sale-leaseback transactions that have newly-originated leases and real estate investments under construction, or build-to-suit investments, are recorded as asset acquisitions. The accounting for asset acquisitions is similar to the accounting for business combinations, except that the acquisition consideration, including acquisition costs, is allocated to the individual assets acquired and liabilities assumed on a relative fair value basis. Based on this allocation methodology, asset acquisitions do not result in the recognition of goodwill or a bargain purchase. Additionally, for build-to-suit investments in which the Company may engage a developer to construct a property or provide funds to a tenant to develop a property, the Company capitalizes the funds provided to the developer/tenant and real estate taxes, if applicable, during the construction period.
To determine the fair value of assets acquired and liabilities assumed in an acquisition, which generally include land, building, improvements, and intangibles, such as the value of above- and below-market leases and origination costs associated with the in-place leases at the acquisition date, the Company utilizes various estimates, processes and information to determine the as-if-vacant property value. Estimates of value are made using customary methods, including data from appraisals, comparable sales, and discounted cash flow analyses. 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. The Company assesses the fair value of leases assumed at acquisition based upon estimated cash flow projections that utilize appropriate discount rates and available market information. Refer to the policy section "Intangible Assets and Liabilities" for more information on the Company’s accounting for intangibles.
Depreciation is computed using the straight-line method over the shorter of the estimated useful life at acquisition of the capitalized item or 40 years for buildings, five to ten years for building equipment and fixtures, and the lesser of the useful life or the remaining lease term for tenant improvements and leasehold interests. Maintenance and repair expenditures are charged to expense as incurred.
For transactions that qualify as business combinations, the Company recognizes the assets acquired and liabilities assumed at fair value, including the value of intangible assets and liabilities, and any excess or deficit of the consideration transferred relative to the fair value of the net assets acquired is recorded as goodwill or a bargain purchase gain, as appropriate. Acquisition costs of business combinations are expensed as incurred.

8

Gramercy Property Trust
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share, per share and property data)
March 31, 2017

Capital Improvements
In leasing space, the Company may provide funding to the lessee through a tenant allowance. Certain improvements are capitalized when they are determined to increase the useful life of the building. During construction of qualifying projects, the Company capitalizes project management fees as permitted to be charged under the lease, if incremental and identifiable. In accounting for tenant allowances, the Company determines whether the allowance represents funding for the construction of leasehold improvements and evaluates the ownership of such improvements. If the Company is considered the owner of the leasehold improvements, the Company capitalizes the amount of the tenant allowance and depreciates it over the shorter of the useful life of the leasehold improvements or the lease term. If the tenant allowance represents a payment for a purpose other than funding leasehold improvements, or in the event the Company is not considered the owner of the improvements for accounting purposes, the allowance is considered to be a lease incentive and is recognized over the lease term as a reduction of rental revenue. Factors considered during this evaluation usually include (i) who holds legal title to the improvements, (ii) evidentiary requirements concerning the spending of the tenant allowance, and (iii) other controlling rights provided by the lease agreement (e.g. unilateral control of the tenant space during the build-out process). Determination of the accounting for a tenant allowance is made on a case-by-case basis, considering the facts and circumstances of the individual tenant lease.
Impairments
The Company reviews the recoverability of a property’s carrying value when circumstances indicate a possible impairment of the value of a property, such as an adverse change in future expected occupancy or a significant decrease in the market price of an asset. The review of recoverability is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property’s use and eventual disposition. These estimates consider factors such as changes in strategy resulting in an increased or decreased holding period, expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition and other factors. If management determines impairment exists due to the inability to recover the carrying value of a property, for properties to be held and used, an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the property and for assets held for sale, an impairment loss is recorded to the extent that the carrying value exceeds the fair value less estimated cost of disposal. These assessments are recorded as an impairment loss in the Condensed Consolidated Statements of Operations in the period the determination is made. The estimated fair value of the asset becomes its new cost basis. For a depreciable long-lived asset to be held and used, the new cost basis will be depreciated or amortized over the remaining useful life of that asset.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents.
Restricted Cash
The Company had restricted cash of $13,101 and $12,904 at March 31, 2017 and December 31, 2016, respectively, which primarily consisted of reserves for certain capital improvements, leasing, interest and real estate tax and insurance payments as required by certain mortgage loan obligations.

9

Gramercy Property Trust
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share, per share and property data)
March 31, 2017

Variable Interest Entities
The Company had two and three consolidated VIEs as of March 31, 2017 and December 31, 2016, respectively. The Company had four unconsolidated VIEs as of March 31, 2017 and December 31, 2016. The following is a summary of the Company’s involvement with VIEs as of March 31, 2017:
 
Company carrying value-assets
 
Company carrying value-liabilities
 
Face value of assets held by the VIEs
 
Face value of liabilities issued by the VIEs
Consolidated VIEs:
 
 
 
 
 
 
 
Operating Partnership
$
5,606,860

 
$
2,867,691

 
$
5,606,860

 
$
2,867,691

Gramercy Europe Asset Management (European Fund Manager)
$
1,062

 
$
9

 
$
1,062

 
$
1,473

Unconsolidated VIEs:
 
 
 
 
 
 
 
Gramercy Europe Asset Management (European Fund Carry Co.)
$
7

 
$

 
$
28

 
$

Retained CDO Bonds
$
4,828

 
$

 
$
446,451

 
$
577,169

The following is a summary of the Company’s involvement with VIEs as of December 31, 2016:
 
Company carrying value-assets
 
Company carrying value-liabilities
 
Face value of assets held by the VIEs
 
Face value of liabilities issued by the VIEs
Consolidated VIEs:
 
 
 
 
 
 
 
Operating Partnership
$
5,603,527

 
$
2,842,493

 
$
5,603,527

 
$
2,842,493

Proportion Foods
$
22,836

 
$
3,041

 
$
22,836

 
$
23,514

Gramercy Europe Asset Management (European Fund Manager)
$
1,100

 
$
47

 
$
1,100

 
$
1,742

Unconsolidated VIEs:
 
 
 
 
 
 
 
Gramercy Europe Asset Management (European Fund Carry Co.)
$
8

 
$

 
$
31

 
$

Retained CDO Bonds
$
11,906

 
$

 
$
391,990

 
$
592,414

Consolidated VIEs
Operating Partnership
The Company’s Operating Partnership is a consolidated VIE because the Company is its primary beneficiary due to its majority ownership and ability to exercise control over every aspect of the Operating Partnership’s operations. The assets and liabilities of the Company and its Operating Partnership are substantially the same.
Gramercy Europe Asset Management (European Fund Manager)
In connection with the Company’s December 2014 investment in the Gramercy European Property Fund, the Company acquired equity interests in the entity, hereinafter European Fund Manager, which provides investment and asset management services to the Gramercy European Property Fund. The Company determined that European Fund

10

Gramercy Property Trust
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share, per share and property data)
March 31, 2017

Manager is a VIE, as the equity holders of that entity do not have controlling financial interests and do not have the obligation to absorb losses. As Gramercy Europe Asset Management, through an investment advisory agreement with the VIE, controls the activities that most significantly affect the economic outcome of European Fund Manager, the Company concluded that it is the entity’s primary beneficiary and has consolidated the VIE. The Company receives net cash inflows from European Fund Manager in the form of management fees, and if the VIE’s cash inflows are not sufficient to cover its obligations, the Company may provide financial support for the VIE.
Proportion Foods
In December 2015, the Company entered into a non-recourse financing arrangement with Big Proportion Austin LLC, or BIG, for a build-to-suit industrial property in Round Rock, Texas, or Proportion Foods. Concurrently, the Company entered into a forward purchase agreement with BIG, pursuant to which the Company will acquire the property, which is 100.0% leased to Proportion Foods, upon substantial completion of the facility’s development. The Company determined that Proportion Foods was a VIE, as the equity holders of the entity did not have controlling financial interests and were not obligated to absorb losses. The Company controlled the activities that most significantly affected the economic outcome of Proportion Foods through its financing arrangement to fund the property’s development and its forward purchase agreement with BIG. As such, the Company concluded it was the entity’s primary beneficiary and consolidated the VIE. The construction of the facility on the property was completed in March 2017. The Company acquired the property upon completion in March 2017. As of March 31, 2017, the property was wholly-owned by the Company and was no longer a consolidated VIE.
Unconsolidated VIEs
Gramercy Europe Asset Management (European Fund Carry Co.)
In connection with the Company’s December 2014 investment in the Gramercy European Property Fund, the Company acquired equity interests in the entity, hereinafter European Fund Carry Co., entitled to receive certain preferential distributions, if any, made from time-to-time by the Gramercy European Property Fund. The Company determined that European Fund Carry Co. is a VIE, as the equity holders of that entity do not have controlling financial interests and do not have the obligation to absorb losses in excess of capital committed. Decisions that most significantly affect the economic performance of European Fund Carry Co. are decided by a majority vote of that VIE’s shareholders. As such, the Company does not have a controlling financial interest in the VIE and accounts for it as an equity investment.
Investment in Retained CDO Bonds
The Company has retained non-investment grade subordinate bonds, preferred shares and ordinary shares of three collateralized debt obligations, or CDOs, together the Retained CDO Bonds. The Company does not control the activities that most significantly impact the Retained CDO Bonds’ economic performance and is not obligated to provide any financial support to them, thus the Retained CDO Bonds have been determined to be unconsolidated VIEs, in which the Company’s interest is recorded at fair value within other assets on the Condensed Consolidated Balance Sheets. The Retained CDO Bonds may provide the potential for the Company to receive continuing cash flows in the future, however, there is no guarantee that the Company will realize any proceeds from the Retained CDO Bonds or what the timing of the proceeds may be. The Company’s maximum exposure to loss is limited to its interest in the Retained CDO Bonds.

11

Gramercy Property Trust
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share, per share and property data)
March 31, 2017

Tenant and Other Receivables
Tenant and other receivables are derived from rental revenue, tenant reimbursements, and management fees.
Rental revenue is recorded on a straight-line basis over the initial term of the lease. Since many leases provide for rental increases at specified intervals, straight-line basis accounting requires the Company to record a receivable, and include in revenues, unbilled rent receivables that will only be received if the tenant makes all rent payments required through the expiration of the initial term of the lease. Tenant and other receivables also include receivables related to tenant reimbursements for common area maintenance expenses and certain other recoverable expenses that are recognized as revenue in the period in which the related expenses are incurred.
Tenant and other receivables are recorded net of the allowances for doubtful accounts, which as of March 31, 2017 and December 31, 2016 were $230 and $57, respectively. The Company continually reviews receivables related to rent, tenant reimbursements, and management fees, including incentive fees, and determines collectability by taking into consideration the tenant or asset management clients’ payment history, the financial condition of the tenant or asset management client, business conditions in the industry in which the tenant or asset management client operates and economic conditions in the area in which the property or asset management client is located. In the event that the collectability of a receivable is in doubt, the Company increases the allowance for doubtful accounts or records a direct write-off of the receivable, as appropriate.
Management fees, including incentive management fees, are recognized as earned in accordance with the terms of the management agreements. The management agreements may contain provisions for fees related to dispositions, administration of the assets including fees related to accounting, valuation and legal services, and management of capital improvements or projects on the underlying assets.
Intangible Assets and Liabilities
As discussed above in the policy section “Real Estate Acquisitions” the Company follows the acquisition method of accounting for its asset acquisitions and business combinations and thus allocates the purchase price of acquired properties to tangible and identifiable intangible assets acquired based on their respective fair values. Identifiable intangible assets include amounts allocated to acquired leases for above- and below- market lease rates and the value of in-place leases. Management also considers information obtained about each property as a result of its pre-acquisition due diligence.
Above-market and below-market lease values for properties acquired are recorded based on the present value of the difference between the contractual amount to be paid pursuant to each in-place lease and management’s estimate of the fair market lease rate for each such in-place lease, measured over a period equal to the remaining non-cancelable term of the lease. The present value calculation utilizes a discount rate that reflects the risks associated with the leases acquired. The above-market and below-market lease values are amortized as a reduction of and increase to rental revenue, respectively, over the remaining non-cancelable terms of the respective leases. If a tenant terminates its lease prior to its contractual expiration and no future rental payments will be received, any unamortized balance of the market lease intangibles will be written off to rental revenue.
The aggregate value of in-place leases represents the costs of leasing costs, other tenant related costs, and lost revenue that the Company did not have to incur by acquiring a property that is already occupied. Factors considered by management in its analysis of the in-place lease intangibles include an estimate of carrying costs during the expected

12

Gramercy Property Trust
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share, per share and property data)
March 31, 2017

lease-up period for each property taking into account current market conditions and costs to execute similar leases, including leasing commissions and other related expenses. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the anticipated lease-up period. The value of in-place leases is amortized to depreciation and amortization expense over the remaining non-cancelable term of the respective leases, but never over a term that exceeds the remaining depreciable life of the building. If a tenant terminates its lease prior to its contractual expiration and no future rental payments will be received, any unamortized balance of the in-place lease intangible will be written off to depreciation and amortization expense.
Above-market and below-market ground rent intangibles are recorded for properties acquired in which the Company is the lessee pursuant to a ground lease assumed at acquisition. The above-market and below-market ground rent intangibles are valued similarly to above-market and below-market leases, except that, because the Company is the lessee as opposed to the lessor, the above-market and below-market ground lease values are amortized as a reduction of and increase to rent expense, respectively, over the remaining non-cancelable terms of the respective leases.
Intangible assets and liabilities consist of the following:
 
March 31, 2017
 
December 31, 2016
Intangible assets:
 

 
 

In-place leases, net of accumulated amortization of $137,416 and $117,717
$
536,913

 
$
553,924

Above-market leases, net of accumulated amortization of $17,325 and $15,719
56,198

 
59,647

Below-market ground rent, net of accumulated amortization of $306 and $274
5,078

 
5,109

Amounts related to assets held for sale, net of accumulated amortization of $294 and $0
(1,378
)
 

Total intangible assets
$
596,811

 
$
618,680

Intangible liabilities:
 
 
 
Below-market leases, net of accumulated amortization of $28,485 and $26,168
$
212,415

 
$
223,110

Above-market ground rent, net of accumulated amortization of $302 and $248
7,000

 
7,073

Amounts related to liabilities of assets held for sale, net of accumulated amortization of $437 and $0
(3,014
)
 

Total intangible liabilities
$
216,401

 
$
230,183


13

Gramercy Property Trust
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share, per share and property data)
March 31, 2017

The following table provides the weighted-average amortization period as of March 31, 2017 for intangible assets and liabilities and the projected amortization expense for the next five years.
 
Weighted-Average Amortization Period
 
April 1 to December 31, 2017
 
2018
 
2019
 
2020
 
2021
In-place leases
9.7
 
$
68,372

 
$
83,678

 
$
70,384

 
$
58,007

 
$
50,453

Total to be included in depreciation and amortization expense

 
$
68,372

 
$
83,678

 
$
70,384

 
$
58,007

 
$
50,453

 
 
 
 
 
 
 
 
 
 
 
 
Above-market lease assets
7.3
 
$
8,236

 
$
10,510

 
$
9,340

 
$
7,224

 
$
6,012

Below-market lease liabilities
19.2
 
(9,844
)
 
(12,763
)
 
(12,414
)
 
(12,120
)
 
(11,984
)
Total to be included in rental revenue

 
$
(1,608
)
 
$
(2,253
)
 
$
(3,074
)
 
$
(4,896
)
 
$
(5,972
)
 
 
 
 
 
 
 
 
 
 
 
 
Below-market ground rent
41.1
 
$
95

 
$
127

 
$
127

 
$
127

 
$
127

Above-market ground rent
33.0
 
(161
)
 
(214
)
 
(214
)
 
(214
)
 
(214
)
Total to be included in property operating expense

 
$
(66
)
 
$
(87
)
 
$
(87
)
 
$
(87
)
 
$
(87
)
The Company recorded $24,172 and $27,560 of amortization of in-place lease intangible assets as part of depreciation and amortization for the three months ended March 31, 2017 and 2016, respectively. The Company recorded $621 and $181 of amortization of market lease intangible assets and liabilities as an increase to rental revenue for the three months ended March 31, 2017 and 2016, respectively. The Company recorded $21 and $9 of amortization of ground rent intangible assets and liabilities as a reduction of other property operating expense for the three months ended March 31, 2017 and 2016, respectively.
Revenue Recognition
Real Estate Investments
Rental revenue from leases on real estate investments is recognized on a straight-line basis over the term of the lease, regardless of when payments are contractually due. The excess of rental revenue recognized over the amounts contractually due according to the underlying leases are included in other liabilities on the Condensed Consolidated Balance Sheets. For leases on properties that are under construction at the time of acquisition, the Company begins recognition of rental revenue upon completion of construction of the leased asset and delivery of the leased asset to the tenant.
The Company’s lease agreements with tenants also generally contain provisions that require tenants to reimburse the Company for real estate taxes, insurance costs, common area maintenance costs, and other property-related expenses. Under lease arrangements in which the Company is the primary obligor for these expenses, such amounts are recognized as both revenues and operating expenses for the Company. Under lease arrangements in which the tenant pays these expenses directly, such amounts are not included in revenues or expenses. These reimbursement amounts are recognized in the period in which the related expenses are incurred.
The Company recognizes sales of real estate properties only upon closing. Payments received from purchasers prior to closing are recorded as deposits. Profit on real estate sold is recognized using the full accrual method upon

14

Gramercy Property Trust
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share, per share and property data)
March 31, 2017

closing when the collectability of the sale price is reasonably assured and the Company is not obligated to perform significant activities after the sale. Profit may be deferred in whole or part until the sale meets the requirements of profit recognition on sale of real estate.
Asset Management Business
The Company’s asset and property management agreements may contain provisions for fees related to dispositions, administration of the assets including fees related to accounting, valuation and legal services, and management of capital improvements or projects on the underlying assets. The Company recognizes revenue for fees pursuant to its management agreements in the period in which they are earned. Deferred revenue from management fees received prior to the date earned are included in other liabilities on the Condensed Consolidated Balance Sheets.
Certain of the Company’s asset management contracts include provisions that may allow it to earn additional fees, generally described as incentive fees or profit participation interests, based on the achievement of a targeted valuation of the managed assets or the achievement of a certain internal rate of return on the managed assets. The Company recognizes incentive fees on its asset management contracts based upon the amount that would be due pursuant to the contract, if the contract were terminated at the reporting date. If the contract may be terminated at will, revenue will only be recognized to the amount that would be due pursuant to that termination. If the incentive fee is a fixed amount, only a proportionate share of revenue is recognized at the reporting date, with the remaining fees recognized on a straight-line basis over the measurement period. The values of incentive management fees are periodically evaluated by management. For the three months ended March 31, 2017 and 2016, the Company recognized incentive fees of $1,449 and $973, respectively.
Other Income
Other income primarily consists of income accretion on the Company’s Retained CDO Bonds, which are measured at fair value on a quarterly basis using a discounted cash flow model, realized foreign currency exchange gains (losses), interest income, and miscellaneous property related income.
Foreign Currency
Gramercy Europe Asset Management operates an asset and property management business in the United Kingdom. The Company has unconsolidated equity investments in Europe and Asia and had two wholly-owned properties in Canada and one wholly-owned property in the United Kingdom until their dispositions in March 2017 and December 2016, respectively. The Company also has borrowings outstanding in euros and British pounds sterling under the multicurrency portion of its revolving credit facility. Refer to Note 5 for more information on the Company’s foreign unconsolidated equity investments.
Foreign Currency Translation
During the periods presented, the Company has had interests in Europe and Canada for which the functional currencies are the euro, the British pound sterling, and the Canadian dollar, respectively. The Company performs the translation from these foreign currencies to the U.S. dollar for assets and liabilities using the exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted average exchange rate during the period. The Company reports the gains and losses resulting from such translation as a component of other comprehensive income (loss). For the three months ended March 31, 2017 and 2016, the Company recorded net translation gains of

15

Gramercy Property Trust
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share, per share and property data)
March 31, 2017

$691 and $6,119, respectively. Translation gains and losses are reclassified to other income within earnings when the Company has substantially exited from all investments in the related currency.
Foreign Currency Transactions
A transaction gain or loss realized upon settlement of a foreign currency transaction will be included in earnings for the period in which the transaction is settled. Foreign currency intercompany transactions that are scheduled for settlement are included in the determination of net income. Intercompany foreign currency transactions of a long-term nature that do not have a planned or foreseeable future settlement date, in which the entities to the transactions are consolidated or accounted for by the equity method in the Company’s financial statements, are not included in net income but are reported as a component of other comprehensive income (loss). For the three months ended March 31, 2017 and 2016, the Company recognized net realized foreign currency transaction gains (losses) of $(9) and $105, respectively, on such transactions.
Other Assets
The Company includes prepaid expenses, capitalized software costs, contract intangible assets, deferred costs, goodwill, derivative assets, servicing advances receivable, and Retained CDO Bonds in other assets.
Goodwill
Goodwill represents the fair value of the collaboration expected to be achieved upon consummation of a business combination and is measured as the excess of consideration transferred over the net assets acquired at acquisition date. The Company initially recognized goodwill of $3,887 related to the acquisition of Gramercy Europe Limited, or Gramercy Europe Asset Management, which was adjusted to $3,802 in 2015 as a result of finalization of the purchase price allocation for the acquisition. The carrying value of goodwill is adjusted each reporting period for the effect of foreign currency translation adjustments. The carrying value of goodwill at March 31, 2017 and December 31, 2016 was $3,039 and $2,988, respectively. The Company’s goodwill has an indeterminate life and is not amortized, but is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company takes a qualitative approach to consider whether an impairment of goodwill exists prior to quantitatively determining the fair value of the reporting unit in step one of the impairment test. The Company did not record any impairment on its goodwill during the three months ended March 31, 2017 or 2016.
Retained CDO Bonds
The Retained CDO Bonds are non-investment grade subordinate bonds, preferred shares and ordinary shares of three CDOs. Management estimated the timing and amount of cash flows expected to be collected and recognized an investment in the Retained CDO Bonds equal to the net present value of these discounted cash flows. There is no guarantee that the Company will realize any proceeds from this investment, or what the timing will be for the expected remaining life of the Retained CDO Bonds. The Company considers these investments to be not of high credit quality and does not expect a full recovery of interest and principal. Therefore, the Company has suspended interest income accruals on these investments. The Company classifies the Retained CDO Bonds as available for sale. On a quarterly basis, the Company evaluates the Retained CDO Bonds to determine whether significant changes in estimated cash flows or unrealized losses on these investments, if any, reflect a decline in value which is other-than-temporary. If there is a decrease in estimated cash flows and the investment is in an unrealized loss position, the Company will record an other-than-temporary impairment, or OTTI, in the Condensed Consolidated Statements of Operations. To determine the

16

Gramercy Property Trust
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share, per share and property data)
March 31, 2017

component of the OTTI related to expected credit losses, the Company compares the amortized cost basis of the Retained CDO Bonds to the present value of the revised expected cash flows, discounted using the pre-impairment effective yield. Conversely, if the security is in an unrealized gain position and there is a decrease or significant increase in expected cash flows, the Company will prospectively adjust the yield using the effective yield method. Refer to Note 9 for further discussion regarding the fair value measurement of the Retained CDO Bonds. For the three months ended March 31, 2017 and 2016, the Company recognized OTTI of $4,890 and $0, respectively, on its Retained CDO Bonds.
A summary of the Company’s Retained CDO Bonds as of March 31, 2017 is as follows:
Number of Securities
 
Face Value
 
Amortized Cost
 
Gross Unrealized Gain
 
Other-than-temporary impairment
 
Fair Value
 
Weighted Average Expected Life
9

 
$
387,304

 
$
8,839

 
$
879

 
$
(4,890
)
 
$
4,828

 
1.8

17

Gramercy Property Trust
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share, per share and property data)
March 31, 2017

The following table summarizes the activity related to credit losses on the Retained CDO Bonds for the three months ended March 31, 2017 and for the year ended December 31, 2016:
 
2017
 
2016
Balance as of January 1, 2017 and 2016, respectively, of credit losses on Retained CDO Bonds for which a portion of an OTTI was recognized in other comprehensive income (loss)
$
(491
)
 
$
3,196

Additions to credit losses:
 
 
 
On Retained CDO Bonds for which an OTTI was not previously recognized

 

On Retained CDO Bonds for which an OTTI was previously recognized and a portion of an OTTI was recognized in other comprehensive income (loss)
(4,890
)
 

On Retained CDO Bonds for which an OTTI was previously recognized without any portion of OTTI recognized in other comprehensive income (loss)

 

Reduction for credit losses:

 

On Retained CDO Bonds for which no OTTI was recognized in other
comprehensive income at current measurement date

 

On Retained CDO Bonds sold during the period

 

On Retained CDO Bonds charged off during the period

 

For increases in cash flows expected to be collected that are recognized over the remaining life of the Retained CDO Bonds

 
(3,687
)
Balance as of March 31, 2017 and December 31, 2016, respectively, of credit of losses on Retained CDO Bonds for which a portion of an OTTI was recognized in other comprehensive income (loss)
$
(5,381
)
 
$
(491
)
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash investments, debt investments and accounts receivable. The Company places its cash investments in excess of insured amounts with high quality financial institutions.
Concentrations of credit risk also arise when a number of the Company’s tenants or asset management clients are engaged in similar business activities or are subject to similar economic risks or conditions that could cause their inability to meet contractual obligations to the Company. The Company regularly monitors its portfolio to assess potential concentrations of credit risk. Management believes the current credit risk portfolio is reasonably well diversified. Asset management clients KBS and Gramercy Europe Asset Management accounted for 68.8% and 26.8%, respectively, of the Company's management fee income for the three months ended March 31, 2017 and 86.3% and 12.8%, respectively, of the Company’s management fee income for the three months ended March 31, 2016. No single tenant accounted for more than 10.0% of the Company’s rental revenue for the three months ended March 31, 2017. One tenant, Bank of America, N.A., or BOA, accounted for 10.8% of the Company’s rental revenue for the three months ended March 31, 2016. The concentration of rental revenue from BOA was partially due to amortization recorded on the BOA below-market lease liabilities, which accounted for 2.9% of total rental revenue for the three months ended March 31, 2016. Additionally, for the three months ended March 31, 2017, there were three states, California, Florida, and Texas, that each accounted for 10.0% or more of the Company’s rental revenue.
Use of Estimates
The preparation of financial statements in conformity with Generally Accepted Accounting Principles, or GAAP, 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.

18

Gramercy Property Trust
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share, per share and property data)
March 31, 2017

Recently Issued Accounting Pronouncements
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to customers in an amount reflecting the consideration it expects to receive in exchange for those goods or services. The guidance also requires enhanced disclosures related to the nature, amount, timing, and uncertainty of revenue that is recognized. In April 2016, the FASB issued ASU 2016-10, which amends the new revenue recognition guidance on identifying performance obligations. In February 2017, the FASB issued ASU 2017-05, which clarifies the scope of gains and losses from the derecognition of nonfinancial assets and provides guidance for the partial sales of nonfinancial assets in context of the new revenue standard. The new revenue recognition guidance is effective for the first interim period within annual reporting periods beginning after December 15, 2017, with early adoption permitted for the first interim period within annual reporting periods beginning after December 15, 2016. Companies may use either a full retrospective or a modified retrospective approach to adopt the new guidance. A substantial portion of the Company’s revenue consists of rental revenue from leasing arrangements, which is specifically excluded from the new revenue guidance, however the Company also generates revenue from operating expense reimbursements, management fees, and gains and impairments on disposals, which will be impacted by the new revenue standard. The Company is continuing to analyze the impact of the new revenue guidance on its recognition and disclosure of these streams of revenue. The Company currently expects to adopt the standard in the first quarter of 2018 using the modified retrospective approach.
In February 2016, the FASB issued ASU 2016-02, Leases, which amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. The update will be effective beginning in the first quarter of 2019 and early adoption is permitted. The new standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The Company’s accounting for leases in which it is a lessor, which represents most of its leasing arrangements, will be largely unchanged under ASU 2016-02, however the Company is a lessee in several operating and ground leases and the accounting for these arrangements is more significantly impacted by the new standard. Pursuant to the new guidance, lessees are required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. The Company is continuing to evaluate the impact of adopting the new leases standard on its Condensed Consolidated Financial Statements.
In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation: Improvements to Employee Share-Based Payment Accounting. The update serves to simplify the accounting for share-based payment award transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification of awards on the statement of cash flows. The guidance in the ASU is effective for fiscal years beginning after December 15, 2016. The Company adopted the new guidance in the first quarter of 2017. The adoption of this guidance did not have a material impact on the Company’s Condensed Consolidated Financial Statements.
In January 2017, the FASB issued ASU 2017-01, Amendments to Business Combinations, which amends the current guidance to clarify the definition of a business in order to assist entities in evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The guidance is effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted under certain circumstances. The amendments must be applied prospectively as of the beginning of the period of adoption. The Company elected to early adopt ASU 2017-01 in the first quarter of 2017, as described in the “Real Estate Acquisitions” section above.

19

Gramercy Property Trust
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share, per share and property data)
March 31, 2017

3. Dispositions, Assets Held for Sale, and Discontinued Operations
Real Estate Dispositions and Impairments
During the three months ended March 31, 2017, the Company sold seven properties, which comprised an aggregate 487,872 square feet and generated gross proceeds of $51,683. The Company recognized a gain on disposals of $17,377 during the three months ended March 31, 2017 related to the properties sold during the period. Of the properties sold in 2017, one of the sales was structured as a like-kind exchange within the meaning of Section 1031 of the IRC. As a result of the sale, the Company deposited $23,218 of the total sale proceeds into an IRC Section 1031 exchange escrow account with a qualified intermediary. The Company then used $23,218 of these funds as consideration for one property acquisition during the three months ended March 31, 2017. During the three months ended March 31, 2017, the Company recognized an impairment on real estate investments of $12,771 related to two properties held by the Company as of March 31, 2017, for which the Company determined there were non-recoverable declines in value. Refer to Note 9 for more information on how the Company determined the non-recurring fair value of these two properties.
Assets Held for Sale
The Company separately classifies properties held for sale in the Condensed Consolidated Financial Statements. The Company had one asset and two offices that are part of another asset classified as held for sale as of March 31, 2017 with total net asset value of $5,834 and no assets classified as held for sale as of December 31, 2016. In the normal course of business, the Company identifies non-strategic assets for sale. Real estate investments to be disposed of are reported at the lower of carrying amount or estimated fair value, less costs to sell. Once an asset is classified as held for sale, depreciation and amortization expense is no longer recorded.
The following table summarizes the assets held for sale and liabilities related to the assets held for sale as of March 31, 2017:
Assets held for sale
March 31, 2017
Real estate investments
$
7,538

Acquired lease assets
1,378

Other assets
46

Total assets
$
8,962

Liabilities related to assets held for sale
 
Below-market lease liabilities
3,014

Other liabilities
114

Total liabilities
$
3,128

Net assets held for sale
$
5,834


20

Gramercy Property Trust
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share, per share and property data)
March 31, 2017

Discontinued Operations
The Company’s discontinued operations for the three months ended March 31, 2017 and 2016 were related to the assets that were assumed in the Merger and simultaneously designated as held for sale. The following operating results for the three months ended March 31, 2017 and 2016 are included in discontinued operations for all periods presented:
 
Three Months Ended March 31,
 
2017
 
2016
Revenues
$
(6
)
 
$
5,857

Operating expenses
6

 
(2,180
)
General and administrative expense
(24
)
 
(12
)
Interest expense

 
(955
)
Gain on extinguishment of debt

 
1,930

Net income (loss) from discontinued operations
$
(24
)
 
$
4,640

Discontinued operations have not been segregated in the Condensed Consolidated Statements of Cash Flows. The table below presents additional relevant information pertaining to results of discontinued operations for the three months ended March 31, 2017 and 2016, including depreciation, amortization, capital expenditures, and significant operating and investing noncash items:
 
Three Months Ended March 31,
 
2017
 
2016
Significant operating noncash items
$

 
$
(9,455
)
Increase in cash and cash equivalents related to foreign currency translation

 
275

Total
$

 
$
(9,180
)
4. Real Estate Investments
Property Acquisitions
During the three months ended March 31, 2017, the Company acquired seven properties comprising 2,257,311 square feet for an aggregate contract purchase price of approximately $124,672, including the acquisition of a consolidated VIE for $29,605 and the acquisition of a vacant property for $2,400. Total value of the properties acquired during the three months ended March 31, 2017 was comprised of $115,504 of real estate assets, $11,296 of intangible assets, and $774 of intangible liabilities, including transaction costs capitalized for the asset acquisitions.
Property Purchase Price Allocations
During the first quarter of 2017, the Company adopted ASU 2017-01, Amendments to Business Combinations, which amends the definition of a business and provides a revised framework for the determination of whether an integrated set of assets and activities meets the definition of a business. The Company evaluated its real estate acquisitions during the first quarter of 2017 under the new framework and determined the properties acquired did not meet the definition of a business, thus the transactions were accounted for as asset acquisitions. The Company expects that its acquisitions of real estate will not meet the revised definition of a business and will be accounted for as asset acquisitions going forward. Refer to Note 2 for more information on the new accounting standard and the Company’s adoption thereof.

21

Gramercy Property Trust
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share, per share and property data)
March 31, 2017

As noted above, the Company’s acquisitions in 2017 were accounted for as asset acquisitions, however the majority of the Company’s acquisitions prior to 2017 were accounted for as business combinations pursuant to the definition of a business prior to the adoption of ASU 2017-01. Of the acquisitions prior to 2017, there were 21 properties acquired in 2016 that were accounted for as business combinations which had preliminary purchase price allocations recorded as of December 31, 2016. The Company finalized the purchase price allocations of these 21 properties during the first quarter of 2017. The aggregate changes recorded from the preliminary purchase price allocations to the finalized purchase price allocations, are shown in the table below:
 
 
Preliminary Allocations recorded
 
Finalized Allocations recorded
Period Finalized
 
No. of Acquisitions
 
Real Estate Assets
 
Intangible Assets
 
Intangible Liabilities
 
Real Estate Assets
 
Intangible Assets
 
Intangible Liabilities
 
Decrease to Rental Revenue
 
Increase to Depreciation and Amortization Expense
Three Months Ended March 31, 2017
 
21
 
$
513,424

 
$
61,178

 
$
11,093

 
$
513,087

 
$
60,627

 
$
10,205

 
$
27

 
$
16

5. Unconsolidated Equity Investments
The Company accounts for substantially all of its unconsolidated equity investments under the equity method of accounting because it exercises significant influence, but does not unilaterally control the entities, and is not considered to be the primary beneficiary. In unconsolidated equity investments, the rights of the other investors are protective and participating. Unless the Company is determined to be the primary beneficiary, these rights preclude it from consolidating the investments. The investments are recorded initially at cost as unconsolidated equity investments, as applicable, and subsequently are adjusted for equity interest in net income (loss) and contributions and distributions. The amount of the investments on the Condensed Consolidated Balance Sheets is evaluated for impairment at each reporting period. None of the unconsolidated equity investment debt is recourse to the Company. Transactions with unconsolidated equity method entities are eliminated to the extent of the Company’s ownership in each such entity. Accordingly, the Company’s share of net income (loss) of these equity method entities is included in consolidated net income (loss).
As a result of the Merger in 2015, the Company acquired an interest in four unconsolidated entities, the Goodman Europe JV, the Goodman UK JV, the Duke JV, and CBRE Strategic Partners Asia. The Company’s equity investment in the entities was fair valued on the Merger closing date, and the difference between the historical carrying value of the net assets and the fair value was recorded as a basis difference, which is amortized to equity in net income (loss) from unconsolidated equity investments over the remaining weighted average useful life of the underlying assets of each entity.

22

Gramercy Property Trust
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share, per share and property data)
March 31, 2017

As of March 31, 2017 and December 31, 2016, the Company owned properties through unconsolidated equity investments and had investment interests in these unconsolidated entities as follows:
 
 
As of March 31, 2017
 
As of December 31, 2016
Investment
 
Ownership %
 
Voting Interest %
 
Partner
 
Investment in Unconsolidated Equity Investment 1
 
No. of Properties
 
Investment in Unconsolidated Equity Investment 1
 
No. of Properties
Gramercy European Property Fund 2
 
14.2
%
 
14.2
%
 
Various
 
$
51,524

 
27

 
$
50,367

 
26

Goodman Europe JV 3
 
5.1
%
 
5.1
%
 
Gramercy European Property Fund
 
3,269

 
8

 
3,491

 
8

Strategic Office Partners
 
25.0
%
 
25.0
%
 
TPG Real Estate
 
18,444

 
7

 
15,872

 
6

Goodman UK JV
 
80.0
%
 
50.0
%
 
Goodman Group
 
25,336

 
2

 
25,309

 
2

CBRE Strategic Partners Asia
 
5.07
%
 
5.07
%
 
Various
 
3,999

 
2

 
4,145

 
2

Philips JV
 
25.0
%
 
25.0
%
 
Various
 

 
1

 

 
1

Morristown JV
 
50.0
%
 
50.0
%
 
21 South Street
 
2,615

 
1

 
2,623

 
1

Total
 
 
 
 
 
 
 
$
105,187

 
48

 
$
101,807

 
46

1.
The amounts presented include basis differences of $2,279 and $3,918, net of accumulated amortization, for the Goodman Europe JV and Goodman UK JV, respectively, as of March 31, 2017. The amounts presented include basis differences of $2,286 and $3,941, net of accumulated amortization, for the Goodman Europe JV and Goodman UK JV, respectively, as of December 31, 2016.
2.
Includes European Fund Carry Co., which has a carrying value of $7 and $8 for the Company’s 25.0% interest as of March 31, 2017 and December 31, 2016, respectively.
3.
As of March 31, 2017, the Company has a 5.1% direct interest in the Goodman Europe JV as well as an indirect interest in the remaining 94.9% interest of Goodman Europe JV through its 14.2% interest in the Gramercy European Property Fund. In the table above, as of December 31, 2016, the Company’s 94.9% interest in Goodman Europe JV held through its 14.2% interest in the Gramercy European Property Fund is included in the amount shown for the Gramercy European Property Fund and the Company’s 5.1% direct interest in the Goodman Europe JV is presented separately as the amount shown for the Goodman Europe JV.
The following is a summary of the Company’s unconsolidated equity investments for the three months ended March 31, 2017:
 
Unconsolidated Equity Investments
Balance at January 1, 2017
$
101,807

Contributions to unconsolidated equity investments
2,650

Equity in net loss of unconsolidated equity investments, including adjustments for basis differences
(94
)
Other comprehensive loss of unconsolidated equity investments
1,176

Distributions from unconsolidated equity investments
(352
)
Balance at March 31, 2017
$
105,187

Gramercy European Property Fund

23

Gramercy Property Trust
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share, per share and property data)
March 31, 2017

In December 2014, the Company, along with several equity investment partners, formed the Gramercy European Property Fund, a private real estate investment fund that targets single-tenant industrial, office and specialty retail assets throughout Europe. In the second quarter of 2016, the Gramercy European Property Fund acquired 74.9% of the Company’s 80.0% interest in the Goodman Europe JV. As of March 31, 2017 and December 31, 2016, the Company has a 14.2% interest in the Gramercy European Property Fund, which has a 94.9% ownership interest in the Goodman Europe JV. As of March 31, 2017 and December 31, 2016, the Company has a 5.1% direct interest in the Goodman Europe JV, as well as an indirect interest in the remaining 94.9% interest that is held through the Company’s 14.2% interest in the Gramercy European Property Fund.
Since inception, the equity investors, including the Company, have collectively funded $395,213 (€352,500) in equity capital to the Gramercy European Property Fund. As of March 31, 2017 and December 31, 2016 the Company's cumulative contributions to the Gramercy European Property Fund were $55,892 (€50,000). As of March 31, 2017, the remaining commitments of all equity investors to the Gramercy European Property Fund were $53,260 (€50,000), including $13,315 (€12,500) from the Company. During the three months ended March 31, 2017 and 2016, the Company received distributions of $352 and $3,561, respectively, from the Goodman Europe JV.
During three months ended March 31, 2017 and the year ended December 31, 2016, the Gramercy European Property Fund acquired one and 13 properties, respectively, located in Germany, the Netherlands, Poland, and the United Kingdom, and in 2016 also acquired the Company's 5.1% interest in one property located in Lille, France held by the Goodman Europe JV. Refer to Note 8 for additional information on the equity transactions related to the Gramercy European Property Fund and Goodman Europe JV. As of March 31, 2017, there were 27 properties in the Gramercy European Property Fund and eight additional properties held in the Goodman Europe JV.
Strategic Office Partners    
In August 2016, the Company partnered with TPG Real Estate, or TPG, to form Strategic Office Partners, an unconsolidated equity investment created for the purpose of acquiring, owning, operating, leasing and selling single-tenant office properties located in high-growth metropolitan areas in the United States. In September 2016, the Company contributed six properties to Strategic Office Partners and in the first quarter of 2017 Strategic Office Partners acquired one property. The Company provides asset and property management, accounting, construction, and leasing services to Strategic Office Partners, for which it earns management fees and is entitled to a promoted interest. TPG and the Company have committed to fund an aggregate $400,000 to Strategic Office Partners, including $100,000 from the Company. During the three months ended March 31, 2017, the Company contributed $2,650 to Strategic Office Partners and as of March 31, 2017, the Company's remaining commitment is $81,323. During the three months ended March 31, 2017, the Company received no distributions from the Strategic Office Partners.
Goodman UK JV
The Goodman UK JV invests in industrial properties in the United Kingdom. During the three months ended March 31, 2017 and 2016, the Company received no distributions from the Goodman UK JV.

24

Gramercy Property Trust
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share, per share and property data)
March 31, 2017

Duke JV
The Duke JV invested in industrial and office properties located throughout the United States. In June 2016, the Company and Duke entered into a Dissolution and Liquidation Agreement, pursuant to which the Duke JV distributed seven of its properties to the Company and one of its properties to Duke on June 30, 2016, then was dissolved in July 2016 following the disposition of its remaining property and final distributions of cash to its members. During the three months ended March 31, 2016, the Company received cash distributions of $53,807 from the Duke JV.
CBRE Strategic Partners Asia
CBRE Strategic Partners Asia is a real estate investment fund with investments in China. CBRE Strategic Partners Asia has an eight-year term, which began on January 31, 2008 and may be extended for up to two one-year periods with the approval of two-thirds of the limited partners. In March 2016, the limited partners approved a one-year extension. CBRE Strategic Partners Asia's commitment period has ended, however, it may call capital to fund operations, obligations and liabilities. For the three months ended March 31, 2017, the Company did not receive any distributions from CBRE Strategic Partners Asia. In February 2017, the fund commenced liquidation and will wind up over the succeeding 24 months.
Philips JV
The Company has a 25.0% interest in 200 Franklin Square Drive, a 199,900 square foot building located in Somerset, New Jersey which is 100.0% net leased to Philips Holdings, USA Inc., a wholly-owned subsidiary of Royal Philips Electronics, through December 2021, or the Philips JV. During the three months ended March 31, 2017 and 2016, the Company received no distributions and recognized no revenue from the Philips JV.
Morristown JV
In October 2015, the Company contributed 50.0% of its interest in an office property located in Morristown, New Jersey to a joint venture the Company formed with 21 South Street, a subsidiary of Hampshire Partners Fund VIII LP, or the Morristown JV. Concurrent with the contribution, the Company sold the remaining 50.0% equity interest of the property to 21 South Street.

25

Gramercy Property Trust
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share, per share and property data)
March 31, 2017

The balance sheets for the Company’s unconsolidated equity investments at March 31, 2017 are as follows:
 
Gramercy European Property Fund 1
 
 
 
 
 
 
 
 
 
Goodman Europe JV
 
Gramercy European Property Fund 2
 
Total
 
Strategic Office Partners
 
Goodman UK JV
 
CBRE Strategic Partners Asia
 
Other 3
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate assets, net 4
$
224,122

 
$
480,477

 
$
704,599

 
$
181,655

 
$
30,763

 
$
85,175

 
$
49,342

Other assets
27,485

 
94,407

 
121,892

 
46,673

 
2,057

 
11,992

 
3,251

Total assets
$
251,607

 
$
574,884

 
$
826,491

 
$
228,328

 
$
32,820

 
$
97,167

 
$
52,593

Liabilities and members’ equity:
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgages payable
$
140,245

 
$
285,499

 
$
425,744

 
$
142,498

 
$

 
$

 
$
39,557

Other liabilities
2,753

 
20,958

 
23,711

 
9,974

 
957

 
14,314

 
3,445

Total liabilities
142,998

 
306,457

 
449,455

 
152,472

 
957

 
14,314

 
43,002

Gramercy Property Trust equity
11,924

 
42,862

 
54,786

 
18,444

 
25,336

 
3,999

 
2,622

Other members’ equity
96,685

 
225,565

 
322,250

 
57,412

 
6,527

 
78,854

 
6,969

Liabilities and members’ equity
$
251,607

 
$
574,884

 
$
826,491

 
$
228,328

 
$
32,820

 
$
97,167

 
$
52,593

1.
As of March 31, 2017, the Company has a 5.1% direct interest in the Goodman Europe JV as well as an indirect interest in the remaining 94.9% interest that is held through the Company’s 14.2% interest in the Gramercy European Property Fund. In the table above, the Company’s equity interest in the Goodman Europe JV includes both its direct 5.1% interest as well as its indirect interest that is held through its 14.2% interest in the Gramercy European Property Fund, and the Company’s equity interest in the Gramercy European Property Fund represents its interest in all of the properties owned by the Gramercy European Property Fund except for the properties in the Goodman Europe JV.
2.
Excludes the Gramercy European Property Fund’s 94.9% interest in the Goodman Europe JV.
3.
Includes the Philips JV, the Morristown JV, and European Fund Carry Co.
4.
Includes basis adjustments that were recorded by the Company to adjust the unconsolidated equity investments to fair value upon closing of the Merger.

26

Gramercy Property Trust
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share, per share and property data)
March 31, 2017

The balance sheets for the Company’s unconsolidated equity investments at December 31, 2016 are as follows:
 
Gramercy European Property Fund 1
 
 
 
 
 
 
 
 
 
Goodman Europe JV
 
Gramercy European Property Fund 2
 
Total
 
Strategic Office Partners
 
Goodman UK JV
 
CBRE Strategic Partners Asia
 
Other 3
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate assets, net 4
$
285,087

 
$
347,069

 
$
632,156

 
$
149,484

 
$
25,128

 
$
87,852

 
$
49,580

Other assets
86,273

 
63,523

 
149,796

 
42,323

 
6,650

 
12,247

 
3,020

Total assets
$
371,360

 
$
410,592

 
$
781,952

 
$
191,807

 
$
31,778

 
$
100,099

 
$
52,600

Liabilities and members' equity:
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgages payable
$
174,269

 
$
215,980

 
$
390,249

 
$
121,894

 
$

 
$

 
$
39,730

Other liabilities
7,778

 
19,940

 
27,718

 
4,347

 
934

 
14,383

 
3,259

Total liabilities
182,047

 
235,920

 
417,967

 
126,241

 
934

 
14,383

 
42,989

Gramercy Property Trust equity
12,734

 
41,116

 
53,850

 
15,872

 
25,309

 
4,145

 
2,631

Other members' equity
176,579

 
133,556

 
310,135

 
49,694

 
5,535

 
81,571

 
6,980

Liabilities and members' equity
$
371,360

 
$
410,592

 
$
781,952

 
$
191,807

 
$
31,778

 
$
100,099

 
$
52,600

1.
As of December 31, 2016, the Company has a 5.1% direct interest in the Goodman Europe JV as well as an indirect interest in the remaining 94.9% interest that is held through the Company’s 14.2% interest in the Gramercy European Property Fund. In the table above, the Company’s equity interest in the Goodman Europe JV includes both its direct 5.1% interest as well as its indirect interest that is held through its 14.2% interest in the Gramercy European Property Fund, and the Company’s equity interest in the Gramercy European Property Fund represents its interest in all of the properties owned by the Gramercy European Property Fund except for the properties in the Goodman Europe JV.
2.
Excludes the Gramercy European Property Fund’s 94.9% interest in the Goodman Europe JV.
3.
Includes the Philips JV, the Morristown JV, and European Fund Carry Co.
4.
Includes basis adjustments that were recorded by the Company to adjust the unconsolidated equity investments to fair value upon closing of the Merger.

27

Gramercy Property Trust
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share, per share and property data)
March 31, 2017

Certain real estate assets in the Company’s unconsolidated equity investments are subject to mortgage loans. The following is a summary of the secured financing arrangements within the Company’s unconsolidated equity investments as of March 31, 2017:
 
 
 
 
 
 
 
 
 

Outstanding Balance 2
Property

Unconsolidated Equity Investment

Economic Ownership

Interest Rate 1

Maturity Date

March 31, 2017
 
December 31, 2016
Strategic Office Partners portfolio 3

Strategic Office Partners

25.0%

3.83%

10/7/2019

$
145,800


$
125,000

Durrholz, Germany

Gramercy European Property Fund

14.2%

1.52%

3/31/2020

12,303


12,289

Venray, Germany

Gramercy European Property Fund

14.2%

3.32%

12/2/2020

13,149


13,015

Lille, France

Gramercy European Property Fund

14.2%

3.13%

12/17/2020

27,429


27,081

Carlisle, United Kingdom

Gramercy European Property Fund

14.2%

3.32%

2/19/2021

10,620


10,443

Oud Beijerland, Netherlands

Gramercy European Property Fund

14.2%

2.09%

12/30/2022

8,148


8,077

Zaandam, Netherlands

Gramercy European Property Fund

14.2%

2.08%

12/30/2022

11,749


11,647

Kerkrade, Netherlands

Gramercy European Property Fund

14.2%

2.08%

12/30/2022

9,706


9,622

Friedrichspark, Germany

Gramercy European Property Fund

14.2%

2.08%

12/30/2022

8,770


8,694

Fredersdorf, Germany

Gramercy European Property Fund

14.2%

2.08%

12/30/2022

11,345


11,247

Breda, Netherlands

Gramercy European Property Fund

14.2%

1.90%

12/30/2022

10,035


9,948

Juechen, Germany

Gramercy European Property Fund

14.2%

1.89%

12/30/2022

19,017


18,852

Piaseczno, Poland

Gramercy European Property Fund

14.2%

1.98%

12/30/2022

8,212


8,141

Strykow, Poland

Gramercy European Property Fund

14.2%

1.98%

12/30/2022

19,335


19,167

Uden, Netherlands

Gramercy European Property Fund

14.2%

1.98%

12/30/2022

8,992


8,913

Rotterdam, Netherlands

Gramercy European Property Fund

14.2%

1.89%

12/30/2022

7,700


7,633

Frechen, Germany

Gramercy European Property Fund

14.2%

1.49%

12/30/2022

6,101


6,043

Meerane, Germany

Gramercy European Property Fund

14.2%

1.35%

12/30/2022

10,236


10,138

Amsterdam, Netherlands

Gramercy European Property Fund

14.2%

1.59%

12/30/2022

3,123


3,093

Tiel, Netherlands

Gramercy European Property Fund

14.2%

1.59%

12/30/2022

9,262


9,174

Netherlands portfolio 4

Gramercy European Property Fund

14.2%

3.02%

6/28/2023

13,581


13,409

Kutno, Poland

Gramercy European Property Fund

14.2%

1.91%

7/21/2023

5,965


5,890

European Facility 1 5

Goodman Europe JV

18.6%
6 
0.90%

11/16/2023

31,957


31,551

European Facility 2 5

Goodman Europe JV

18.6%
6 
1.75%

11/16/2023

108,289


106,917

Utrecht, Netherlands

Gramercy European Property Fund

14.2%

1.95%

1/16/2024

36,616



Worksop, United Kingdom

Gramercy European Property Fund

14.2%

3.94%

10/20/2026

10,668


10,551

Somerset, NJ

Philips JV

25.0%

6.90%

9/11/2035

39,557


39,730

Total mortgage notes payable
 
 
 
 
 
 

$
607,665


$
546,265

Net deferred financing costs and net debt premium
 
 
 
 
 
 
 
134

 
5,608

Total mortgage notes payable, net
 
 
 
 
 
 
 
$
607,799

 
$
551,873

1.
Represents the current effective rate as of March 31, 2017, including the swapped interest rate for loans that have interest rate swaps. The current interest rate is not adjusted to include the amortization of fair market value premiums or discounts.
2.
Mortgage loans amounts are presented at 100.0% of the amount in the unconsolidated equity investment.
3.
There are seven properties under this mortgage loan.
4.
There are five properties under this mortgage loan.
5.
There are eight properties under this loan facility.
6.
Represents the Company’s economic ownership in the Goodman Europe JV, which includes both its 5.1% direct interest in the Goodman Europe JV as well as an indirect interest in the remaining 94.9% interest that is held through the Company’s 14.2% interest in the Gramercy European Property Fund.


28

Gramercy Property Trust
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share, per share and property data)
March 31, 2017

The statements of operations for the Company’s unconsolidated equity investments for the three months ended March 31, 2017 or partial period for acquisitions or dispositions which closed during these periods, are as follows:
 
Gramercy European Property Fund 1
 
 
 
 
 
 
 
 
 
Goodman Europe JV
 
Gramercy European Property Fund 2
 
Total
 
Strategic Office Partners
 
Goodman UK JV