Quarterly report pursuant to Section 13 or 15(d)

Real Estate

v3.20.1
Real Estate
3 Months Ended
Mar. 31, 2020
Real Estate [Abstract]  
Real Estate REAL ESTATE

Development/Redevelopment

We have properties under development/redevelopment and held for current or future development. As of March 31, 2020, we have invested $119.8 million, including the cost of acquired land, in The Trove, a 401-unit multifamily development adjacent to The Wellington. During the 2020 Quarter, we substantially completed major construction activities for The Trove’s base building and garage and delivered 121 units. As of March 31, 2020, we have placed into service assets totaling $58.9 million. We expect to place the remainder of The Trove development into service during 2020. We have also invested $27.0 million, including the cost of acquired land, in a multifamily development adjacent to Riverside Apartments. In addition, there are several other projects with minor development activity in the multifamily and office segments.

Properties Sold and Held for Sale

We intend to hold our properties for investment with a view to long-term appreciation, to engage in the business of acquiring, developing and owning our properties, and to make occasional sales of properties that no longer meet our long-term strategy or return objectives and where market conditions for sale are favorable. The proceeds from the sales may be reinvested into other properties, used to fund development operations or to support other corporate needs, or distributed to our shareholders.

We classified as held for sale or sold our interests in the following properties during 2020 and 2019:
Disposition Date
 
Property Name
 
Property Type
 
Rentable Square Feet
 
Contract Sales Price
(in thousands)
 
(Loss) Gain on Sale
(in thousands)
April 21, 2020
 
John Marshall II (1)
 
Office
 
223,000
 
$
57,000

 
N/A

 
 
 
 
Total 2020
 
223,000
 
$
57,000

 
N/A

 
 
 
 
 
 
 
 
 
 
 
June 26, 2019
 
Quantico Corporate Center (2)
 
Office
 
272,000
 
$
33,000

 
$
(1,046
)
July 23, 2019
 
Shopping Center Portfolio (3)
 
Retail
 
800,000
 
485,250

 
333,023

August 21, 2019
 
Frederick Crossing and Frederick County Square
 
Retail
 
520,000
 
57,500

 
9,507

August 27, 2019
 
Centre at Hagerstown
 
Retail
 
330,000
 
23,500

 
(3,506
)
December 19, 2019
 
1776 G Street
 
Office
 
262,000
 
129,500

 
61,007

 
 
 
 
Total 2019
 
2,184,000
 
$
728,750

 
$
398,985


______________________________
(1)
Held for sale as of March 31, 2020.
(2)
Consists of 925 and 1000 Corporate Drive.
(3)
Consists of five retail properties: Gateway Overlook, Wheaton Park, Olney Village Center, Bradlee Shopping Center and Shoppes of Foxchase.

During the second quarter of 2019, we sold Quantico Corporate Center, an office property in Stafford, Virginia, consisting of two office buildings totaling 272,000 square feet, for a contract sale price of $33.0 million, recognizing a loss on sale of real estate of $1.0 million. Prior to the sale, due to the negotiations to sell the property, we evaluated Quantico Corporate Center for impairment and recognized an $8.4 million impairment charge during the first quarter of 2019 in order to reduce the carrying value of the property to its estimated fair value.

In June 2019, we entered into two separate purchase and sale agreements with two separate buyers to sell the Shopping Center Portfolio (Gateway Overlook, Wheaton Park, Olney Village Center, Bradlee Shopping Center and Shoppes of Foxchase) and the Power Center Portfolio (Frederick Crossing, Frederick County Square and Centre at Hagerstown). As of June 30, 2019, the properties in the Retail Portfolio (as defined below) met the criteria for classification as held for sale.

We closed on the Shopping Center Portfolio sale transaction on July 23, 2019, recognizing a gain on sale of real estate of $333.0 million. Prior to closing on the disposition of the Shopping Center Portfolio, we prepaid the mortgage note secured by Olney Village Center, incurring a loss on extinguishment of debt of approximately $0.8 million, which we recognized in the third quarter of 2019.

In the third quarter of 2019, the purchase and sale agreement to sell the Power Center Portfolio was amended to include only Frederick Crossing and Frederick County Square. We closed on the sale of these assets on August 21, 2019, recognizing a gain on sale of real estate of $9.5 million. Following the amendment to the purchase and sale agreement to sell the Power Center Portfolio, we marketed Centre at Hagerstown for sale and identified a separate buyer. We closed on the sale of this asset on August 27, 2019, recognizing a loss on sale of real estate of $3.5 million.

References to the “Retail Portfolio” include the Shopping Center Portfolio, Frederick Crossing, Frederick County Square and Centre at Hagerstown. The disposition of the Retail Portfolio represented a strategic shift that had a major effect on our financial results and we accordingly reported the Retail Portfolio as discontinued operations. The Retail Portfolio represented a majority of our retail assets and following its sale, we determined that our retail line of business was no longer a reportable segment.

In December 2019, we executed a purchase and sale agreement to sell John Marshall II for a contract sale price of $63.4 million. Upon execution of the purchase and sale agreement, the property met the criteria for classification as held for sale. As of March 31, 2020, the property continued to meet the criteria for classification as held for sale. Subsequent to the end of the 2020 Quarter, we executed an amendment to the purchase and sale agreement decreasing the contract sale price to $57.0 million and closed on the sale on April 21, 2020.

As of March 31, 2020, we assessed certain properties for impairment and did not recognize any impairment charges during the 2020 Quarter. We applied reasonable estimates and judgments in evaluating each of the properties as of March 31, 2020. Should external or internal circumstances change requiring the need to shorten holding periods or adjust future estimated cash flows from our properties, we could be required to record impairment charges in the future.

Discontinued Operations

The results of the Retail Portfolio are classified as discontinued operations and are summarized as follows (amounts in thousands, except for share data):
 
Three Months Ended March 31, 2019
Real estate rental revenue
$
11,740

Real estate expenses
(3,067
)
Depreciation and amortization
(2,490
)
Interest expense
(145
)
       Income from discontinued operations
$
6,038

 
 
Basic net income per share
$
0.08

Diluted net income per share
$
0.08

 
 
Capital expenditures
$
406