Quarterly report pursuant to Section 13 or 15(d)

Real Estate

v3.21.2
Real Estate
9 Months Ended
Sep. 30, 2021
Real Estate [Abstract]  
Real Estate REAL ESTATE
Acquisitions

We acquired the following property during the 2021 Period (the “2021 acquisition”):
Acquisition Date Property Type # of homes (unaudited) Average Occupancy
(unaudited)
Contract
Purchase Price
(in thousands)
August 10, 2021 The Oxford Residential 240 93.5% $ 48,000 
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The results of operations from the acquired operating property are included in the consolidated statements of operations as of its acquisition date and are as follows (in thousands):
Three and Nine Months Ended September 30, 2021
Real estate rental revenue $ 488 
Net loss (349)

We accounted for the 2021 acquisition as an asset acquisition. We measured the value of the acquired physical assets (land and building) and in-place leases (absorption costs) by allocating the total cost of the acquisition on a relative fair value basis.

The total cost of the 2021 acquisition was as follows (in thousands):
Contract purchase price $ 48,000 
Capitalized acquisition costs 52 
Total $ 48,052 

We have recorded the total cost of the 2021 acquisition as follows (in thousands):
Land $ 4,798 
Building 42,079 
Absorption costs 1,175 
Total $ 48,052 

The weighted remaining average life for the absorption costs is 4 months.

Development/Redevelopment

We have properties under development/redevelopment and held for current or future development. As of September 30, 2021, we have invested $29.4 million, including the cost of acquired land, in a residential development adjacent to Riverside Apartments. In addition, in our residential segment, we continue to capitalize qualifying costs on several other projects with minor development activity necessary to ready each project for its intended use. We placed the remainder of the Trove development costs into service during the first quarter of 2021.

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. Depreciation on these properties is discontinued at the time they are classified as held for sale, but operating revenues, operating expenses and interest expense continue to be recognized until the date of sale.
We sold the following properties during 2021 and 2020:
Disposition Date Property Name Property Type Rentable Square Feet Contract Sales Price
(in thousands)
(Loss) Gain on Sale
(in thousands)
July 26, 2021
Office Portfolio (1)
Office 2,370,000  $ 766,000  $ (11,220)
September 22, 2021
Retail Portfolio (2)
 Retail 693,000  168,314  57,661 
Total 2021 3,063,000 $ 934,314  $ 46,441 
April 21, 2020 John Marshall II Office 223,000 $ 57,000  $ (6,855)
December 2, 2020 Monument II Office 207,000 53,000  (8,595)
December 17, 2020 1227 25th Street NW Office 135,000 53,500  1,125 
Total 2020 565,000 $ 163,500  $ (14,325)
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(1)     Consists of twelve office properties: 1901 Pennsylvania Avenue, 515 King Street, 1220 19th Street, 1600 Wilson Boulevard, Silverline Center, Courthouse Square, 2000 M Street, 1140 Connecticut Avenue, Army Navy Club, 1775 Eye Street, Fairgate at Ballston and Arlington Tower.
(2)    Consists of eight retail properties: Takoma Park, Westminster, Concord Centre, Chevy Chase Metro Plaza, 800 S. Washington Street, Randolph Shopping Center, Montrose Shopping Center and Spring Valley Village.


We have fully transferred control of the assets sold in 2020 and 2021 and do not have continuing involvement in their operations.

In June 2021, we entered into a purchase and sale agreement with a single buyer to sell the Office Portfolio for a purchase price of $766.0 million. Upon execution of the purchase and sale agreement, the properties in the Office Portfolio met the criteria for classification as held for sale. We closed on the sale of the Office Portfolio on July 26, 2021, recognizing a loss on sale of real estate of $11.2 million.

In June 2021, we executed a letter of intent to sell the Retail Portfolio. During the 2021 Quarter, we executed a purchase and sale agreement for the sale of our remaining eight retail properties for a purchase price of $168.3 million and closed on the sale on September 22, 2021, recognizing a gain on real estate of $57.7 million.

The dispositions of the Office Portfolio and the Retail Portfolio represent a strategic shift that will have a major effect on our financial results and we have accordingly reported the Office Portfolio and Retail Portfolio as discontinued operations.

As of September 30, 2021, we assessed our properties for impairment and did not recognize any impairment charges during the 2021 Quarter. We applied reasonable estimates and judgments in evaluating each of the properties as of September 30, 2021. 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 Office Portfolio and Retail Portfolio are classified as discontinued operations and are summarized as follows (amounts in thousands, except for share data):

Three months ended September 30, Nine months ended September 30,
2021 2020 2021 2020
Real estate rental revenue $ 10,932  $ 29,511  $ 70,519  $ 89,673 
Expenses
Property operating and maintenance (1,870) (5,232) (11,201) (15,433)
Real estate taxes and insurance (1,476) (4,839) (11,136) (14,233)
Property management (378) (947) (2,195) (2,830)
Depreciation and amortization —  (12,406) (22,904) (37,106)
Gain on sale of real estate, net 46,441  —  46,441  — 
       Income from discontinued operations $ 53,649  $ 6,087  $ 69,524  $ 20,071 
Basic net income per share $ 0.63  $ 0.07  $ 0.82  $ 0.24 
Diluted net income per share $ 0.63  $ 0.07  $ 0.82  $ 0.24 
Capital expenditures $ 833  $ 4,239  $ 3,316  $ 11,825 

All assets and liabilities related to the Office Portfolio and Retail Portfolio were sold as of September 30, 2021. As of December 31, 2020, assets and liabilities related to the Office Portfolio and Retail Portfolio were as follows (in thousands):
December 31, 2020
Land $ 249,869 
Income producing property 958,704 
1,208,573 
Accumulated depreciation and amortization (414,008)
Income producing property, net 794,565 
Development in progress and land held for development 1,122 
Investment in real estate, net $ 795,687 
Cash and cash equivalents
Restricted cash 10 
Rents and other receivables 48,532 
Prepaid expenses and other assets 41,452 
Total assets $ 885,684 
Accounts payable and other liabilities $ 14,706 
Advance rents 4,754 
Tenant security deposits 5,769 
Liabilities related to properties sold or held for sale $ 25,229