Quarterly report pursuant to Section 13 or 15(d)

Real Estate

v3.20.2
Real Estate
6 Months Ended
Jun. 30, 2020
Real Estate [Abstract]  
Real Estate REAL ESTATE
Acquisitions

We acquired the following properties (collectively, the “Assembly Portfolio”) during the 2019 Period:
Acquisition Date Property Name Property Type # of Units (unaudited) Contract Purchase Price (in thousands)
April 30, 2019
Assembly Portfolio - Virginia (1)
Multifamily 1,685 $ 379,100   
June 27, 2019
Assembly Portfolio - Maryland (2)
Multifamily 428 82,070   
Total 2019 2,113 $ 461,170   
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(1)  Consists of Assembly Alexandria, Assembly Manassas, Assembly Dulles, Assembly Leesburg and Assembly Herndon.
(2)  Consists of Assembly Germantown and Assembly Watkins Mill.

Development/Redevelopment

We have properties under development/redevelopment and held for current or future development. As of June 30, 2020, we have invested $126.5 million, including the cost of acquired land, in The Trove, a 401-unit multifamily development adjacent to The Wellington. During the 2020 Period, we substantially completed major construction activities for The Trove’s base building and garage and delivered 131 units. As of June 30, 2020, we have placed into service assets totaling $67.1 million. We have also invested $27.8 million, including the cost of acquired land, in a multifamily development adjacent to Riverside Apartments. In addition, in our multifamily and office segments, we continue to capitalize qualifying costs on several other projects with minor development activity necessary to get each project ready for its intended use.

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 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 Office 223,000 $ 57,000    $ (6,855)  
Total 2020 223,000 $ 57,000    $ (6,855)  
June 26, 2019
Quantico Corporate Center (1)
Office 272,000 $ 33,000    $ (1,046)  
July 23, 2019
Shopping Center Portfolio (2)
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   
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(1)  Consists of 925 and 1000 Corporate Drive.
(2)  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 October 2019, we renewed and extended our lease with the World Bank at 1776 G Street NW, an office property in Washington, DC, through December 31, 2025. In December 2019, we sold the property to the World Bank for a contract sale price of $129.5 million, recognizing a gain on sale of real estate of $61.0 million.

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. During the 2020 Quarter, we executed an amendment to the purchase and sale agreement which decreased the contract sale price to $57.0 million and closed on the sale on April 21, 2020, recognizing a loss on sale of real estate of $6.9 million.
As of June 30, 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 June 30, 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 June 30, 2019 Six Months Ended June 30, 2019
Real estate rental revenue $ 12,334    $ 24,074   
Real estate expenses (2,641)   (5,708)  
Depreciation and amortization (2,377)   (4,867)  
Interest expense (138)   (283)  
       Income from discontinued operations $ 7,178    $ 13,216   
Basic net income per share $ 0.09    $ 0.17   
Diluted net income per share $ 0.09    $ 0.17   
Capital expenditures $ 402    $ 809