COPT Defense Properties Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Properties, Net

Properties, Net

9 Months Ended

Sep. 30, 2018

Operating properties, net consisted of the following (in thousands):



	September 30, 2018			December 31, 2017
Land	$	481,527		$	455,680
Buildings and improvements	3,182,709			3,068,124
Less: Accumulated depreciation	(867,659		)	(786,193		)
Operating properties, net	$	2,796,577		$	2,737,611

Projects in development or held for future development consisted of the following (in thousands):



	September 30, 2018		December 31, 2017
Land	$	220,468	$	240,825
Development in progress, excluding land	190,382		162,669
Projects in development or held for future development	$	410,850	$	403,494

Our property held for sale is 11751 Meadowville Lane, a property in our Data Center Shells sub-segment, the sale of which was not recognized for accounting purposes. We provided a financial guaranty to the buyer under which we provided an indemnification for up to $20 million in losses it could incur related to a potential defined capital event occurring on the property; our financial guaranty to the buyer expired on October 1, 2018, resulting in no losses to us. We accounted for this transaction as a financing arrangement. Accordingly, we did not recognize the sale of this property for accounting purposes until the expiration of the guaranty on October 1, 2018, and we reported the sales proceeds as a liability on the consolidated balance sheets as of September 30, 2018 and December 31, 2017 in the line entitled “deferred property sale.” The table below sets forth the components of this property’s assets as of September 30, 2018 and December 31, 2017 (in thousands):



Properties, net	$	38,670
Deferred rent receivable	3,237
Deferred leasing costs, net	319
Assets held for sale, net	$	42,226

2018 Construction Activities

During the nine months ended September 30, 2018, we placed into service 432,000 square feet in four newly-constructed properties and 18,000 square feet in one redeveloped property. As of September 30, 2018, we had nine properties under construction (including one partially-operational property), or which we were contractually committed to construct, that we estimate will total 1.3 million square feet upon completion and two properties under redevelopment (including one partially-operational property) that we estimate will total 128,000 square feet upon completion.