COPT Defense Properties Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Prepaid Expenses and Other Assets, Net

Prepaid Expenses and Other Assets, Net

12 Months Ended

Dec. 31, 2018

Prepaid Expense and Other Assets [Abstract]

Prepaid expenses and other assets, net consisted of the following (in thousands):



	December 31,
	2018		2017
Prepaid expenses	$	25,658	$	24,670
Lease incentives, net	21,258		19,011
Furniture, fixtures and equipment, net	8,630		5,256
Non-real estate equity investments	5,940		5,056
Deferred financing costs, net (1)	4,733		1,202
Restricted cash	3,884		2,570
Construction contract costs incurred in excess of billings	3,189		4,884
Deferred tax asset, net	2,084		1,892
Other assets	6,337		2,177
Total for COPLP and subsidiaries	81,713		66,718
Marketable securities in deferred compensation plan	3,868		4,616
Total for COPT and subsidiaries	$	85,581	$	71,334

(1) Represents deferred costs, net of accumulated amortization, attributable to our Revolving Credit Facility and interest rate derivatives.

Deferred tax asset, net reported above includes the following tax effects of temporary differences and carry forwards of our TRS (in thousands):



	December 31,
	2018			2017
Operating loss carry forward	$	4,354		$	3,209
Share-based compensation	28			7
Accrued payroll	2			49
Property	427			43
Valuation allowance	(2,727		)	(1,416		)
Deferred tax asset, net	$	2,084		$	1,892

We recognize a valuation allowance on our deferred tax asset if we believe all or some portion of the asset may not be realized. An increase or decrease in the valuation allowance resulting from a change in circumstances that causes a change in our judgment about the realizability of our deferred tax asset is included in income. The deferred tax asset valuation allowance is due to a decrease in future projected income in our TRS resulting primarily from our dispositions of certain properties to which the TRS provided amenity services and our planned reduction in amenity services provided by the TRS at certain other properties. We believe it is more likely than not that the results of future operations in our TRS will generate sufficient taxable income to realize our December 31, 2018 net deferred tax asset.