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

Annual report pursuant to Section 13 and 15(d)

Properties, Net

Properties, Net

12 Months Ended

Dec. 31, 2019

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



	December 31,
	2019			2018
Land	$	472,976		$	503,274
Buildings and improvements	3,306,791			3,241,894
Less: Accumulated depreciation	(1,007,120		)	(897,903		)
Operating properties, net	$	2,772,647		$	2,847,265

2019 Dispositions

In 2019, we sold, through a series of transactions, a 90% interest in nine recently-developed data center shells in Northern Virginia based on an aggregate property value of property value of $345.1 million, retaining a 10% interest in the properties through BREIT COPT DC JV LLC (“BREIT-COPT”), a newly-formed joint venture. The transactions for seven of these properties were completed on June 20, 2019 and the remaining two properties on December 5, 2019. Our partner in the joint venture acquired the 90% interest from us for $310.6 million. We account for our interest in the joint venture using the equity method of accounting as described further in Note 6. We recognized a gain on sale of $105.2 million.

2019 Development Activities

In 2019, we placed into service 1.1 million square feet in nine newly-developed properties and 85,000 square feet in one partially-operational property under redevelopment. As of December 31, 2019, we had 13 properties under development, or which we were contractually committed to develop, that we estimate will total 2.3 million square feet upon completion and one partially-operational property under redevelopment that we estimate will total 106,000 square feet upon completion.

2018 Dispositions

In 2018, we sold 11751 Meadowville Lane, an operating property totaling 193,000 square feet in Chester, Virginia (in our Data Center Shells sub-segment). We contractually closed on the sale of this property on October 27, 2017 for $44.0 million. 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. In the fourth quarter of 2018, we recognized a gain on this sale of $1.5 million.

2018 Development Activities

In 2018, we placed into service 666,000 square feet in six newly-developed properties (including two partially- operational properties), 22,000 square feet in one redeveloped property and land under a long-term contract.

In the fourth quarter of 2018, we abandoned plans to redevelop a property in our Fort Meade/BW Corridor sub-segment after we completed leasing on the property that did not require any redevelopment. Accordingly, we recognized an impairment loss of $2.4 million representing pre-development costs associated with the property.

2017 Dispositions

In 2017, we sold the following operating properties (dollars in thousands):



Project Name	City, State	Segment	Date of Sale	Number of Properties	Total Rentable Square Feet	Transaction Value		Gain on Sale
3120 Fairview Park Drive	Falls Church, VA	Northern Virginia Defense/IT	2/15/2017	1	190,000	$	39,000	$	—
1334 Ashton Road	Hanover, MD	Fort Meade/BW Corridor	6/9/2017	1	37,000	2,300		—
White Marsh Properties (1)	White Marsh, MD	Regional Office and Other	7/28/2017	8	412,000	47,500		1,180
201 Technology Drive	Lebanon, VA	Data Center Shells	10/27/2017	1	103,000	29,500		3,625
7320 Parkway Drive	Hanover, MD	Fort Meade/BW Corridor	12/15/2017	1	57,000	7,529		831
				12	799,000	$	125,829	$	5,636

(1) This sale also included land.

We also sold other land for $14.3 million and recognized a gain on sale of $4.2 million.

2017 Development Activities

In 2017, we placed into service 1.1 million square feet in eight newly-developed properties (including a partially- operational property) and 94,000 square feet in three redeveloped properties.