|
4. Properties, net
Operating properties, net consisted of the following (in thousands):
|
|
|
June 30,
|
|
December 31,
|
|
|
|
|
2011
|
|
2010
|
|
|
Land
|
|
$
|
491,188
|
|
$
|
501,210
|
|
|
Buildings and improvements
|
|
2,777,861
|
|
2,804,595
|
|
|
Less: accumulated depreciation
|
|
(527,616
|
)
|
(503,032
|
)
|
|
Operating properties, net
|
|
$
|
2,741,433
|
|
$
|
2,802,773
|
|
Properties under construction or development consisted of the following (in thousands):
|
|
|
June 30,
|
|
December 31,
|
|
|
|
|
2011
|
|
2010
|
|
|
Land
|
|
$
|
248,647
|
|
$
|
256,487
|
|
|
Construction in progress, excluding land
|
|
407,674
|
|
386,195
|
|
|
Properties under construction or development
|
|
$
|
656,321
|
|
$
|
642,682
|
|
Strategic Reallocation Plan and Impairment Losses
In April 2011, we completed a review of our portfolio and identified a number of properties that are no longer closely aligned with our strategy, and our Board of Trustees approved a plan by management to dispose of some of these properties during the next three years (the Strategic Reallocation Plan). We subsequently identified an additional property with an increased likelihood of a shortened holding period. While we expect to recognize gains on the dispositions of some of these properties, we also determined that the carrying amounts of certain of these properties (the Impaired Properties) will not likely be recovered from the cash flows from the operations and sales of such properties over the shorter holding periods. Accordingly, during the three months ended June 30, 2011, we recognized aggregate non-cash impairment losses of $44.6 million (including $6.3 million classified as discontinued operations and excluding $4.6 million in related income tax benefit) for the amounts by which the carrying values of the Impaired Properties exceeded their respective estimated fair values.
The properties to be disposed of pursuant to the Strategic Reallocation Plan consist primarily of smaller, non-strategic office properties in certain submarkets in the Greater Baltimore, Suburban Maryland and St. Marys County regions. We expect that net proceeds from the execution of the Strategic Reallocation Plan after the repayment of debt secured by the properties will approximate $200 million. We expect to invest the proceeds in properties that will serve customers in the United States Government, defense information technology and related data sectors. In May 2011, we completed the sale of three properties under the Strategic Reallocation Plan totaling 39,000 square feet for $3.8 million and recognized a gain of $150,000. As of June 30, 2011, we had 17 operating properties and a recently redeveloped property included in the Strategic Reallocation Plan classified as held for sale that consisted of the following (in thousands):
|
Land, operating properties
|
|
$
|
10,343
|
|
|
Land, development
|
|
5,599
|
(1)
|
|
Buildings and improvements
|
|
43,022
|
|
|
Construction in progress, excluding land
|
|
22,934
|
(1)
|
|
Less: accumulated depreciation
|
|
(6,791
|
)
|
|
Properties held for sale, net
|
|
$
|
75,107
|
|
(1) Pertains to a property nearing completion of redevelopment.
On February 15 and 17, 2011, the United States Army (the Army) provided us disclosures regarding the past testing and use of tactical defoliants/herbicides at our property in Cascade, Maryland that was formerly an Army base known as Fort Ritchie (Fort Ritchie). Upon receipt of these disclosures, we commenced a review of our development plans and prospects for the property. We believe that these disclosures by the Army are likely to cause further delays in the resolution of certain existing litigation related to the property, and that they also increase the level of uncertainty as to our ultimate development rights at the property and future residential and commercial demand for the property. We analyzed various possible outcomes and resulting cash flows expected from the operations and ultimate disposition of the property. After determining that the carrying amount of the property will not likely be recovered from those cash flows, we recognized a non-cash impairment loss of $27.7 million in March 2011 for the amount by which the carrying value of the property exceeded its estimated fair value.
2011 Construction, Development and Redevelopment Activities
During the six months ended June 30, 2011, we had two newly constructed office properties totaling 228,000 square feet, including one in the Baltimore/Washington Corridor and one in Greater Baltimore, become fully operational (79,000 of these square feet were placed into service in 2010).
As of June 30, 2011, we had construction underway on ten office properties totaling 1.2 million square feet, including four in the Baltimore/Washington Corridor, two in Greater Baltimore, one in San Antonio, one in Northern Virginia, one in Huntsville, Alabama and one in St. Marys County. We also had development activities underway on eight office properties totaling 1.0 million square feet, including three in the Baltimore/Washington Corridor, two in San Antonio, two in Huntsville and one in Northern Virginia. In addition, we had redevelopment underway on two office properties totaling 297,000 square feet, including one in Greater Philadelphia and one in Northern Virginia.
|