|
4. Properties, net
Operating properties, net consisted of the following (in thousands):
|
|
|
September 30,
|
|
December 31,
|
|
|
|
|
2011
|
|
2010
|
|
|
Land
|
|
$
|
486,538
|
|
$
|
501,210
|
|
|
Buildings and improvements
|
|
2,839,071
|
|
2,804,595
|
|
|
Less: accumulated depreciation
|
|
(553,306
|
)
|
(503,032
|
)
|
|
Operating properties, net
|
|
$
|
2,772,303
|
|
$
|
2,802,773
|
|
Properties under construction or development consisted of the following (in thousands):
|
|
|
September 30,
|
|
December 31,
|
|
|
|
|
2011
|
|
2010
|
|
|
Land
|
|
$
|
248,945
|
|
$
|
256,487
|
|
|
Construction in progress, excluding land
|
|
447,969
|
|
386,195
|
|
|
Properties under construction or development
|
|
$
|
696,914
|
|
$
|
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 additional properties 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 second quarter of 2011, we recognized aggregate non-cash impairment losses of $44.6 million (including $14.5 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 office properties in certain submarkets in the Greater Baltimore, Suburban Maryland and St. Marys County regions that no longer fit our strategic focus. 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. We completed the sale of the following properties under the Strategic Reallocation Plan during the nine months ended September 30, 2011 (dollars in thousands):
|
|
|
|
|
|
|
Number
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
Date of
|
|
of
|
|
Rentable
|
|
|
|
Gain on
|
|
|
Project Name
|
|
Location
|
|
Sale
|
|
Buildings
|
|
Square Feet
|
|
Sale Price
|
|
Sale
|
|
|
1344 & 1348 Ashton Road and 1350 Dorsey Road
|
|
Hanover, Maryland
|
|
5/24/2011
|
|
3
|
|
39,000
|
|
$
|
3,800
|
|
$
|
150
|
|
|
216 Schilling Circle
|
|
Hunt Valley, Maryland
|
|
8/23/2011
|
|
1
|
|
36,000
|
|
4,700
|
|
175
|
|
|
Towson Portfolio
|
|
Towson, Maryland
|
|
9/29/2011
|
|
4
|
|
179,000
|
|
16,000
|
|
1,124
|
|
|
|
|
|
|
|
|
8
|
|
254,000
|
|
$
|
24,500
|
|
$
|
1,449
|
|
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 Acquisition
On August 9, 2011, we acquired 310 The Bridge Street, a 138,000 square foot office property in Huntsville, Alabama that was 100% leased, for $33.4 million. The table below sets forth the allocation of the acquisition costs of this property (in thousands):
|
Land, operating properties
|
|
$
|
251
|
|
|
Building and improvements
|
|
26,824
|
|
|
Intangible assets on real estate acquisitions
|
|
6,338
|
|
|
Total assets
|
|
$
|
33,413
|
|
Intangible assets recorded in connection with the above acquisitions included the following (dollars in thousands):
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Amortization
|
|
|
|
|
|
|
Period
|
|
|
|
|
|
|
(in Years)
|
|
|
Tenant relationship value
|
|
$
|
3,072
|
|
8
|
|
|
In-place lease value
|
|
2,800
|
|
3
|
|
|
Above-market leases
|
|
466
|
|
3
|
|
|
|
|
$
|
6,338
|
|
6
|
|
We expensed $152,000 in the nine months ended September 30, 2011 in connection with acquisitions of operating properties that are included in business development expenses on our consolidated statements of operations.
2011 Construction and Redevelopment Activities
During the nine months ended September 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) and placed into service 61,000 square feet in one partially operational office property in the Baltimore/Washington Corridor.
As of September 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 redevelopment underway on two office properties totaling 297,000 square feet, including one in Northern Virginia and one in Greater Philadelphia.
|