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, 2021

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


	December 31,
	2021		2020
Land	$	572,900	$	522,219
Buildings and improvements	3,670,133		3,444,804
Less: Accumulated depreciation	(1,152,523)		(1,052,007)
Operating properties, net	$	3,090,510	$	2,915,016

Discontinued Operations

As of December 31, 2021, our wholesale data center was under contract to be sold, and the sale was completed on January 25, 2022. Our wholesale data center, a separate reportable segment, is reported herein as discontinued operations. The table below sets forth the components of our wholesale data center’s assets classified as held for sale on our consolidated balance sheets (in thousands):


	December 31,
	2021		2020
Properties, net	$	191,857	$	200,264
Deferred rent receivable	462		1,025
Intangible assets on property acquisitions, net	73		95
Deferred leasing costs, net	307		436

Assets held for sale, net	$	192,699	$	201,820

The table below sets forth our wholesale data center’s results of operations included in discontinued operations on our consolidated statements of operations and its operating and investing cash flows included on our consolidated statements of cash flows (in thousands):


	For the Years Ended December 31,
	2021		2020		2019
	(in thousands)
Revenues from real estate operations	$	30,490	$	27,011	$	29,405
Property operating expenses	(16,842)		(13,044)		(12,694)
Depreciation and amortization associated with real estate operations	(10,290)		(11,690)		(12,061)


Discontinued operations	3,358		2,277		4,650

Cash flows from operating activities	$	10,930	$	16,051	$	18,626
Cash flows from investing activities	$	(1,912)	$	(11,485)	$	(805)

2021 Dispositions

On June 2, 2021, we sold a 90% interest in two data center shell properties in Northern Virginia based on an aggregate property value of $118.8 million and retained a 10% interest in the properties through B RE COPT DC JV III LLC (“BRE-COPT 3”), a newly-formed joint venture. Our partner in the joint venture acquired the 90% interest from us for $106.9 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 $40.2 million.

On December 30, 2021, we sold a property that was previously removed from service from our data center shells sub-segment for $30.0 million and recognized a gain on sale of $25.9 million.

2021 Development Activities

In 2021, we placed into service 766,000 square feet in eight newly-developed properties. As of December 31, 2021, we had 11 properties under development, including one partially-operational property, that we estimate will total 1.7 million square feet upon completion.

2020 Dispositions

On October 30, 2020, we sold a 90% interest in two data center shell properties in Northern Virginia based on an aggregate property value of $89.7 million and retained a 10% interest in the properties through B RE COPT DC JV II LLC (“BRE-COPT 2”), a newly-formed joint venture. Our partner in the joint venture acquired the 90% interest from us for $80.7 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 $30.0 million.

2020 Development Activities

In 2020, we placed into service 1.8 million square feet in 11 newly-developed properties, 42,000 square feet in expansions of three fully-operational properties and 21,000 square feet in a redeveloped property.

In the third quarter of 2020, we concluded that we no longer expected to develop a property in Baltimore, Maryland. As a result, we recognized an impairment loss on previously incurred pre-development costs of $1.5 million.

2019 Dispositions

In 2019, we sold, through a series of transactions, a 90% interest in nine data center shells in Northern Virginia based on an aggregate 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 property under redevelopment.