Annual report pursuant to Section 13 and 15(d)

Real Estate Facilities

v3.20.4
Real Estate Facilities
12 Months Ended
Dec. 31, 2020
Real Estate Facilities [Abstract]  
Real Estate Facilities


3. Real estate facilities

Activity related to our real estate facilities for the years ended December 31, 2020, 2019, and 2018 is as follows (in thousands):

Buildings and

Accumulated

Land

Improvements

Depreciation

Total

Balances at December 31, 2017

$

708,706 

$

1,921,379 

$

(1,012,798)

$

1,617,287 

Acquisition of real estate facilities

25,806 

112,230 

138,036 

Consolidation of joint venture

21,814 

84,903 

106,717 

Capital expenditures

38,904 

38,904 

Disposals (1)

(17,345)

17,345 

Depreciation and amortization expense

(96,732)

(96,732)

Transfer to properties held for sale

(4,208)

6,252 

2,044 

Balances at December 31, 2018

756,326 

2,135,863 

(1,085,933)

1,806,256 

Acquisition of real estate facilities

88,093 

44,313 

132,406 

Capital expenditures

40,092 

40,092 

Disposals (1)

(15,796)

15,796 

Depreciation and amortization expense

(93,416)

(93,416)

Transfer to properties held for sale

(1,164)

5,064 

3,900 

Balances at December 31, 2019 (2)

844,419 

2,203,308 

(1,158,489)

1,889,238 

Acquisition of real estate facilities

30,261 

27,168 

57,429 

Capital expenditures

36,328 

36,328 

Disposals (1)

(19,399)

19,399 

Depreciation and amortization expense

(90,058)

(90,058)

Transfer to properties held for sale

(16)

46 

30 

Balances at December 31, 2020

$

874,680 

$

2,247,389 

$

(1,229,102)

$

1,892,967 

____________________________

(1)Disposals primarily represent the book value of tenant improvements that have been removed upon the customer vacating their space.

(2)Land, building and improvements, and accumulated depreciation, respectively, totaling $2.2 million, $2.8 million, and $1.2 million were reclassified as of December 31, 2019 to “properties held for sale, net” representing two industrial buildings totaling 40,000 square feet located in Redmond, Washington, which were subject to an eminent domain process and sold in 2020.

We have a 95.0% interest in a joint venture that owns Highgate at The Mile, a 395-unit multifamily apartment complex on a five-acre parcel within The Mile. The remaining 5.0% interest in the joint venture is held by the JV Partner. We consolidate the joint venture that owns Highgate at The Mile and as such, the consolidated real estate assets and activities related to this joint venture are included in the table above.

The unaudited December 31, 2020 net federal tax basis of real estate facilities was approximately $1.7 billion.

As of December 31, 2020, we have commitments, pursuant to executed leases throughout our portfolio, to spend $9.1 million on transaction costs, which include tenant improvements and lease commissions.

The purchase price of acquired properties is allocated to land, buildings and improvements (including tenant improvements, unamortized lease commissions, acquired in-place lease intangible and customer relationships, if any), and intangible assets and intangible liabilities (see Note 2), based upon the relative fair value of each component, which are evaluated independently.

The Company must make significant assumptions in determining the fair value of assets acquired and liabilities assumed, which can affect the recognition and timing of revenue and depreciation and amortization expense. The fair value of land is estimated based upon, among other considerations, comparable sales of land within the same region. The fair value of buildings and improvements is determined using a combination of the income and replacement cost approaches which both utilize available market information relevant to the acquired property. The fair value of other acquired assets including tenant improvements and unamortized lease commissions are determined using the replacement cost approach. The amount recorded to acquired in-place lease intangible is also determined utilizing the income approach using market assumptions

which are based on management’s assessment of current market conditions and the estimated lease-up periods for the respective spaces. Transaction costs related to asset acquisitions are capitalized.

On October 28, 2020, we acquired a multi-tenant industrial park comprising approximately 246,000 rentable square feet in Alexandria, Virginia, for a total purchase price of $46.6 million, inclusive of capitalized transaction costs.

On January 10, 2020, we acquired a multi-tenant industrial park comprising approximately 73,000 rentable square feet in La Mirada, California, for a total purchase price of $13.5 million, inclusive of capitalized transaction costs.

On December 20, 2019, we acquired a multi-tenant flex park comprising approximately 79,000 rentable square feet in Santa Clara, California, for a total purchase price of $16.8 million, inclusive of capitalized transaction costs.

On September 5, 2019, we acquired a multi-tenant industrial park comprising approximately 543,000 rentable square feet in Santa Fe Springs, California, for a total purchase price of $104.3 million, inclusive of capitalized transaction costs.

On April 18, 2019, we acquired a multi-tenant industrial park comprising approximately 74,000 rentable square feet in Signal Hill, California, for a total purchase price of $13.8 million, inclusive of capitalized transaction costs.

On June 8, 2018, we acquired two multi-tenant industrial parks aggregating 1.1 million rentable square feet in Springfield, Virginia, for a purchase price of $143.8 million, inclusive of capitalized transaction costs.

The following table summarizes assets acquired and liabilities assumed for the years ended December 31, (in thousands):

2020

2019

2018

Land

$

30,261 

$

88,093 

$

25,806 

Buildings and improvements

27,168 

44,313 

112,230 

Other assets (above-market in-place rents)

523

1,487 

Accrued and other liabilities (below-market in-place rents)

(557)

(1,241)

(1,790)

Other assets (in-place lease intangible)

2,700 

3,777 

6,033 

Total purchase price

60,095 

134,942 

143,766 

Net operating assets acquired and liabilities assumed

(76)

(664)

(1,367)

Total cash paid

$

60,019 

$

134,278 

$

142,399 

The following table summarizes the assets acquired and liabilities assumed related to the consolidation of the joint venture, which was accounted for as an asset acquisition, as of January 1, 2018 (in thousands):

Land

$

21,814 

Buildings and improvements

84,903 

Other assets (in-place lease intangible)

1,199 

Total consolidated joint venture

107,916 

Noncontrolling interest in consolidated joint venture

(4,032)

Net book value of joint venture at consolidation

$

103,884 

During 2020, we developed an 83,000 square foot shallow-bay industrial building at our Freeport Business Park in Irving, Texas. As of December 31, 2020, $7.8 million had been incurred and was reflected under land and building held for development, net on our consolidated balance sheets. An additional $0.3 million was incurred subsequent to December 31, 2020 and construction was completed in January 2021.

Properties Sold

On September 16, 2020, the Company sold two industrial buildings totaling 40,000 square feet located in Redmond, Washington, which were subject to an eminent domain process for net proceeds of $11.4 million, which resulted in a gain on sale of $7.7 million. On January 7, 2020, we sold an 113,000 square foot office building located at Metro Park North in Rockville, Maryland, for net sale proceeds of $29.3 million, which resulted in a gain on sale of $19.6 million. These properties were classified as held for sale, net, in the consolidated balance sheet as of December 31, 2019.

On October 8, 2019, the Company sold 1.3 million rentable square feet of flex and office business parks located in Rockville and Silver Spring, Maryland, for net sale proceeds of $144.6 million, which resulted in a gain on sale of $16.6 million. We determined that these sales did not meet the criteria for discontinued operations presentation, as the sales of such assets did not represent a strategic shift that will have a major effect on our operations and financial results.

On March 5, 2018, we sold Corporate Pointe Business Park, a park consisting of five multi-tenant office buildings totaling 161,000 square feet located in Orange County, California, for net sale proceeds of $41.7 million, which resulted in a gain on sale of $26.8 million. On April 18, 2018, we sold Orange County Business Center, a park consisting of five multi-tenant office buildings totaling 437,000 square feet located in Orange County, California, for net sale proceeds of $73.3 million, which resulted in a gain on sale of $50.6 million. On April 30, 2018, we sold Northgate Business Park, a park consisting of seven multi-tenant flex buildings totaling 194,000 square feet located in Dallas, Texas, for net sale proceeds of $11.8 million, which resulted in a gain on sale of $7.9 million. On October 31, 2018, we sold Orangewood Office Park, a park consisting of two multi-tenant office buildings totaling 107,000 square feet located in Orange County, California, for net sale proceeds of $18.3 million, which resulted in a gain on sale of $8.2 million. We determined that these sales also did not meet the criteria for discontinued operations presentation, as the sales of such assets did not represent a strategic shift that will have a major effect on our operations and financial results.