Annual report pursuant to Section 13 and 15(d)

Real Estate Facilities

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Real Estate Facilities
12 Months Ended
Dec. 31, 2021
Real Estate Facilities [Abstract]  
Real Estate Facilities 3. Real estate facilities Activity related to our real estate facilities for the years ended December 31, 2021, 2020, and 2019 is as follows (in thousands): Buildings and Accumulated Land Improvements Depreciation Total Balances at December 31, 2018$ 725,411  $ 1,973,658  $ (968,680) $ 1,730,389 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 — (3,796) 10,691  6,895 Balances at December 31, 2019 813,504  2,038,471  (1,035,609) 1,816,366 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 — (1,673) 4,529  2,856 Balances at December 31, 2020 (2) 843,765  2,080,895  (1,101,739) 1,822,921 Acquisition of real estate facilities 22,591  123,711  — 146,302 Capital expenditures — 37,976  — 37,976 Disposals (1) — (9,892) 9,892  —Depreciation and amortization expense — — (90,175) (90,175)Transfer from property held for development 989  8,063  — 9,052 Transfer to properties held for sale — (1,616) 3,625  2,009 Balances at December 31, 2021$ 867,345  $ 2,239,137  $ (1,178,397) $ 1,928,085 ____________________________(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 $30.9 million, $166.5 million, and $127.4 million were reclassified as of December 31, 2020 to “properties held for sale, net” representing a 772,000 square foot industrial-flex business park located in Irving, Texas, a 371,000 square foot industrial-flex business park located in San Diego, California, a 244,000 square foot office business park located in Herndon, Virginia, a 198,000 square foot office-oriented flex business park located in Chantilly, Virginia, a 53,000 square foot industrial building located in Beltsville, Maryland, and a 22,000 square foot single-tenant industrial-flex building located in Irving, Texas. 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, 2021 net federal tax basis of real estate facilities was approximately $1.7 billion. As of December 31, 2021, we have commitments, pursuant to executed leases throughout our portfolio, to spend $9.8 million on transaction costs, which include tenant improvements and lease commissions. Acquisitions We account for acquisitions as asset acquisitions. The purchase price of acquired properties is allocated to land, buildings, and improvements (including tenant improvements, 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 November 18, 2021, the Company acquired a multi-tenant industrial business park comprising approximately 141,000 rentable square feet in Plano, Texas, for a total purchase price of $25.6 million, inclusive of capitalized transaction costs. On September 1, 2021, the Company acquired a multi-tenant industrial business park comprising approximately 718,000 rentable square feet in Grapevine, Texas, for a total purchase price of $123.3 million, inclusive of capitalized transaction costs. On October 28, 2020, the Company acquired a multi-tenant industrial business 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, the Company acquired a multi-tenant industrial business 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, the Company acquired a multi-tenant industrial-flex business 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, the Company acquired a multi-tenant industrial business 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, the Company acquired a multi-tenant industrial business park comprising approximately 74,000 rentable square feet in Signal Hill, California, for a total purchase price of $13.8 million, inclusive of capitalized transaction costs. The following table summarizes assets acquired and liabilities assumed for the years ended December 31, 2021, 2020 and 2019 (in thousands): 2021 2020 2019Land$ 22,591  $ 30,261  $ 88,093 Buildings and improvements 123,711  27,168  44,313 Other assets (above-market in-place rents) — 523  —Accrued and other liabilities (below-market in-place rents) (1,457) (557) (1,241)Other assets (in-place lease intangible) 4,023  2,700  3,777 Total purchase price 148,868  60,095  134,942 Net operating assets acquired and liabilities assumed (1,166) (76) (664)Total cash paid$ 147,702  $ 60,019  $ 134,278  During 2021, we completed the development of an 83,000 square foot shallow-bay industrial building at our Freeport Business Park locatedin Irving, Texas for total development costs of $8.1 million. The total developed asset value, inclusive of land costs, of $9.1 million was placed into service on March 1, 2021 and accordingly was reflected under real estate facilities, at cost on our consolidated balance sheets at December 31, 2021. As of December 31, 2021, we were in the process of developing an approximately 83,000 square foot multi-tenant industrial building at our 212 Business Park located in Kent, Washington. As of December 31, 2021, $2.2 million of the estimated $15.4 million total development costs had been incurred and was reflected under land and building held for development, net on our consolidated balance sheets. This construction project is scheduled to be completed in the fourth quarter of 2022. As of December 31, 2021, we have contractual construction commitments totaling $1.2 million that will be paid to various contractors as the project is completed. As of December 31, 2021, we were in the process of developing an approximately 17,000 square foot multi-tenant industrial building at our Boca Commerce Park, located in Boca Raton, Florida. As of December 31, 2021, $1.1 million of the estimated $4.0 million total development costs had been incurred and was reflected under land and building held for development, net on our consolidated balance sheets. This construction project is scheduled to be completed in the fourth quarter of 2022. As of December 31, 2021, we have contractual construction commitments totaling $2.9 million that will be paid to various contractors as the project is completed. Dispositions On December 30, 2021, the Company sold a 53,000 square foot industrial building located in Beltsville, Maryland, for net sale proceeds of $4.5 million, which resulted in a gain on sale of $3.2 million. On December 29, 2021, the Company sold a 70,000 square foot industrial-flex building located in Irving, Texas, for net sale proceeds of $8.8 million, which resulted in a gain on sale of $6.3 million. On October 19, 2021, we sold a 371,000 square foot industrial-flex business park located in San Diego, California, for net sale proceeds of $311.1 million, which resulted in a gain on sale of $301.3 million. On September 17, 2021, the Company sold a 22,000 square foot industrial-flex building located in Irving, Texas, for net sale proceeds of $3.4 million, which resulted in a gain on sale of $2.9 million. On July 16, 2021, the Company sold a 244,000 square foot office business park located in Herndon, Virginia, for net sale proceeds of $40.5 million, which resulted in a gain on sale of $27.0 million. On June 17, 2021, the Company sold a 198,000 square foot office-oriented flex business park located in Chantilly, Virginia, for net sale proceeds of $32.6 million, which resulted in a gain on sale of $19.2 million. (Collectively the “2021 Assets Sold”). During 2021, the Company reclassified such assets as properties held for sale, net, in the consolidated balance sheet as of December 31, 2020. 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 sale proceeds of $11.4 million, which resulted in a gain on sale of $7.7 million. On January 7, 2020, the Company 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. (Collectively the “2020 Assets Sold”). On October 8, 2019, the Company sold 1.3 million rentable square feet of industrial-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. (Collectively the “2019 Assets Sold”). The Company determined that the 2021 Assets Sold, 2020 Assets Sold, and the 2019 Assets Sold did not meet the criteria for discontinued operations presentation, as the sale of such assets did not represent a strategic shift that will have a major effect on our operations and financial results. ‎