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REAL ESTATE OWNED

9 Months Ended

Sep. 30, 2022

REAL ESTATE OWNED

REAL ESTATE OWNED

3. REAL ESTATE OWNED

Real estate assets owned by the Company consist of income producing operating properties, properties under development, land held for future development, and held for disposition properties. As of September 30, 2022, the Company owned and consolidated 164 communities in 13 states plus the District of Columbia totaling 54,728 apartment homes. The following table summarizes the carrying amounts for our real estate owned (at cost) as of September 30, 2022 and December 31, 2021 (dollars in thousands):


		September 30,			December 31,
		2022			2021
Land		$	2,523,430		$	2,342,385
Depreciable property — held and used:
Land improvements			246,849			241,905
Building, improvements, and furniture, fixtures and equipment			12,255,260			11,717,931
Real estate intangible assets			50,013			50,013
Under development:
Land and land improvements			59,732			74,399
Building, improvements, and furniture, fixtures and equipment			308,733			314,170
Real estate held for disposition:
Land and land improvements			12,768			—
Building, improvements, and furniture, fixtures and equipment			11,195			—
Real estate owned			15,467,980			14,740,803
Accumulated depreciation (a)			(5,605,809)			(5,137,096)
Real estate owned, net		$	9,862,171		$	9,603,707

(a)

Accumulated depreciation is inclusive of $13.1 million and $8.8 million of accumulated amortization related to real estate intangible assets as of September 30, 2022 and December 31, 2021, respectively.

Acquisitions

In April 2022, the Company acquired a to-be-developed parcel of land located in Fort Lauderdale, Florida for approximately $16.0 million.

In June 2022, the Company acquired a 434 apartment home operating community located in Danvers, Massachusetts for approximately $207.5 million. The Company increased its real estate assets owned by approximately $203.7 million and recorded $3.8 million of in-place lease intangibles.

In June 2022, the Company acquired three contiguous to-be-developed parcels of land located in Dallas, Texas for approximately $90.2 million.

In June 2022, the Company acquired a to-be-developed parcel of land, which included two operating retail components, located in Riverside, California for approximately $29.0 million. The Company increased its real estate assets owned by approximately $28.2 million and recorded $0.8 million of in-place lease intangibles.

Dispositions

The Company did not have any dispositions during the nine months ended September 30, 2022.

In August 2022, the Company entered into an agreement to sell an operating community in Orange County, California with a total of 90 apartment homes for a sales price of approximately $41.5 million. The operating community was classified as held for disposition as of September 30, 2022 and the sale is expected to close in the fourth quarter of 2022.

Other Activity

Predevelopment, development, and redevelopment projects and related costs are capitalized and reported on the Consolidated Balance Sheets as Total real estate owned, net of accumulated depreciation. The Company capitalizes costs directly related to the predevelopment, development, and redevelopment of a capital project, which include, but are not limited to, interest, real estate taxes, insurance, and allocated development and redevelopment overhead related to support costs for personnel working on the capital projects. We use our professional judgment in determining whether such costs meet the criteria for capitalization or must be expensed as incurred. These costs are capitalized only during the period in which activities necessary to ready an asset for its intended use are in progress and such costs are incremental and identifiable to a specific activity to get the asset ready for its intended use. These costs, excluding the direct costs of development and redevelopment and capitalized interest, for the three months ended September 30, 2022 and 2021, were $5.2 million and $2.4 million, respectively, and $15.4 million and $9.2 million, respectively, for the nine months ended September 30, 2022 and 2021. Total capitalized interest was $3.5 million and $2.4 million, respectively, for the three months ended September 30, 2022 and 2021, and $10.4 million and $6.8 million for the nine months ended September 30, 2022 and 2021, respectively. As each apartment home in a capital project is completed and becomes available for lease-up, the Company ceases capitalization on the related portion of the costs and depreciation commences over the estimated useful life.

We record impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by the future operation and disposition of those assets are less than the net book value of those assets. Our cash flow estimates are based upon historical results adjusted to reflect our best estimate of future market and operating conditions and our estimated holding periods. The net book value of impaired assets is reduced to fair value. Our estimates of fair value represent our best estimate based upon Level 3 inputs such as industry trends and reference to market rates and transactions. The Company did not recognize any impairments in the value of its long-lived assets during the three and nine months ended September 30, 2022 and 2021.

In connection with the acquisition of certain properties, the Company agreed to pay certain of the tax liabilities of certain contributors if the Company sells one or more of the properties contributed in a taxable transaction prior to the expiration of specified periods of time following the acquisition. The Company may, however, sell, without being required to pay any tax liabilities, any of such properties in a non-taxable transaction, including, but not limited to, a tax-deferred Section 1031 exchange.

Further, the Company has agreed to maintain certain debt that may be guaranteed by certain contributors for specified periods of time following the acquisition. The Company, however, has the ability to refinance or repay guaranteed debt or to substitute new debt if the debt and the guaranty continue to satisfy certain conditions.