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Properties, net | 12 Months Ended
--- | ---
Dec. 31, 2011
Properties, net |
Properties, net |
5. Properties, net Operating properties, net consisted of the following (in thousands):
|  | December 31, |
--- | --- | --- | ---
|  | 2011 |  | 2010 |
Land |  | $ | 472,483 |  | $ | 501,210 |
Buildings and improvements |  |  | 2,801,252 |  |  | 2,804,595 |
Less: accumulated depreciation |  |  | (559,679 | ) |  | (503,032 | )
Operating properties, net |  | $ | 2,714,056 |  | $ | 2,802,773 |
Projects we had in development or held for future development consisted of the following (in thousands):
|  | December 31, |
--- | --- | --- | ---
|  | 2011 |  | 2010 |
Land |  | $ | 229,833 |  | $ | 256,487 |
Construction in progress, excluding land |  |  | 409,086 |  |  | 386,195 |
Projects in development or held for future development |  | $ | 638,919 |  | $ | 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 (the "Strategic Reallocation Plan"). In December 2011, we identified additional properties for disposal, and our Board of Trustees approved a plan by management to increase the scope of the Strategic Reallocation Plan to include the disposition of additional properties. We determined that the carrying amounts of certain of the properties included in the Strategic Reallocation Plan (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, we recognized aggregate non-cash impairment losses in 2011 of $122.5 million (including $23.3 million classified as discontinued operations and excluding $8.7 million in related income tax benefit) for the amounts by which the carrying values of the Impaired Properties exceeded their respective estimated fair values. We estimate that the aggregate fair value of the land and 83 operating properties included in the Strategic Reallocation Plan totaled $562 million at December 31, 2011 and that net proceeds from the plan's execution after the repayment of debt secured by the properties will approximate $441 million. We expect to complete the operating property dispositions by the end of 2013 and use the proceeds to invest in properties that will serve customers in the United States Government, defense information technology and related data sectors, to repay borrowings on our Revolving Credit Facility and for general corporate purposes. We completed the sale of the following properties under the Strategic Reallocation Plan in 2011 (dollars in thousands):
Project Name |  | Location |  | Date of Sale |  | Number of Buildings |  | Total Rentable Square Feet |  | Sale Price |  | Gain on 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 |  |  | 1,134 |
11011 McCormick Road |  | Hunt Valley, Maryland |  | 11/1/2011 |  |  | 1 |  |  | 57,000 |  |  | 3,450 |  |  | 822 |
10001 Franklin Square Drive |  | White Marsh, Maryland |  | 12/13/2011 |  |  | 1 |  |  | 218,000 |  |  | 16,250 |  |  | 305 |
Rutherford Business Center Portfolio |  | Woodlawn, Maryland |  | 12/15/2011 |  |  | 13 |  |  | 365,000 |  |  | 32,460 |  |  | 2,221 |
|  |  |  |  |  |  | 23 |  |  | 894,000 |  | $ | 76,660 |  | $ | 4,807 |
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. In 2011, we also recognized additional impairment losses of $803,000 on goodwill associated with operating properties. The table below sets forth the impairment losses recognized in 2011 by period of recognition and by property classification (in thousands):
|  | Three Months Ended |
--- | --- | --- | ---
|  | 3/31/2011 |  | 6/30/2011 |  | 12/31/2011 |  | Total |
Non-operating properties |  | $ | 27,742 |  | $ | 13,574 |  | $ | 39,193 |  | $ | 80,509 |
Operating properties |  |  | — |  |  | 31,031 |  |  | 39,481 |  |  | 70,512 |
Total |  | $ | 27,742 |  | $ | 44,605 |  | $ | 78,674 |  | $ | 151,021 |
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 |  | $ | 261 |
Building and improvements |  |  | 26,577 |
Intangible assets on real estate acquisitions |  |  | 6,575 |
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 |  | $ | 3,187 |  |  | 8 |
In-place lease value |  |  | 2,904 |  |  | 3 |
Above-market leases |  |  | 484 |  |  | 3 |
|  | $ | 6,575 |  |  | 6 |
We expensed $156,000 in 2011 in connection with acquisitions of operating properties that are included in business development expenses on our consolidated statements of operations. 2011 Construction Activities During 2011, we placed into service an aggregate of 566,000 square feet in seven newly constructed office properties, including three in the Baltimore/Washington Corridor, two in Greater Baltimore, one in San Antonio and one in St. Mary's County. As of December 31, 2011, we had construction underway on six office properties that we estimate will total 789,000 square feet upon completion, including three in the Baltimore/Washington Corridor, one in Greater Baltimore, one in Northern Virginia and one in Huntsville, Alabama, and redevelopment underway on one office property in Greater Philadelphia that we estimate will total 113,000 square feet upon completion. 2010 Acquisitions Our acquisitions in 2010 included: • 1550 Westbranch Drive, a 152,000 square foot office property in McLean, Virginia that was 100% leased, for $40.0 million on June 28, 2010; • 9651 Hornbaker Road, a 233,000 square foot wholesale data center known as Power Loft @ Innovation in Manassas, Virginia, for $115.5 million on September 14, 2010. Rents for this property are based on the amount of megawatts of power made available for the exclusive use of tenants in the property; we refer to this power as critical load. This property, the shell of which was completed in early 2010, was 17% leased on the date of acquisition to two tenants that have a combined initial critical load of three megawatts and further expansion rights of up to a combined five megawatts. We expect to complete the development of the property to an initial stabilization critical load of 18 megawatts for additional development costs of approximately $160.0 million, of which $82.3 million was incurred through December 31, 2011; • two office properties totaling 362,000 square feet at 1201 M Street SE and 1220 12th Street SE (known as Maritime Plaza I and II) in Washington, DC that were 100% leased for $122.1 million on September 28, 2010. The buildings are subject to ground leases that expire in 2099 and 2100. In connection with this acquisition, we assumed a $70.1 million mortgage loan having a fair value at assumption of $73.3 million with a stated fixed interest rate of 5.35% (effective interest rate of 3.95%) that matures in March 2014; and • 3120 Fairview Park Drive, a 183,000 square foot, shell-complete office property in Falls Church, Virginia for $43.0 million on November 23, 2010. The table below sets forth the allocation of the aggregate acquisition costs of these properties (in thousands):
Land, operating properties |  | $ | 13,265 |
Land, development |  |  | 5,545 |
Building and improvements |  |  | 173,589 |
Construction in progress |  |  | 85,525 |
Intangible assets on real estate acquisitions |  |  | 42,896 |
Total assets |  |  | 320,820 |
Below-market leases |  |  | (231 | )
Total acquisition cost |  | $ | 320,589 |
Intangible assets recorded in connection with the above acquisitions included the following (dollars in thousands):
|  |  |  | Weighted Average Amortization Period (in Years) |
--- | --- | --- | --- | --- | ---
In-place lease value |  | $ | 21,616 |  |  | 4 |
Tenant relationship value |  |  | 14,450 |  |  | 10 |
Above-market cost arrangements |  |  | 6,193 |  |  | 40 |
Above-market leases |  |  | 637 |  |  | 2 |
|  | $ | 42,896 |  |  | 11 |
We expensed $3.4 million in 2010 in connection with acquisitions of operating properties that are included in business development expenses on our consolidated statements of operations. 2010 Construction Activities During 2010, we placed into service an aggregate of 816,000 square feet in nine newly constructed office properties, including three in the Baltimore/Washington Corridor, two in greater Baltimore, two in San Antonio and two in Colorado Springs.

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- Definition The entire disclosure for certain real estate investment financial statements, real estate investment trust operating support agreements, real estate owned, retail land sales, time share transactions, as well as other real estate related disclosures. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 04 -Paragraph c -Subparagraph Schedule III -Article 5 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 67 -Paragraph 4, 5, 6, 7 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 03 -Paragraph 11 -Article 9 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Statement of Position (SOP) -Number 04-2 -Paragraph 41, 63, 64 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher OTS -Name Federal Regulation (FR) -Number Title 12 -Chapter V -Section 563c.102 -Paragraph 11 -Subsection I -LegacyDoc This is a non-GAAP reference that was included in the 2009 taxonomy. It will be removed from future versions of this taxonomy. 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Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 03 -Paragraph 10 -Subparagraph 4 -Article 9 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Audit and Accounting Guide (AAG) -Number AAG-DEP -Chapter 11 -Paragraph 2, 6, 9-11, 18, 20 -IssueDate 2006-05-01 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 66 -Paragraph 4, 5, 37, 50, 59, 65, 95, 97 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 6 -Subparagraph a -Article 5 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Statement of Position (SOP) -Number 75-2 -Paragraph 47, 51, 52 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. 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