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Real Estate Investments | 6 Months Ended
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Jun. 30, 2017
Real Estate [Abstract] |
REAL ESTATE INVESTMENTS | 3. REAL ESTATE INVESTMENTS As of June 30, 2017 and December 31, 2016, the gross carrying value of the properties was as follows (in thousands):
| June 30, |  |  | December 31, |
| 2017 |  |  | 2016 |
Land | $ | 462,743 |  |  | $ | 469,522 |
Building and improvements |  | 2,861,180 |  |  |  | 2,683,087 |
Tenant improvements |  | 445,755 |  |  |  | 433,686 |
Operating properties |  | 3,769,678 |  |  |  | 3,586,295 |
Assets held for sale - real estate investments (a) |  | - |  |  |  | 73,591 |
Total | $ | 3,769,678 |  |  | $ | 3,659,886 |
(a) | Real estate investments related to assets held for sale above represents gross real estate assets and does not include accumulated depreciation, land held for development or other assets on the balance sheet of the property held for sale. See “Held for Sale” below in this Note 3.
Dispositions The Company sold the following twelve office properties, one retail property and one mixed-use property during the six-month period ended June 30, 2017 (dollars in thousands):
Disposition Date |  | Property/Portfolio Name |  | Location |  | Type |  | Number of Properties |  | Rentable Square Feet |  |  | Sales Price |  |  | Net Proceeds on Sale |  |  | Gain/(Loss) on Sale (a) |  |
June 27, 2017 |  | Two, Four A, Four B and Five Eves Drive (Evesham Corporate Center) |  | Marlton, NJ |  | Office |  | 4 |  |  | 134,794 |  |  | $ | 9,700 |  |  | $ | 8,650 |  |  | $ | (325 | ) | (b)
June 12, 2017 |  | 7000 Midlantic Drive |  | Mount Laurel, NJ |  | Retail |  | 1 |  |  | 10,784 |  |  |  | 8,150 |  |  |  | 7,714 |  |  |  | 1,413 |  |
March 30, 2017 |  | 200, 210 & 220 Lake Drive East (Woodland Falls) |  | Cherry Hill, NJ |  | Office |  | 3 |  |  | 215,465 |  |  |  | 19,000 |  |  |  | 17,771 |  |  |  | (249 | ) | (c)
March 15, 2017 |  | Philadelphia Marine Center (Marine Piers) |  | Philadelphia, PA |  | Mixed-use |  | 1 |  |  | 181,900 |  |  |  | 21,400 |  |  |  | 11,182 |  |  |  | 6,498 |  | (d)
March 13, 2017 |  | 11700, 11710, 11720 & 11740 Beltsville Drive (Calverton) |  | Beltsville, MD |  | Office |  | 3 |  |  | 313,810 |  |  |  | 9,000 |  |  |  | 8,354 |  |  |  | - |  | (e)
February 2, 2017 |  | 1200 & 1220 Concord Avenue (Concord Airport Plaza) |  | Concord, CA |  | Office |  | 2 |  |  | 350,256 |  |  |  | 33,100 |  |  |  | 32,010 |  |  |  | 551 |  | (f)
Total Dispositions |  |  |  |  |  |  |  | 14 |  |  | 1,207,009 |  |  | $ | 100,350 |  |  | $ | 85,681 |  |  | $ | 7,888 |  |
(a) | Gain/(Loss) on Sale is net of closing and other transaction related costs.
(b) | During the first quarter of 2017, the Company recognized a $1.0 million impairment related to these properties. The loss on sale represents closing costs.
(c) | During the fourth quarter of 2016, the Company recognized a $7.3 million impairment related to these properties. The loss on sale represents closing costs.
(d) | On March 15, 2017, the Company sold its sublease interest in the Piers at Penn’s Landing (the “Marine Piers”), which includes leasehold improvements containing 181,900 net rentable square feet, and a marina, located in Philadelphia, Pennsylvania for an aggregate sales price of $21.4 million, which will be paid in two installments. On the closing date, the buyer paid $12.0 million in cash. On the second purchase price installment date, the buyer will pay $9.4 million. The second purchase price installment is due on (a) January 31, 2020, in the event that the tenant at the Marine Piers does not exercise its existing option to extend the term of the sublease or (b) January 15, 2024, in the event that the tenant does exercise its current extension option to extend the term of the sublease. In accordance with ASC 360-20, Real Estate Sales, the Company determined that it is appropriate to account for the sales transaction under the cost recovery method. The Company received cash proceeds of $11.2 million, after closing costs and prorations, and the net book value of the Marine Piers was $4.7 million, resulting in a gain on sale of $6.5 million. The remaining gain on sale of $9.4 million will be recognized on the second purchase price installment date.
(e) | During the fourth quarter of 2016, the Company recognized a $3.0 million impairment related to these properties. During the first quarter of 2017, there was a price reduction of $1.7 million under the agreement of sale and an additional impairment of $1.7 million was recognized.
(f) | This sale is designated as a like-kind exchange under Section 1031 of the Internal Revenue Code (“IRC”) and, as such, the proceeds, totaling $32.0 million after closing costs and prorations, were deposited with a Qualified Intermediary, as defined under the IRC. The proceeds received at closing were recorded as “Other assets” in the Company’s consolidated balance sheet. During the fourth quarter of 2016, the Company recognized an $11.5 million impairment related to these properties.
In addition to the amounts in the table above, the Company recorded $0.5 million gain during the first quarter of 2017 from the receipt of additional cash from the disposition of Cira Square during 2016. For further information relating to this sale, see Note 3, “Real Estate Investments,” in the notes to the audited financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2016. The Company sold the following land parcels during the six-month period ended June 30, 2017 (dollars in thousands):
Disposition Date |  | Property/Portfolio Name |  | Location |  | Number of Parcels |  |  | Acres |  |  | Sales Price |  |  | Net Proceeds on Sale |  |  | Gain on Sale |  |
April 28, 2017 |  | Garza Ranch - Multi-family |  | Austin, TX |  |  | 1 |  |  |  | 8.4 |  |  | $ | 11,800 |  |  | $ | 11,560 |  |  | $ | - |  | (a)
February 15, 2017 |  | Gateway Land - Site C |  | Richmond, VA |  |  | 1 |  |  |  | 4.8 |  |  |  | 1,100 |  |  |  | 1,043 |  |  |  | - |  | (b)
January 30, 2017 |  | Garza Ranch - Hotel |  | Austin, TX |  |  | 1 |  |  |  | 1.7 |  |  |  | 3,500 |  |  |  | 3,277 |  |  |  | - |  | (a)
Total Dispositions |  |  |  |  |  |  | 3 |  |  |  | 14.9 |  |  | $ | 16,400 |  |  | $ | 15,880 |  |  | $ | - |  |
(a) | The Company has a continuing involvement through a completion guaranty, which requires the Company as developer to complete certain infrastructure improvements on behalf of the buyers of the land parcels. The cash received at settlement was recorded as “Deferred income, gains and rent” on the Company’s consolidated balance sheet and the Company will recognize the sale once the infrastructure improvements are complete. See Item 2., “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual Obligations” for further discussion of the infrastructure improvements.
(b) | During the fourth quarter of 2016, the Company recognized a nominal impairment related to this land parcel.
Held for Sale As of June 30, 2017, the Company had land held for development, consisting of a 50-acre parcel of land located in the Company’s Other segment, classified as held for sale but which did not meet the criteria to be classified within discontinued operations. Accordingly, as of June 30, 2017, $5.6 million was reclassified from ‘Land held for development’ to ‘Assets held for sale, net’ on the consolidated balance sheets. There were no other reclassifications related to this parcel of land. As the fair value less anticipated costs to sell was less than the carrying value for the land parcel, the Company recorded an impairment of $0.3 million at June 30, 2017. See “Land Impairment” below in this Note 3. As of December 31, 2016, the Company classified three office properties in its Metropolitan Washington, D.C. segment, two office properties in its Other segment and a five-acre parcel of land in its Other segment as held for sale. As of December 31, 2016, $40.7 million and $1.0 million was reclassified from ‘Operating real estate investments, net’ and ‘Land held for development’, respectively, to ‘Assets held for sale, net’ on the consolidated balance sheets; an immaterial amount was reclassified from ‘Other liabilities’ to ‘Liabilities related to assets held for sale’. Land Impairment As of June 30, 2017, the Company determined that it would not recover the carrying value, less cost of sale, of one land parcel, consisting of 50 acres that was classified as held for sale as of June 30, 2017. Accordingly, the Company recorded an impairment charge of $0.3 million at June 30, 2017, reducing the aggregate carrying value of the land parcel from $5.9 million to its estimated fair value of $5.6 million. The fair value measurement is based on pricing in the purchase and sale agreement for the property. As the pricing in the purchase and sale agreement is unobservable, the Company determined that the input utilized to determine fair value for the property falls within Level 3 in accordance with the fair value hierarchy established by Accounting Standards Codification (ASC) Topic 820, “Fair Value Measurements and Disclosures”. Held for Use Impairment As of June 30, 2017, the Company evaluated the recoverability of the carrying value of its properties that triggered assessment. Based on the analysis, no impairment charges were identified. As of March 31, 2017, the Company evaluated the recoverability of the carrying value of its properties that triggered assessment under the undiscounted cash flow model. Based on the Company’s evaluation, it was determined that due to the reduction in the Company’s intended hold period of four properties located in the Other segment, the Company would not recover the carrying values of these properties. Accordingly, the Company recorded impairment charges on these properties of $1.0 million at March 31, 2017, reducing the aggregate carrying values of the properties from $10.2 million to their estimated fair value of $9.2 million. The Company measured these impairments based on a discounted cash flow analysis, using a hold period of 10 years and residual capitalization rates and discount rates of 9.00% and 9.25%, respectively. The results were comparable to indicative pricing in the market. The assumptions used to determine fair value under the income approach are Level 3 inputs in accordance with the fair value hierarchy established by Accounting Standards Codification (ASC) Topic 820, “Fair Value Measurements and Disclosures.” During the three and six-month periods ended June 30, 2016, the Company recognized provisions for impairment of $5.7 million $13.1 million, respectively. For further information relating to these impairments, see Note 3, “Real Estate Investments,” in the notes to the audited financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2016. The sales of properties, land and the land parcel held for sale do not represent a strategic shift that has a major effect on the Company's operations and financial results. Accordingly, the operating results of these properties remain classified within continuing operations for all periods presented.

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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 FASB -Name Accounting Standards Codification -Topic 970 -URI http://asc.fasb.org/topic&trid=2156125 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 972 -URI http://asc.fasb.org/topic&trid=2134617 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 978 -URI http://asc.fasb.org/topic&trid=2134977 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 974 -URI http://asc.fasb.org/topic&trid=2156429 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 976 -URI http://asc.fasb.org/topic&trid=2134846 + Details
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