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Disposition of Properties

9 Months Ended

Sep. 30, 2023

Dispositions of properties

Dispositions of properties

9. Disposition of Properties and Asset Held for Sale

In 2021, the Company determined that further debt reduction would provide greater financial flexibility and potentially increase shareholder value. Accordingly, the Company adopted a strategy to dispose of certain properties where it believes valuation potential has been reached.

In 2022, the Company sold two office properties located in Broomfield, Colorado on August 31, 2022 for an aggregate sales price of $102.5 million, at a gain of approximately $24.1 million. The Company sold an office property located in Evanston,

Illinois on December 28, 2022 for a sales price of $27.8 million, at a gain of approximately $3.9 million. The Company used the proceeds of the dispositions principally to repay outstanding indebtedness.

In 2023, the Company sold one office property located in Elk Grove, Illinois on March 10, 2023, for a sales price of $29.1 million, at a gain of approximately $8.4 million. The Company used the proceeds of the disposition principally to repay a portion of outstanding indebtedness. The Company sold one office property located in Charlotte, North Carolina on August 9, 2023 for a sales price of $9.2 million, at a loss of $0.8 million. During the three months ended September 30, 2023, the Company recorded a gain on sale of $53,000 as a result of conveying approximately 7,826 square feet of land at our Addison, Texas property to the Town of Addison as part of a road revitalization project.

During the three months ended September 30, 2023, the Company entered into an agreement to sell a property in Miami, Florida for a gross sales price of approximately $68.0 million at an expected loss of $19.2 million and an agreement to sell a property in Atlanta, Georgia for a gross sales price of approximately $40.0 million at an expected loss of $20.5 million.

The Company reclassified $96.4 million of its office properties in Miami, Florida and Atlanta, Georgia as assets held for sale as of September 30, 2023, which is comprised of $122.2 million of real estate assets, net of accumulated depreciation, $5.5 million of straight-line rents receivable, and $8.4 million of deferred leasing commissions, net of accumulated amortization. The Company recorded these properties at the fair value less cost to sell, which was less than the carrying value and resulted in an impairment of $39.7 million in the three months ended September 30, 2023. The reclassification is a non-cash investing activity on the statement of cash flows. The Company estimated the fair value of these properties, less estimated costs to sell, using the offers to purchase the properties made by third parties (Level 3 inputs, as there is no active market).

During the three months ended September 30, 2023, the Company entered into an agreement to sell a property in Plano, Texas for a gross sales price of approximately $48.0 million at an expected gain of $10.6 million. The Company reclassified $36.2 million of this office property as an asset held for sale as of September 30, 2023, which is comprised of $32.6 million of real estate assets, net of accumulated depreciation, $1.4 million of straight-line rents receivable, $1.7 million of deferred leasing commissions, net of accumulated amortization and $0.5 million of acquired real estate leases, net of accumulated amortization. The reclassification is a non-cash investing activity on the statement of cash flows.

The Company reports the results of operations of its properties in its consolidated statements of operations, which includes rental income, rental operating expenses, real estate taxes and insurance and depreciation and amortization.

The operating results for the properties that the Company disposed of or classified as assets held for sale are summarized below:



		Three months ended September 30,						Nine months ended September 30,
(in thousands)		2023			2022			2023			2022
Rental revenue		$	5,354		$	8,592		$	16,062		$	27,646
Rental operating expenses			(1,862)			(2,809)			(5,277)			(8,669)
Real estate taxes and insurance			(720)			(2,416)			(2,264)			(7,287)
Depreciation and amortization			(1,034)			(3,157)			(5,372)			(10,246)
Income from dispositions and assets held for sale		$	1,738		$	210		$	3,149		$	1,444