Real Estate | 3 Months Ended |
Mar. 31, 2015 |
Real Estate [Abstract] | |
Real Estate | NOTE 3: REAL ESTATE |
Redevelopment |
In the office segment, we have a redevelopment project to renovate Silverline Center. Our investment in the renovation at Silverline Center is included in properties under development on our consolidated balance sheet. As of March 31, 2015 and December 31, 2014, we had invested $35.1 million and $27.9 million, respectively, in the renovation. We substantially completed major construction activities on this project in April 2015. |
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Variable Interest Entities |
In June 2011, we executed a joint venture operating agreement with a real estate development company to develop The Maxwell, a mid-rise multifamily property at 650 North Glebe Road in Arlington, Virginia. Major construction activities at The Maxwell ended during December 2014, and the building became available for occupancy by the end of the 2015 Quarter. Washington REIT is the 90% owner of the joint venture. The real estate development company owns 10% of the joint venture and was responsible for the development and construction of the property. |
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In November 2011, we executed a joint venture operating agreement with a real estate development company to develop a high-rise multifamily property at 1225 First Street in Alexandria, Virginia. We estimate the total cost of the project to be $95.3 million |
. Washington REIT is the 95% owner of the joint venture and will have management and leasing responsibilities if the project is completed and stabilized. The real estate development company owns 5% of the joint venture and will be responsible for the development and construction of the property, if the property is developed. In the first quarter of 2013, we decided to delay commencement of construction due to market conditions and concerns of oversupply. We continue to reassess this project on a periodic basis going forward. |
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We have determined that The Maxwell and 1225 First Street joint ventures are variable interest entities ("VIE's") primarily based on the fact that the equity investment at risk is not sufficient to permit either entity to finance its activities without additional financial support. As of March 31, 2015, $29.5 million was outstanding on The Maxwell's construction loan, and we expect that 70% of the total development costs for 1225 First Street would be financed through debt. We have also determined that Washington REIT is the primary beneficiary of each VIE due to the fact that Washington REIT is providing 90% to 95% of the equity contributions and will oversee management of each property no later than stabilization. |
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We include the joint venture land acquisition for 1225 First Street on our consolidated balance sheets in properties under development or held for future development. As of March 31, 2015 and December 31, 2014, the land and capitalized development costs for 1225 First Street were as follows (in thousands): |
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| March 31, 2015 | | December 31, 2014 | | | | | |
Properties under development or held for future development | $ | 20,807 | | | $ | 20,807 | | | | | | |
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Cash and cash equivalents | 390 | | | 395 | | | | | | |
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As of March 31, 2015 and December 31, 2014, the liabilities for 1225 First Street were as follows (in thousands): |
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| March 31, 2015 | | December 31, 2014 | | | | | |
Accounts payable and other liabilities | $ | 81 | | | $ | 38 | | | | | | |
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As of March 31, 2015 and December 31, 2014, The Maxwell's assets were as follows (in thousands): |
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| March 31, 2015 | | December 31, 2014 | | | | | |
Land | $ | 12,851 | | | $ | 12,851 | | | | | | |
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Income producing property | 37,647 | | | 18,432 | | | | | | |
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Accumulated depreciation and amortization | (543 | ) | | — | | | | | | |
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Properties under development or held for future development | — | | | 17,947 | | | | | | |
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Other assets | 393 | | | $ | — | | | | | | |
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| $ | 50,348 | | | $ | 49,230 | | | | | | |
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As of March 31, 2015 and December 31, 2014, The Maxwell's liabilities were as follows (in thousands): |
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| March 31, 2015 | | December 31, 2014 | | | | | |
Mortgage notes payable | $ | 29,535 | | | $ | 27,690 | | | | | | |
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Accounts payable and other liabilities | 2,006 | | | 2,196 | | | | | | |
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Tenant security deposits | 35 | | | 17 | | | | | | |
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| $ | 31,576 | | | $ | 29,903 | | | | | | |
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Sold Properties and Discontinued Operations |
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We dispose of assets that no longer meet our long-term strategy or return objectives and where market conditions for sale are favorable. The proceeds from the sales may be reinvested into other properties, used to fund development operations or to support other corporate needs, or distributed to our shareholders. |
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In September 2013, we entered into four separate purchase and sale agreements to effectuate the sale of our entire medical office segment (including land held for development at 4661 Kenmore Avenue) and two office buildings (Woodholme Center and 6565 Arlington Boulevard) for an aggregate purchase price of $500.8 million. The sale was structured as four transactions. Transactions I and II closed in November 2013 and Transactions III and IV closed in January 2014. |
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The results of the assets in our former medical office segment sold in January 2014 are summarized as follows (amounts in thousands, except per share data): |
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| Three Months Ended March 31, | | | | | |
| 2015 | | 2014 | | | | | |
Real estate rental revenue | $ | — | | | $ | 892 | | | | | | |
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Net income | — | | | 546 | | | | | | |
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Basic net income per share | — | | | 0.01 | | | | | | |
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Diluted net income per share | — | | | 0.01 | | | | | | |
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We sold the following properties in 2015 and 2014: |
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Property Name | | Segment | | Rentable Square Feet | | Contract | | Gain on Sale |
Purchase Price | (in thousands) |
(in thousands) | |
Country Club Towers (227 units) (1) | | Multifamily | | N/A | | $ | 37,800 | | | $ | 30,277 | |
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| | Total 2015 | | | | $ | 37,800 | | | $ | 30,277 | |
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Medical Office Portfolio Transactions III & IV (2) | | Medical Office | | 427,000 | | $ | 193,561 | | | $ | 105,985 | |
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5740 Columbia Road (1) | | Retail | | 3,000 | | 1,600 | | | 570 | |
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| | Total 2014 | | 430,000 | | $ | 195,161 | | | $ | 106,555 | |
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(1) | These properties are classified as continuing operations. | | | | | | | | | | | |
(2) Woodburn Medical Park I and II and Prosperity Medical Center I, II and III, which are classified as discontinued operations. |
Income from operations of properties classified as discontinued operations for the three months ended March 31, 2015 and 2014 was as follows (in thousands): |
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| Three Months Ended March 31, | | | | | |
| 2015 | | 2014 | | | | | |
Real estate rental revenue | $ | — | | | $ | 892 | | | | | | |
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Real estate expenses | — | | | (346 | ) | | | | | |
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Income from operations classified as discontinued operations | $ | — | | | $ | 546 | | | | | | |
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