Dispositions of Properties

6 Months Ended

Jun. 30, 2018

Dispositions of property

Dispositions of properties

8.  Dispositions of properties

During the three months ended June 30, 2017, the Company reached a decision to classify an office property located in Baltimore, Maryland as an asset held for sale.  In evaluating the Baltimore, Maryland property, management considered various subjective factors, including the time, cost and likelihood of successfully leasing the property, the effect of the property’s results on its unencumbered asset value, which is part of the leverage ratio used to compare to a maximum leverage covenant in the JPM Term Loan, BMO Term Loan and the BAML Credit Facility, future capital costs to upgrade and reposition the multi-tenant property and to lease up the building, recent leasing and economic activity in the local area, and offers to purchase the property.  The Company concluded that selling the property was the more prudent decision and outweighed the potential future benefit of continuing to hold the property.   The property was expected to sell within one year at a loss, which was recorded as a provision for loss on a property held for sale of $20.5 million net of applicable income taxes and was classified as an asset held for sale of $31.9 million at June 30, 2017.  During the three months ended September 30, 2017, the Company increased the provision for loss by $0.3 million to $20.7 million net of applicable income taxes, and the property was classified as an asset held for sale in the amount of $31.6 million at September 30, 2017.  The Company sold the property on October 20, 2017 for net proceeds of $31.6 million resulting in a total loss of $20.8 million, net of applicable income taxes.

During the three months ended December 31, 2016, the Company reached an agreement to sell an office property located in Milpitas, California.  The property was classified as an asset held for sale at December 31, 2016 and was sold on January 6, 2017 at approximately a $2.3 million gain.

The disposals did not represent a strategic shift that has a major effect on the Company's operations and financial results.  Accordingly, the properties remain classified within continuing operations for all periods presented.