Disposition of Properties

6 Months Ended

Jun. 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. During the three months ended June 30, 2023, the Company entered into an agreement to sell a property in Charlotte, North Carolina for a gross sales price of approximately $9.2 million and an expected loss of $0.8 million. The Company reclassified $8.9 million of its office property as an asset held for sale as of June 30, 2023, which is comprised of $8.4 million of real estate assets, net of accumulated depreciation, $0.8 million of straight-line rents receivable, and $0.5 million of deferred leasing commissions, net of accumulated amortization. The Company recorded the property at the fair value less cost to sell, which was less than the carrying value and resulted in an impairment of $0.8 million in the three months ended June 30, 2023. The reclassification is a non-cash investing activity on the statement of cash flows. The Company estimated the fair value of the property, less estimated costs to sell, using the offers to purchase the property made by third parties (Level 3 inputs, as there is no active market).

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.