REAL ESTATE HELD FOR INVESTMENT

12 Months Ended

Dec. 31, 2024

As of December 31, 2024, the Company consolidated nine office complexes, encompassing, in the aggregate, 3.2 million rentable square feet and these properties were 67% occupied. In addition, the Company owned one residential home portfolio consisting of 2,093 residential homes, and one apartment property containing 317 units, which were 93% and 92% occupied, respectively. The Company also owned one hotel property with 196 rooms, three investments in undeveloped land with 247 developable acres, and one office/retail development property. The following table summarizes the Company’s real estate held for investment as of December 31, 2024 and 2023, respectively (in thousands):


	December 31, 2024		December 31, 2023
Land	$	197,644	$	228,087
Buildings and improvements	834,848		881,924
Tenant origination and absorption costs	11,394		15,423
Total real estate, cost	1,043,886		1,125,434
Accumulated depreciation and amortization	(161,895)		(154,613)
Total real estate, net	$	881,991	$	970,821

Operating Leases

Certain of the Company’s real estate properties are leased to tenants under operating leases for which the terms and expirations vary. As of December 31, 2024, the leases, excluding options to extend apartment leases and residential home leases, which have terms that are generally one year or less, had remaining terms of up to 15.7 years with a weighted-average remaining term of 3.5 years. Some of the leases have provisions to extend the lease agreements, options for early termination after paying a specified penalty and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Generally, upon the execution of a lease, the Company requires a security deposit from tenants in the form of a cash deposit and/or a letter of credit. The amount required as a security deposit varies depending upon the terms of the respective leases and the creditworthiness of the tenant, but generally are not significant amounts. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in cash and assumed in real estate acquisitions related to tenant leases are included in other liabilities in the accompanying consolidated balance sheets and totaled $5.9 million as of both December 31, 2024 and 2023.

During the years ended December 31, 2024, 2023 and 2022, the Company recognized deferred rent from tenants of $0.9 million, $0.2 million and $2.6 million, respectively, net of lease incentive amortization. As of December 31, 2024 and 2023, the cumulative deferred rent receivable balance, including unamortized lease incentive receivables, was $19.7 million and $19.1 million, respectively, and is included in rents and other receivables, net in the accompanying consolidated balance sheets. The cumulative deferred rent receivable balance included $2.2 million and $2.5 million of unamortized lease incentives as of December 31, 2024 and 2023, respectively.

As of December 31, 2024, the future minimum rental income from the Company’s office complexes, under non-cancelable operating leases was as follows (in thousands):


2025	$	57,846
2026	47,370
2027	39,135
2028	31,510
2029	25,422
Thereafter	46,006
	$	247,289

Hotel

The following table provides detailed information regarding the Company’s hotel revenues for its hotel properties for the years ended December 31, 2024, 2023 and 2022 (in thousands):


	Year Ended December 31,
	2024		2023		2022
Hotel revenues:
Room	$	7,886	$	7,981	$	23,834
Other	1,175		1,172		6,915
Hotel revenues	$	9,061	$	9,153	$	30,749

Contract Liabilities

The following table summarizes the Company’s contract liabilities, which are comprised of: hotel advanced deposits, deferred proceeds received from the buyers of the Park Highlands undeveloped land sales, and value of Park Highlands undeveloped land that was contributed to a master association, which are included in other liabilities in the accompanying consolidated balance sheets, as of December 31, 2024 and 2023 (in thousands):


	December 31, 2024		December 31, 2023
Contract liabilities	$	25,700	$	23,783
Revenue and other income recognized in the period from:
Amounts included in contract liabilities at the beginning of the period	$	9,758	$	16,192

Geographic Concentration Risk

As of December 31, 2024, the Company’s real estate investments in California and Georgia represented 11.4% and 11.3%, respectively, of the Company’s total assets. As a result, the geographic concentration of the Company’s portfolio makes it particularly susceptible to adverse economic developments in the California and Georgia real estate markets. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, changing demographics and other factors, or any decrease in demand for office space resulting from the local business climate, could adversely affect the Company’s operating results and its ability to make distributions to stockholders.

Impairment of Real Estate

During the year ended December 31, 2024, the Company recorded impairment charges on real estate in the aggregate of $76.1 million, to write down the carrying value of five strategic opportunistic properties and one hotel to their estimated fair values due to declines in market conditions and projected cash flows, changes in sales comparisons, and also based on a quoted price.

During the year ended December 31, 2023, the Company recorded impairment charges on real estate in the aggregate of $64.8 million, to write down the carrying value of three strategic opportunistic properties to their estimated fair values due to increases in the discount and terminal cap rate assumptions, decreases in projected cash flows, and changes in sales comparisons.

During the year ended December 31, 2022, the Company recorded impairment charges on real estate in the aggregate of $18.5 million, to write down the carrying value of two strategic opportunistic properties to their estimated fair value due to a change in the projected hold period and related decrease in projected cash flows. Additionally, the Company determined that based on the amended sale price of one hotel, the book value was not recoverable and the Company wrote down the carrying value of the hotel by $2.5 million.

Tenant Origination and Absorption Costs

As of December 31, 2024 and 2023, the Company’s tenant origination and absorption costs (included in real estate held for investment, net) were as follows (in thousands):


	Tenant Origination and Absorption Costs
	December 31, 2024		December 31, 2023
Cost	$	11,394	$	15,423
Accumulated Amortization	(7,587)		(8,392)
Net Amount	$	3,807	$	7,031

During the years ended December 31, 2024, 2023 and 2022, the Company recognized tenant origination and absorption cost amortization expense of $2.6 million, $5.0 million and $9.9 million, respectively.

The remaining unamortized balance for these outstanding intangible assets and liabilities as of December 31, 2024 will be amortized for the years ending December 31 as follows (in thousands):


	Tenant Origination and Absorption Costs
2025	$	(1,638)
2026	(751)
2027	(305)
2028	(216)
2029	(205)
Thereafter	(692)
	$	(3,807)
Weighted-Average Remaining Amortization Period	3.0 years