Real Estate Properties

As of March 31, 2017, we owned 74 properties (96 buildings), with an undepreciated carrying value of $1,909,506, excluding one property (one building) classified as discontinued operations with an undepreciated carrying value of $12,260. We generally lease space at our properties on a gross lease or modified gross lease basis pursuant to fixed term contracts expiring between 2017 and 2032. Our leases generally require us to pay all or some property operating expenses and to provide all or most property management services. During the three months ended March 31, 2017, we entered into 12 leases for 360,103 rentable square feet, for a weighted (by rentable square feet) average lease term of 10.6 years and we made commitments for $2,241 of leasing related costs. As of March 31, 2017, we have estimated unspent leasing related obligations of $24,800, and we have committed to redevelop and expand an existing property prior to commencement of the lease with an estimated remaining cost to complete as of March 31, 2017 of $10,138. During the three months ended March 31, 2017, we capitalized $61 of interest expense related to the redevelopment and expansion of that existing property.

Acquisition Activities

During the three months ended March 31, 2017, we acquired an office property (one building) located in Manassas, VA with 69,374 rentable square feet. This property was 100% leased to Prince William County on the date of acquisition. This transaction was accounted for as an acquisition of assets. The purchase price was $12,641, including capitalized acquisition costs of $21. Our allocation of the purchase price of this acquisition based on the estimated fair values of the acquired assets and assumed liabilities is presented in the table below.

Number

Buildings

Other

Acquisition

Properties/

Square

Purchase

and

Assumed

Date

Location

Type

Buildings

Feet

Price

Land

Improvements

Assets

January 2017

Manassas, VA

Office

1/1

69,374

12,641

1,562

8,237

2,842

In August 2016, we entered an agreement to acquire transferable development rights that would allow us to expand a property we own in Washington, D.C. for a purchase price of $2,030, excluding acquisition costs. This acquisition is subject to conditions; accordingly, we cannot be sure that we will complete this acquisition, that this acquisition will not be delayed or that its terms will not change.

We regularly evaluate whether events or changes in circumstances have occurred that could indicate an impairment in the value of our long lived assets. If there is an indication that the carrying value of an asset is not recoverable, we estimate the projected undiscounted cash flows to determine if an impairment loss should be recognized. We determine the amount of any impairment loss by comparing the historical carrying value to estimated fair value. We estimate fair value through an evaluation of recent financial performance and projected discounted cash flows using standard industry valuation techniques. In addition to consideration of impairment upon the events or changes in circumstances described above, we regularly evaluate the remaining lives of our long lived assets. If we change our estimate of the remaining lives, we allocate the carrying value of the affected assets over their revised remaining lives.

Disposition Activities – Discontinued Operations

In March 2016, we entered an agreement to sell an office property (one building) in Falls Church, VA with 164,746 rentable square feet and a net book value of $12,282 at March 31, 2017. In March 2017, we agreed to extend the closing date for this sale to June 1, 2017 and increased the sales price by $150, which we received as a non-refundable deposit. The contract sales price is now $13,298, excluding closing costs. This sale is subject to conditions; accordingly, we cannot be sure that the sale of this property will be completed, that the sale will not be delayed or that its terms will not change. Results of operations for this property, which qualified as held for sale prior to our adoption in 2014 of ASU No. 2014-8, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, are classified as discontinued operations in our condensed consolidated financial statements.

Summarized balance sheet and income statement information for this property is as follows:

Balance Sheets



	March 31,		December 31,
	2017		2016
Real estate properties, net	$	12,260	$	12,260
Other assets	278		281
Assets of discontinued operations	$	12,538	$	12,541

Other liabilities	$	52	$	45
Liabilities of discontinued operations	$	52	$	45

Statements of Operations



	Three Months Ended March 31,
	2017			2016
Rental income	$	7		$	28
Real estate taxes	(24		)	(23		)
Utility expenses	(46		)	(50		)
Other operating expenses	(53		)	(76		)
General and administrative	(28		)	(28		)
Loss from discontinued operations	$	(144	)	$	(149	)