Real Estate Properties

As of March 31, 2018, we wholly owned 107 properties (166 buildings), with an aggregate undepreciated carrying value of $2,953,770, and had a noncontrolling ownership interest in two unconsolidated joint ventures that owned two properties (three buildings). We generally lease space at our properties on a gross lease or modified gross lease basis pursuant to fixed term contracts expiring between 2018 and 2034. 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, 2018, we entered into 33 leases for 280,419 rentable square feet, for a weighted (by rentable square feet) average lease term of 5.6 years and we made commitments for $7,998 of leasing related costs. As of March 31, 2018, we have estimated unspent leasing related obligations of $32,762.

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

In March 2018, we sold an office property (one building) located in Minneapolis, MN with 193,594 rentable square feet for $20,000, excluding closing costs. During the three months ended March 31, 2018, we recorded a $640 loss on impairment of real estate to reduce the carrying value of this property to its estimated fair value less costs to sell.

As of March 31, 2018, we had two properties (two buildings) with an aggregate carrying value of $18,080 classified as held for sale in our condensed consolidated balance sheets and included in continuing operations in our condensed consolidated statements of comprehensive income. In February 2018, we entered an agreement to sell one of these office properties (one building) located in Sacramento, CA with 110,500 rentable square feet for $10,755, excluding closing costs. This sale is expected to occur in the second quarter of 2018. During the three months ended March 31, 2018, we recorded a $3,023 loss on impairment of real estate to reduce the carrying value of this property to its estimated fair value less costs to sell. In February 2018, we entered an agreement to sell the second of these office properties (one building) located in Safford, AZ with 36,139 rentable square feet for $8,250, excluding closing costs. During the three months ended March 31, 2018, we recorded a $2,453 loss on impairment of real estate to reduce the carrying value of this property to its estimated fair value less costs to sell. In April 2018, the agreement to sell this property was terminated.

In April 2018, we entered an agreement to sell an office property (one building) located in New York, NY with 187,060 rentable square feet and a net book value of $96,633 at March 31, 2018 for $118,500, excluding closing costs. This property did not meet the held for sale criteria as of March 31, 2018. This sale is expected to occur in the second quarter of 2018.

As part of our long term plans to reduce our leverage, we expect to sell additional properties. We are marketing or plan to market for sale 23 properties (55 buildings) with an aggregate carrying value of $467,677 as of March 31, 2018. These properties did not meet the held for sale criteria as of March 31, 2018.

We cannot be sure we will sell our properties under agreement or any of our properties that we are marketing or plan to market for sale or sell them for prices in excess of our carrying values or that we will not recognize impairment losses with respect to these properties. In addition, our pending sales are subject to conditions; accordingly, we cannot be sure that we will complete these sales or that these sales will not be delayed or their terms will not change.

Pro Forma Financial Information

On October 2, 2017, we acquired First Potomac Realty Trust, or FPO, pursuant to a merger transaction, as a result of which we acquired 35 office properties (72 buildings) with 6,028,072 rentable square feet and FPO's 50% and 51% interests in two joint ventures that own two properties (three buildings) with 443,867 rentable square feet, or collectively, the FPO Transaction. The aggregate value we paid at the closing of the FPO Transaction was $1,370,888. We financed the FPO Transaction with the assumption of certain FPO mortgage debt, borrowings under our revolving credit facility and cash on hand, including net proceeds from our public offerings of common shares and senior unsecured notes.

The following table presents our pro forma results of operations for the three months ended March 31, 2017 as if the FPO Transaction and related financing activities had occurred on January 1, 2017. The historical FPO results of operations included in this pro forma financial information have been adjusted to eliminate the results of operations of FPO properties and joint venture interests that were sold from January 1, 2017 to October 2, 2017, the closing date of the FPO Transaction. The effect of these adjustments was a decrease in pro forma rental income of $804 and a decrease in net income of $46,905 for the three months ended March 31, 2017.

This pro forma financial information is not necessarily indicative of what our actual financial position or results of operations would have been for the periods presented or for any future period. Differences could result from numerous factors, including future changes in our portfolio of investments, capital structure, property level operating expenses and revenues, including rents expected to be received on our existing leases or leases we may enter during and after 2018, changes in interest rates and other reasons. Actual future results are likely to be different from amounts presented in this pro forma financial information and such differences could be significant.



	Three Months Ended March 31,
	2017
Rental income	$	110,305
Net loss	(4,687		)
Net loss per share	$	0.05

Unconsolidated Joint Ventures

We own noncontrolling interests in two joint ventures that own two properties (three buildings). We account for these investments under the equity method of accounting. As of March 31, 2018, our investment in unconsolidated joint ventures consisted of the following:



Joint Venture	GOV Ownership	GOV Carrying Value of Investment at March 31, 2018		Property Type	Number of Buildings	Location	Square Feet
Prosperity Metro Plaza	51%	$	27,086	Office	2	Fairfax, VA	328,456
1750 H Street, NW	50%	21,672		Office	1	Washington, DC	115,411
Total		$	48,758		3		443,867

The following table provides a summary of the mortgage debt of our unconsolidated joint ventures:



Joint Venture	Interest Rate ⁽¹⁾	Maturity Date	Principal Balance at March 31, 2018 ⁽²⁾
Prosperity Metro Plaza	4.09%	12/1/2029	$	50,000
1750 H Street, NW	3.69%	8/1/2024	32,000
Weighted Average/Total	3.93%		$	82,000


(1)	Includes the effect of mark to market purchase accounting.


(2)	Reflects the entire balance of the debt secured by the properties and is not adjusted to reflect the interests in the joint venture we do not own. None of the debt is recourse to us.

At March 31, 2018, the aggregate $8,811 unamortized basis difference of our unconsolidated joint ventures is primarily attributable to the difference between the amount we paid to purchase our interest in these joint ventures, including transaction costs, and the historical carrying value of the net assets of these joint ventures. This difference is being amortized over the remaining useful life of the properties owned by these joint ventures and the resulting amortization expense is included in equity in earnings of investees in our condensed consolidated statements of comprehensive income.