Real Estate Properties

9 Months Ended

Sep. 30, 2020

As of September 30, 2020, our wholly owned properties were comprised of 184 properties with approximately 24,909,000 rentable square feet, with an aggregate undepreciated carrying value of $3,544,937, including $18,018 classified as held for sale, and we had noncontrolling ownership interests in three properties totaling approximately 444,000 rentable square feet through two unconsolidated joint ventures in which we own 51% and 50% interests. We generally lease space at our properties on a gross lease, modified gross lease or net lease basis pursuant to fixed term contracts expiring between 2020 and 2040. Some of 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 September 30, 2020, we entered into 17 leases for approximately 595,000 rentable square feet for a weighted (by rentable square feet) average lease term of 10.6 years and we made commitments for approximately $6,238 of leasing related costs. During the nine months ended September 30, 2020, we entered into 60 leases for approximately 1,826,000 rentable square feet for a weighted (by rentable square feet) average lease term of 7.1 years and we made commitments for approximately $35,697 of leasing related costs.

As of September 30, 2020, we have estimated unspent leasing related obligations of $61,307.

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. The future net undiscounted cash

flows are subjective and are based in part on assumptions regarding hold periods, market rents and terminal capitalization rates. 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 the 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.

Acquisition Activities

In February 2020, we acquired a property adjacent to a property we own in Boston, MA for $11,864, including $364 of acquisition related costs. This acquisition was accounted for as an asset acquisition. The purchase price of this acquisition was allocated to land and building in the amounts of $2,618 and $9,246, respectively.

In August 2020, we terminated a previously disclosed agreement to acquire an office property in Denver, CO for a purchase price of $38,100.

In October 2020, we entered into an agreement to acquire three properties containing approximately 194,000 square feet adjacent to properties we own in an office park in Brookhaven, GA for $15,250, excluding acquisition related costs.

Disposition Activities

During the nine months ended September 30, 2020, we sold six properties with a combined 734,784 rentable square feet for an aggregate sales price of $85,363, excluding closing costs and including the repayment of one mortgage note with an outstanding principal balance of $13,095, an annual interest rate of 5.9% and a maturity date in August 2021.

The sales of these properties, as presented in the table below, do not represent significant dispositions individually or in the aggregate nor do they represent a strategic shift in our business. As a result, the results of operations of these properties are included in continuing operations through the date of sale in our condensed consolidated statements of comprehensive income (loss).


Date of Sale	Number of Properties	Location	Rentable Square Feet	Gross Sales Price (1)		Gain (Loss) on Sale of Real Estate
January 2020	2	Stafford, VA	64,656	$	14,063	$	4,704
January 2020	1	Windsor, CT	97,256	7,000		314
February 2020	1	Lincolnshire, IL	222,717	12,000		1,176
March 2020	1	Trenton, NJ	267,025	30,100		(192)
March 2020	1	Fairfax, VA	83,130	22,200		4,820










	6		734,784	$	85,363	$	10,822

(1)Gross sales price is equal to the gross contract price, includes purchase price adjustments, if any, and excludes closing costs.

As of September 30, 2020, we had four properties with an aggregate undepreciated carrying value of $18,018 under agreement to sell for a sales price of $25,100, excluding closing costs. These properties were classified as held for sale in our condensed consolidated balance sheet as of September 30, 2020. We recorded a $2,954 loss on impairment of real estate during the three months ended September 30, 2020 to adjust the carrying value of these properties to their estimated fair value less costs to sell. The operating results of these properties are included in continuing operations in our condensed consolidated statements of comprehensive income (loss). The sale of these properties was completed in October 2020.

Unconsolidated Joint Ventures

We own interests in two joint ventures that own three properties. We account for these investments under the equity method of accounting. As of September 30, 2020 and December 31, 2019, our investments in unconsolidated joint ventures consisted of the following:


		OPI Carrying Value of Investments at
Joint Venture	OPI Ownership	September 30, 2020		December 31, 2019		Number of Properties	Location	Rentable Square Feet
Prosperity Metro Plaza	51%	$	22,080	$	22,483	2	Fairfax, VA	328,655
1750 H Street, NW	50%	16,453		17,273		1	Washington, D.C.	115,411
Total		$	38,533	$	39,756	3		444,066

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


Joint Venture	Interest Rate (1)	Maturity Date	Principal Balance at September 30, 2020 and December 31, 2019 (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 ventures we do not own. None of the debt is recourse to us.

At September 30, 2020, the aggregate unamortized basis difference of our two unconsolidated joint ventures of $7,584 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 related properties and the resulting amortization expense is included in equity in net losses of investees in our condensed consolidated statements of comprehensive income (loss).