Real Estate Properties

3 Months Ended

Mar. 31, 2024

As of March 31, 2024, our wholly owned properties were comprised of 151 properties containing approximately 20,293,000 rentable square feet, with an undepreciated carrying value of $4,091,230, including $11,979 classified as held for sale. We also had noncontrolling ownership interests of 51% and 50% in two unconsolidated joint ventures that owned three properties containing approximately 471,000 rentable square feet. 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 2024 and 2053. 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 March 31, 2024, we entered into 13 leases for approximately 488,000 rentable square feet for a weighted (by rentable square feet) average lease term of 9.3 years, and we made commitments of $10,977 for leasing related costs. As of March 31, 2024, we had estimated unspent leasing related obligations of $103,390.

We regularly evaluate whether events or changes in circumstances have occurred that could indicate an impairment in the value of long lived assets. Impairment indicators may include declining tenant occupancy, lack of progress re-leasing vacant space, tenant bankruptcies, low long term prospects for improvement in property performance, weak or declining tenant profitability, cash flow or liquidity, our decision to dispose of an asset before the end of its estimated useful life and legislative, market or industry changes that could permanently reduce the value of a property. 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 consideration of impairment upon the events or changes in circumstances described above, we regularly evaluate the remaining useful lives of our long lived assets. If we change our estimate of the remaining useful lives, we allocate the carrying value of the affected assets over their revised remaining useful lives.

Disposition Activities

During the three months ended March 31, 2024, we sold one property containing approximately 248,000 rentable square feet for a sales price of $38,500, excluding closing costs, and recognized a $2,384 loss on sale of real estate. The sale of this property does not represent a strategic shift in our business. As a result, the results of operations of this property are included in continuing operations through the date of sale in our condensed consolidated statements of comprehensive income (loss).

As of March 31, 2024, we had one property containing approximately 156,000 rentable square feet classified as held for sale in our condensed consolidated balance sheet. In April 2024, we entered into an agreement to sell another property containing approximately 126,000 rentable square feet for a sales price of $7,800, excluding closing costs. This pending sale is subject to conditions, and accordingly, we cannot be sure that we will complete this sale or that this sale will not be delayed or the terms will not change.

Unconsolidated Joint Ventures

As of March 31, 2024, we owned interests in two joint ventures that owned three properties. We accounted for these investments under the equity method of accounting. As of March 31, 2024 and December 31, 2023, our investments in unconsolidated joint ventures consisted of the following:


		OPI Carrying Value of Investments at
Joint Venture	OPI Ownership	March 31, 2024		December 31, 2023		Number of Properties	Location	Rentable Square Feet
Prosperity Metro Plaza	51%	$	17,898	$	18,128	2	Fairfax, VA	346,000
1750 H Street, NW	50%	—		—		1	Washington, D.C.	125,000
Total		$	17,898	$	18,128	3		471,000

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 March 31, 2024 and December 31, 2023 (2)
Prosperity Metro Plaza	4.09%	12/1/2029	$	50,000
1750 H Street, NW	3.69%	8/1/2027	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.

In March 2024, our 1750 H Street, NW joint venture did not have sufficient cash flow to pay its monthly debt service, resulting in an event of default. We expect the non-recourse mortgage lender to this joint venture to take full possession of the property in the second quarter. We wrote off our full investment in this joint venture as of December 31, 2023 and did not make capital contributions to this joint venture during the three months ended March 31, 2024. Accordingly, we did not record our proportionate share of operating results of the joint venture for the three months ended March 31, 2024.

As of March 31, 2024, the unamortized basis difference of our Prosperity Metro Plaza joint venture of $694 was primarily attributable to the difference between the amount we paid to purchase our interest in this joint venture, including transaction costs, and the historical carrying value of the net assets of this joint venture. This difference is being amortized over the remaining useful life of the related property and the resulting amortization expense is included in equity in net losses of investees in our condensed consolidated statements of comprehensive income (loss).

As of March 31, 2024, there was no unamortized basis difference for our 1750 H Street, NW joint venture.