REAL ESTATE

12 Months Ended

Dec. 31, 2024

As of December 31, 2024, the Company’s real estate portfolio was composed of 13 office properties and one mixed-use office/retail property encompassing in the aggregate approximately 6.4 million rentable square feet. As of December 31, 2024, the Company’s real estate portfolio was collectively 80.6% occupied. The following table summarizes the Company’s investments in real estate as of December 31, 2024 (in thousands):

Property

Date Acquired

City

State

Property Type

Total Real Estate, at Cost (1)

Accumulated Depreciation and Amortization (1)

Total Real Estate, Net (1)

Town Center

03/27/2012

Plano

Office

143,310

(58,514)

84,796

Gateway Tech Center

05/09/2012

Salt Lake City

Office

37,388

(14,095)

23,293

60 South Sixth

01/31/2013

Minneapolis

Office

115,520

(1,825)

113,695

Sterling Plaza

06/19/2013

Dallas

Office

97,086

(36,020)

61,066

Accenture Tower

12/16/2013

Chicago

Office

575,455

(184,634)

390,821

Ten Almaden

12/05/2014

San Jose

Office

131,599

(45,433)

86,166

Towers at Emeryville

12/23/2014

Emeryville

Office

223,697

(73,665)

150,032

3003 Washington Boulevard

12/30/2014

Arlington

Office

154,814

(49,418)

105,396

Park Place Village

06/18/2015

Leawood

Office/Retail

87,836

(17,430)

70,406

201 17th Street

06/23/2015

Atlanta

Office

105,507

(37,952)

67,555

515 Congress

08/31/2015

Austin

Office

137,475

(40,512)

96,963

The Almaden

09/23/2015

San Jose

Office

193,133

(56,081)

137,052

3001 Washington Boulevard

11/06/2015

Arlington

Office

60,999

(16,648)

44,351

Carillon

01/15/2016

Charlotte

Office

181,104

(49,165)

131,939

2,244,923

(681,392)

1,563,531

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(1) Amounts presented are net of impairment charges and write-offs of fully depreciated/amortized assets.

As of December 31, 2024, the following property represented more than 10% of the Company’s total assets:


Property	Location	Rentable Square Feet	Total Real Estate, Net (in thousands)		Percentage of Total Assets		Annualized Base Rent (in thousands) (1)		Occupancy
Accenture Tower	Chicago, IL	1,457,724	$	390,821	21.4	%	$	38,988	93.1	%

_____________________

(1) Annualized base rent represents annualized contractual base rental income as of December 31, 2024, adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term.

Operating Leases

The Company’s office and office/retail properties are leased to tenants under operating leases for which the terms and expirations vary. As of December 31, 2024, the leases, including leases that have been executed but not yet commenced, had remaining terms, excluding options to extend, of up to 14.5 years with a weighted-average remaining term of 5.6 years. Some of the leases have provisions to extend the term of the leases, options for early termination for all or a part of the leased premises 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 the tenant 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 lease and the creditworthiness of the tenant, but generally is not a significant amount. 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 related to tenant leases are included in other liabilities in the accompanying consolidated balance sheets and totaled $8.4 million and $10.0 million as of December 31, 2024 and 2023, respectively.

During the years ended December 31, 2024, 2023 and 2022, the Company recognized deferred rent from tenants of $8.6 million, $7.6 million and $10.9 million, respectively. As of December 31, 2024 and 2023, the cumulative deferred rent balance was $95.1 million and $87.2 million, respectively, and is included in rents and other receivables on the accompanying balance sheets. The cumulative deferred rent balance included $17.9 million and $15.2 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 properties under its non-cancelable operating leases was as follows (in thousands):


2025	$	173,216
2026	166,042
2027	144,762
2028	125,612
2029	103,562
Thereafter	377,923
	$	1,091,117

As of December 31, 2024, the Company’s office and office/retail properties were leased to approximately 460 tenants over a diverse range of industries and geographic areas. As of December 31, 2024, no tenant accounted for more than 10% of annualized base rent.

Geographic Concentration Risk

As of December 31, 2024, the Company’s net investments in real estate in Illinois, California and Texas represented 21.4%, 20.5% and 13.3% of the Company’s total assets, respectively. As a result, the geographic concentration of the Company’s portfolio makes it particularly susceptible to adverse economic developments in the Illinois, California and Texas 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.

Impairment of Real Estate

During the year ended December 31, 2024, the Company recorded non-cash impairment charges of $6.8 million to write down the carrying value of 60 South Sixth (located in Minneapolis, Minnesota) to its estimated fair value as a result of changes in cash flow estimates which resulted in the future estimated undiscounted cash flows being lower than the net carrying value of the property. The decrease in cash flow projections was primarily due to the continued challenges in the leasing environment.

During the year ended December 31, 2023, the Company recorded non-cash impairment charges of $45.5 million to write down the carrying value of 201 Spear Street (located in San Francisco, California) to its estimated fair value as a result of continued market uncertainty due to rising interest rates, increased vacancy rates as a result of slow return to office in San Francisco, additional projected vacancy due to anticipated tenant turnover and further declining values of comparable sales in the market, all of which impacted ongoing cash flow estimates and leasing projections, which resulted in the future estimated undiscounted cash flows being lower than the net carrying value of the property. As a result, 201 Spear Street was valued at substantially less than the outstanding mortgage debt. During the year ended December 31, 2023, the borrower under the 201 Spear Street Mortgage Loan (the “Spear Street Borrower”) entered into a deed-in-lieu of foreclosure transaction (the “Deed-in-Lieu Transaction”) with the lender of the 201 Spear Street Mortgage Loan (the “Spear Street Lender”). On January 9, 2024, the Spear Street Lender transferred the title of the 201 Spear Street property to a third-party buyer of the 201 Spear Street Mortgage Loan. See below, “— Disposition Through Deed-in-Lieu Transaction.”

The Company did not record any impairment charges on its real estate properties during the year ended December 31, 2022.

Disposition Through Deed-in-Lieu Transaction

During the year ended December 31, 2024, the Company disposed of the 201 Spear Street property in connection with the Deed-in-Lieu Transaction and recognized a $56.4 million gain from extinguishment of debt for the year ended December 31, 2024. As of December 31, 2023, the 201 Spear Street property was held for non-sale disposition. The results of operations for 201 Spear Street are included in continuing operations on the Company’s consolidated statements of operations. The following table summarizes the revenues and expenses related to 201 Spear Street for the years ended December 31, 2024, 2023 and 2022, respectively (in thousands).


	Years Ended December 31,
	2024		2023		2022
Revenues
Rental income (1)	$	197	$	7,930	$	20,999
Other operating income	9		507		670
Total revenues	$	206	$	8,437	$	21,669
Expenses
Operating, maintenance, and management	$	52	$	3,773	$	4,140
Real estate taxes and insurance	69		2,701		2,831
Asset management fees to affiliate	26		789		1,054
General and administrative expenses	93		113		67
Depreciation and amortization	—		3,941		5,617
Interest expense	419		10,001		4,256
Impairment charge	—		45,459		—
Total expenses	$	659	$	66,777	$	17,965

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(1) For the year ended December 31, 2023, rental income includes a reserve for straight-line rent for a lease at 201 Spear Street.

The following table summarizes the assets and liabilities related to 201 Spear Street, which was held for non-sale disposition as of December 31, 2023 (in thousands):


	December 31, 2023
Assets related to real estate held for non-sale disposition
Total real estate, at cost and net of impairment charges	$	70,571
Accumulated depreciation and amortization	(1,543)
Real estate held for non-sale disposition, net	69,028

Restricted cash	3,103

Rent and other receivables, net	1,142
Prepaid expenses and other assets	1,421
Total assets	$	74,694
Liabilities related to real estate held for non-sale disposition
Notes payable, net	$	125,000
Accounts payable and accrued liabilities	3,927
Due to affiliate	16

Other liabilities	1,816
Total liabilities	$	130,759