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Real Estate Investments and Equity Method Investments

12 Months Ended

Dec. 31, 2023

Real Estate Investments and Equity Method Investments

The Company’s real estate investments comprised the following as of December 31, 2023 and 2022 (in thousands):


	December 31, 2023
	Income producing property		Held for development		Construction in progress		Total
Land	$	279,135	$	11,978	$	5,000	$	296,113
Land improvements	73,313		—		—		73,313
Buildings and improvements	1,740,584		—		—		1,740,584
Development and construction costs	—		—		97,277		97,277
Real estate investments	$	2,093,032	$	11,978	$	102,277	$	2,207,287


	December 31, 2022
	Income producing property		Held for development		Construction in progress		Total
Land	$	285,030	$	6,294	$	5,000	$	296,324
Land improvements	71,308		—		—		71,308
Buildings and improvements	1,527,876		—		—		1,527,876
Development and construction costs	—		—		48,067		48,067
Real estate investments	$	1,884,214	$	6,294	$	53,067	$	1,943,575

2023 Operating Property Acquisitions

Constellation Energy Building

On January 14, 2023, the Company acquired an additional 11% membership interest in the Constellation Energy Building, increasing its ownership interest to 90%, in exchange for full satisfaction of the $12.8 million loan that was extended to the seller upon the acquisition of the property in January 2022.

The Interlock

On May 19, 2023, the Company acquired The Interlock, a 311,000 square foot Class A commercial mixed-use asset in West Midtown Atlanta anchored by Georgia Tech. The Interlock consists of office and retail space as well as structured parking. For segment reporting purposes, management has separated office and retail components of The Interlock into two operating properties respectively presented in the office and retail real estate segments. The Company acquired the asset for total consideration of $214.1 million plus capitalized acquisition costs of $1.2 million. As part of this acquisition, the Company paid $6.1 million in cash, redeemed its outstanding $90.2 million mezzanine loan, issued $12.2 million of Class A units of limited partnership interest in the Operating Partnership ("Class A Units") to the seller, and assumed the asset's senior construction loan of $105.6 million, that was paid off on the acquisition date using the proceeds of the TD term loan facility and an increase in borrowings under the revolving credit facility, as defined in Note 8. The Company also assumed the leasehold interest in the underlying land owned by Georgia Tech. The ground lease has an expiration in 2117 after considering renewal options.

The following table summarizes the purchase price allocation (including acquisition costs) based on the relative fair value of the assets acquired for the operating property purchased during the year ended December 31, 2023 (in thousands):


	The Interlock(1)


Building	$	183,907


In-place leases	35,234
Above-market leases	62
Below-market leases	(3,931)

Finance lease right-of-use assets(2)	46,616
Finance lease liabilities	(46,616)



Net assets acquired	$	215,272

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(1) The net assets acquired attributable to the office and retail real estate segments were $134.6 million and $80.6 million, respectively.

(2) Excludes $1.1 million of rent for the finance lease, which was prepaid on the acquisition date. The total finance lease right-of-use asset recognized on the acquisition date was $47.7 million.

2022 Operating Property Acquisitions

Constellation Energy Building

On January 14, 2022, the Company acquired a 79% membership interest and an additional 11% economic interest in the partnership that owns the Constellation Energy Building for a purchase price of approximately $92.2 million in cash and a loan to the seller of $12.8 million. The Constellation Energy Building is a mixed-use structure located in Baltimore's Harbor Point and is comprised of an office building, the Constellation Office, that serves as the headquarters for Constellation Energy Corp., which was spun-off from Exelon, a Fortune 100 energy company, in February 2022, as well as a multifamily component, 1305 Dock Street. The Constellation Office includes a parking garage and retail space. The Constellation Energy Building was subject to a $156.1 million loan, which the Company immediately refinanced following the acquisition with a new $175.0 million loan. The new loan bears interest at a rate of the Bloomberg Short-Term Bank Yield Index ("BSBY") plus a spread of 1.50% and will mature on November 1, 2026. This loan is hedged by an interest rate derivative of 1.00% and 3.00% as well as an interest rate cap of 4.00%. See Note 9 for further details.

Pembroke Square

On November 4, 2022, the Company acquired a 124,000 square foot grocery-anchored shopping center in Virginia Beach, Virginia for a purchase price of $26.5 million plus capitalized acquisition costs of $0.2 million.

The following table summarizes the purchase price allocation (including acquisition costs) based on the relative fair value of the assets acquired for the three operating properties purchased during the year ended December 31, 2022 (in thousands):


	Constellation Energy Building(1)		Pembroke Square
Land	$	23,317	$	14,513
Site improvements	141		465
Building	194,916		8,825


In-place leases	53,705		4,445
Above-market leases	306		—
Below-market leases	—		(1,557)




Net assets acquired	$	272,385	$	26,691

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(1) The Constellation Energy Building is comprised of two properties which include the Constellation Office and 1305 Dock Street.

2021 Operating Property Acquisitions

On February 26, 2021, the Company acquired Delray Beach Plaza, a Whole Foods-anchored retail property located in Delray Beach, Florida, for a contract price of $27.6 million plus capitalized transaction costs of $0.2 million. The

developer of this property repaid the Company's mezzanine note receivable of $14.3 million at the time of the acquisition.

On June 28, 2021, the Company purchased the remaining 7.5% ownership interest in Hoffler Place for a cash payment of $0.3 million.

On June 28, 2021, the Company purchased the remaining 10% ownership interest in Summit Place for a cash payment of $0.5 million.

On July 28, 2021, the Company acquired Overlook Village, a retail center in Asheville, North Carolina, for a contract price of $28.3 million plus capitalized acquisition costs of $0.1 million.

On August 24, 2021, the Company acquired Greenbrier Square, a Kroger-anchored retail center in Chesapeake, Virginia, for total consideration of $36.5 million plus capitalized acquisition costs of $0.3 million. As a part of this acquisition, the Company assumed a note payable of $20.0 million.

The following table summarizes the purchase price allocation (including acquisition costs) based on relative fair value of the assets acquired and intangible liabilities assumed for the three operating properties purchased during the year ended December 31, 2021 (in thousands):


	Delray Beach Plaza		Overlook Village		Greenbrier Square
Land	$	—	$	6,328	$	8,549
Site improvements	4,607		1,727		1,974
Building and improvements	22,544		18,375		19,196

In-place leases	7,209		3,997		6,659
Above-market leases	—		81		1,753
Below-market leases	(3,121)		(2,146)		(1,365)
Finance lease liabilities	(27,940)		—		—
Finance lease right-of-use assets	24,466		—		—
Fair value adjustment on acquired debt	—		—		11
Net assets acquired	$	27,765	$	28,362	$	36,777

Other 2023 Real Estate Transactions

On April 11, 2023, the Company completed the sale of a non-operating outparcel at Market at Mill Creek in full satisfaction of the outstanding consideration payable for the acquisition of the noncontrolling interest in the property completed on December 31, 2022. The gain recorded on this disposition was $0.5 million.

On September 20, 2023, the Company exercised its option to purchase an outparcel adjacent to Brooks Crossing Retail and subsequently sold the outparcel. The gain recorded on this disposition was $0.2 million.

Other 2022 Real Estate Transactions

On January 14, 2022, the Company acquired the remaining 20% ownership interest in the entity that is developing the Ten Tryon project in Charlotte, North Carolina for a cash payment of $3.9 million. The Company recorded the amount as an adjustment to additional paid-in-capital.

On April 1, 2022, the Company completed the sale of Hoffler Place for a sale price of $43.1 million. The loss recognized upon sale was $0.8 million.

On April 11, 2022, the Company exercised its option to acquire an additional 16% of the partnership that owns The Residences at Annapolis Junction, increasing its ownership to 95%. In exchange for this increased partnership interest, the terms of the partnership waterfall calculation in the event of a capital event were modified.

On April 25, 2022, the Company completed the sale of Summit Place for a sale price of $37.8 million. The loss recognized upon sale was $0.5 million.

In addition to the losses recognized on the sales of the Hoffler Place and Summit Place student-housing properties during the year ended December 31, 2022 described above, the Company recognized impairment of real estate of $18.3 million to record these properties at their fair values during the three months ended December 31, 2021.

On June 29, 2022, the Company completed the sale of the Home Depot and Costco outparcels at North Pointe for a sale price of $23.9 million. The gain on disposition was $20.9 million.

On July 22, 2022, the Company completed the sale of The Residences at Annapolis Junction for a sale price of $150.0 million. The gain recognized on disposition was $31.5 million, $5.4 million of which was allocated to the Company's noncontrolling interest partner.

On July 26, 2022, the Company completed the sale of the AutoZone and Valvoline outparcels at Sandbridge Commons for a sale price of $3.5 million. The gain recognized on disposition was $2.4 million.

On September 23, 2022, the Company completed the sale of the retail portion of The Everly for a sale price of $1.5 million. There was no gain or loss on the disposition. In conjunction with the sale, the Company paid down The Everly loan by $0.8 million.

In October 2022, the Company acquired the remaining 5% ownership interest in the entity that developed The Everly. During 2022, the Company made earn-out payments totaling $4.2 million to its development partner in addition to development cost savings of $0.8 million paid to the partner.

On December 31, 2022, the Company acquired the remaining 30% of the partnership that owns the Market at Mill Creek shopping center in Mount Pleasant, South Carolina for total consideration of $1.5 million.

Other 2021 Real Estate Transactions

On January 4, 2021, the Company completed the sale of the 7-Eleven outparcel at Hanbury Village for a sales price of $2.9 million. The gain on disposition was $2.4 million.

On January 14, 2021, the Company completed the sale of a land outparcel at Nexton Square for a sale price of $0.9 million. There was no gain or loss on the disposition. In conjunction with the sale, the Company paid down the Nexton Square loan by $0.8 million.

On March 16, 2021, the Company completed the sale of Oakland Marketplace for a sale price of $5.5 million. The gain on disposition was $1.1 million.

On March 18, 2021, the Company completed the sale of easement rights at Courthouse 7-Eleven for a sale price of $0.3 million. The gain on disposition was $0.2 million.

During the three months ended March 31, 2021, the Company recognized impairment of real estate of $3.0 million related to the Socastee Commons shopping center in Myrtle Beach, South Carolina. The Company anticipated a decline in cash flows due to the expiration of the anchor tenant lease. The Company had not re-leased the anchor tenant space and had determined that it was not probable that this space would be leased at rates sufficient to recover the Company’s investment in the property. The Company recorded an impairment loss equal to the excess of the book value of the property’s assets over the estimated fair value of the property during the first quarter of 2021. On August 25, 2021, the Company completed the sale of Socastee Commons for a price of $3.8 million. The loss on disposition was $0.1 million.

On October 28, 2021 the Company completed the sale of Courthouse 7-Eleven for a sale price of $3.1 million. The gain on disposition was $1.1 million.

On November 16, 2021 the Company completed the sale of Johns Hopkins Village for a sale price of $75.0 million. The gain on disposition was $14.4 million.

On December 15, 2021, the Company completed the sale of a land parcel at Brooks Crossing for a sale price of $0.5 million. The loss recognized upon disposition was immaterial.

Equity Method Investments

Harbor Point Parcel 3

The Company owns a 50% interest in Harbor Point Parcel 3, a joint venture with Beatty Development Group, for purposes of developing T. Rowe Price's new global headquarters office building in Baltimore, Maryland. The Company is a noncontrolling partner in the joint venture and serves as the project's general contractor. During the year ended December 31, 2023, the Company invested $1.0 million in Harbor Point Parcel 3. The Company has a current estimated total equity commitment of $47.0 million relating to this project. In October 2022, Harbor Point Parcel 3 modified its construction loan, which was increased from $161.7 million to $180.4 million as a result of an increase in the scope of the project. In accordance with a preexisting promissory note secured by the development partner's ownership interest in Harbor Point Parcel 4, the Company advanced $3.8 million to the Harbor Point Parcel 3 development partner to satisfy its additional equity contribution required under the Harbor Point Parcel 3 operating agreement. As of December 31, 2023 and 2022, the carrying value of the Company's investment in Harbor Point Parcel 3 was $40.7 million and $39.8 million, respectively, which excludes $2.2 million and $0.9 million, respectively, of intra-entity profits. For the years ended December 31, 2023 and 2022, Harbor Point Parcel 3 had no operating activity, and therefore the Company received no allocated income.

Based on the terms of the operating agreement, the Company has concluded that Harbor Point Parcel 3 is a VIE and that the Company holds a variable interest. The Company has significant influence over the project due to its 50% ownership interest; however, the Company does not have the power to direct the activities of the project that most significantly impact its performance. This includes activity as the managing member of the entity, which is a power that is retained by the Company's joint venture partner. Accordingly, the Company is not the project's primary beneficiary and, therefore, does not consolidate Harbor Point Parcel 3 in its consolidated financial statements. The Company's investment in the project is recorded as an equity method investment in the consolidated balance sheets.

Harbor Point Parcel 4

On April 1, 2022, the Company acquired a 78% interest in Harbor Point Parcel 4, a real estate venture with Beatty Development Group, for purposes of developing a mixed-use project, which is planned to include multifamily units, retail space, and a parking garage. The Company holds an option to increase its ownership to 90%. The Company is a noncontrolling partner in the real estate venture and serves as the project's general contractor. During the year ended December 31, 2023, the Company invested $69.1 million in Harbor Point Parcel 4. The Company has a current estimated total equity commitment of $113.3 million relating to this project. As of December 31, 2023 and 2022, the carrying value of the Company's investment in Harbor Point Parcel 4 was $101.3 million and $32.2 million, respectively, which excludes $0.8 million and $0.2 million, respectively, of intra-entity profits. For the years ended December 31, 2023 and 2022, Harbor Point Parcel 4 had no operating activity, and therefore the Company received no allocated income.

Based on the terms of the operating agreement, the Company has concluded that Harbor Point Parcel 4 is a VIE and that the Company holds a variable interest. The Company has significant influence over the project due to its 78% ownership interest; however, the Company does not have the power to direct the activities of the project that most significantly impact its performance. This includes activity as the managing member of the entity, which is a power that is retained by the Company's partner. Accordingly, the Company is not the project's primary beneficiary and, therefore, does not consolidate Harbor Point Parcel 4 in its consolidated financial statements. The Company's investment in the project is recorded as an equity method investment in the consolidated balance sheets.