Real Estate

12 Months Ended

Dec. 31, 2023

REAL ESTATE

Construction in Progress

Construction in progress includes land, preconstruction and development costs of active projects. Preconstruction costs include legal, zoning and permitting costs and other project carrying costs incurred prior to the commencement of construction. Development costs include direct construction costs and indirect costs incurred subsequent to the start of construction such as architectural, engineering, construction management and carrying costs consisting of interest, real estate taxes and insurance. The following table shows the components of construction in progress.


	December 31,
(in thousands)	2023		2022

Twinbrook Quarter	$	355,113	$	227,672
Hampden House	142,240		80,704


Other	17,200		13,850
Total	$	514,553	$	322,226

Acquisitions

Twinbrook Quarter

On November 5, 2019, the Company entered into the Twinbrook Contribution Agreement to acquire from 1592 Rockville Pike, a wholly-owned subsidiary of the Saul Trust, approximately 6.8 acres of land and its leasehold interest in approximately 1.3 acres of contiguous land, together in each case with the improvements located thereon, located at the Twinbrook Metro Station in Rockville, Maryland in exchange for 1,416,071 limited partnership units in the Operating Partnership. The Contributed Property is immediately adjacent to approximately 10.3 acres owned by the Company. Title to the Contributed Property and the units were placed in escrow until certain conditions of the Twinbrook Contribution Agreement were satisfied.

The units issued to 1592 Rockville Pike remained in escrow until the conditions of the Twinbrook Contribution Agreement, as amended, were satisfied. Half of the units held in escrow were released on October 18, 2021. The remaining units held in escrow were released on October 18, 2023.

On March 5, 2021, the Company entered into an amendment to the Twinbrook Contribution Agreement in which it and 1592 Rockville Pike agreed to release to the Company from escrow the deed and assignment of the leasehold interest of the Contributed Property, as of that date. The Company also reimbursed 1592 Rockville Pike for certain expenses pursuant to the Twinbrook Contribution Agreement totaling $7.4 million. Acquisition costs totaled $1.2 million. The Company recorded a finance lease right-of-use asset of $19.4 million and corresponding lease liability of $19.4 million related to the leasehold interest assumed in the transaction. The incremental borrowing rate used to calculate the lease liability was 5.63%.

On June 29, 2021, the third-party landlord under the ground lease contributed to the Company the fee simple interest in the land underlying the leasehold interest in exchange for 469,740 limited partnership units in the Operating Partnership, representing an aggregate value of $21.5 million. Acquisition costs were paid in cash and totaled $0.7 million. Accordingly, the related finance lease right-of-use asset and finance lease liability were extinguished. Amortization expense and interest expense related to the lease totaled $104,000 and $362,800, respectively, for the year ended December 31, 2021.

Allocation of Purchase Price of Real Estate Acquired

The Company allocates the purchase price of real estate investment properties to various components, such as land, buildings and intangibles related to in-place leases and customer relationships, based on their relative fair values.

The gross carrying amount of lease acquisition costs included in deferred leasing costs as of December 31, 2023 and 2022 was $10.6 million and $10.7 million, respectively, and accumulated amortization was $9.4 million and $9.2 million, respectively. Amortization expense totaled $0.3 million, $0.4 million and $0.5 million, for the years ended December 31, 2023, 2022, and 2021, respectively. The gross carrying amount of below market lease intangible liabilities included in deferred income as of December 31, 2023 and 2022 was $23.3 million and $23.3 million, respectively, and accumulated amortization was $18.6 million and $17.3 million, respectively. Accretion income totaled $1.3 million, $1.3 million, and $1.4 million, for the years ended December 31, 2023, 2022, and 2021, respectively. The gross carrying amount of above market lease intangible assets included in accounts receivable as of December 31, 2023 and 2022 was $0.6 million and $0.6 million, respectively, and accumulated amortization was $227,700 and $194,800, respectively. Amortization expense totaled $32,900, $32,900 and $32,900, for the years ended December 31, 2023, 2022 and 2021, respectively. The remaining weighted-average amortization period as of December 31, 2023 is 4.7 years, 5.8 years, and 5.0 years for lease acquisition costs, above market leases and below market leases, respectively.

As of December 31, 2023, scheduled amortization of intangible assets and deferred income related to in place leases is as follows:


(In thousands)	Lease acquisition costs		Above market leases		Below market leases
2024	$	198	$	33	$	878
2025	153		33		601
2026	131		33		508
2027	119		33		507
2028	117		33		507
Thereafter	476		211		1,730
Total	$	1,194	$	376	$	4,731