Quarterly report pursuant to Section 13 or 15(d)

Real Estate Transactions

v2.4.0.8
Real Estate Transactions
 6 Months Ended
Jun. 30, 2013
Real Estate Transactions [Abstract]  
Real Estate Transactions

3.    REAL ESTATE TRANSACTIONS

 

Acquisitions

On January 18, 2013, the Company acquired Alterra at Overlook Ridge 1A (“Alterra 1A”), a 310-unit multi-family rental property located in Revere, Massachusetts, for approximately $61.3 million in cash, which was funded primarily through borrowings  under the Company’s unsecured revolving credit facility.

 

On April 4, 2013, the Company acquired Alterra at Overlook Ridge IB (“Alterra 1B”), a 412-unit multi-family property in Revere, Massachusetts, for approximately $88 million in cash, which was funded primarily through borrowings under the Company’s unsecured revolving credit facility.  

 

The purchase prices were allocated to the net assets acquired during the six months ended June 30, 2013 as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Alterra 1A

 

 

 

Alterra 1B

 

 

 

Acquisitions

 

Land

$
9,042 

 

 

$
12,055 

 

 

$
21,097 

 

Buildings and improvements

 
50,671 

 

 

 
71,409 

 

 

 
122,080 

 

Furniture, fixtures and equipment

 
801 

 

 

 
1,474 

 

 

 
2,275 

 

In-place lease values

 
931 
(1)

 

 
3,148 
(1)

 

 
4,079 

 

 

 
61,445 

 

 

 
88,086 

 

 

 
149,531 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Below market lease values

 
195 
(1)

 

 
136 
(1)

 

 
331 

 

 

 
195 

 

 

 
136 

 

 

 
331 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash paid at acquisition

$
61,250 

 

 

$
87,950 

 

 

$
149,200 

 

 

 

 

 

 

 

(1)             In-place lease values and below market lease values will be amortized over one year or less.

 

For the six months ended June 30, 2013, included in general and administrative expense was an aggregate of approximately $214,000 in transaction costs related to the property acquisitions.

 

Properties Commencing Initial Operations

The following property commenced initial operations during the six months ended June 30, 2013 (dollars in thousands, except per square foot):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Development

 

 

Development

 

 

 

# of

Rentable

 

 

Costs Incurred

 

 

Costs

Date

Property/Address

Location

Bldgs.

Square Feet

 

 

by Company (a)

 

 

Per Square Foot

6/5/2013

14 Sylvan Way

Parsippany, New Jersey
1 
203,506 

 

$
50,661 

 

$
248.94 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a)      Development costs included approximately $13.1 million in land costs and $4.3 million in leasing costs.  Amounts are as of June 30, 2013.

 

 

Property Sales

The Company sold the following office properties during the six months ended June 30, 2013 (dollars in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rentable

 

 

Net

 

 

Net

 

Sale

 

 

# of

Square

 

 

Sales

 

 

Book

Realized

Date

Property/Address

Location

Bldgs.

Feet

 

 

Proceeds

 

 

Value

Gain (loss)

04/10/13

19 Skyline Drive (a)

Hawthorne, New York
1 
248,400 

 

$
16,131 

 

$
16,005 
126 

04/26/13

55 Corporate Drive

Bridgewater, New Jersey
1 
204,057 

 

 
70,967 

 

 
51,308 
19,659 

05/02/13

200 Riser Road

Little Ferry, New Jersey
1 
286,628 

 

 
31,775 

 

 
14,852 
16,923 

05/13/13

777 Passaic Avenue

Clifton, New Jersey
1 
75,000 

 

 
5,640 

 

 
3,713 
1,927 

05/30/13

16 and 18 Sentry Parkway West (b)

Blue Bell, Pennsylvania
2 
188,103 

 

 
19,041 

 

 
19,721 
(680)

05/31/13

51 Imclone Drive (c)     

Branchburg, New Jersey
1 
63,213 

 

 
6,101 

 

 
5,278 
823 

06/28/13

40 Richards Avenue

Norwalk, Connecticut
1 
145,487 

 

 
15,858 

 

 
17,027 
(1,169)

 

 

 

 

 

 

 

 

 

 

 

Totals:

 
8 
1,210,888 

 

$
165,513 

 

$
127,904 
37,609 

 

 

 

 

 

 

 

 

 

 

 

 

(a)  The Company recognized a valuation allowance of $7.1 million on this property at December 31, 2012.  In connection with the sale, the Company provided an interest-free note receivable to the buyer of $5 million (with a net present value of $3.7 million at June 30, 2013) which matures in ten years and requires monthly payments of principal.  See Note 5: Deferred charges, goodwill and other assets.

(b)  The Company recorded an $8.4 million impairment charge on these properties at December 31, 2012.  The Company has retained a subordinated interest in these properties.

(c)  The property was encumbered by a mortgage loan which was satisfied by the Company at the time of the sale.  The Company incurred $0.7 million in costs for the debt satisfaction, which was included in discontinued operations:  loss from early retirement of debt for the three and six months ended June 30, 2013.

 

On July 10, 2013, the Company sold its 132,010 square foot office property located at 106 Allen Road in Bernards, New Jersey for approximately $18.0 million.

 

In July 2013, the Company entered into a contract to sell its 1.66 million square foot Pennsylvania office portfolio and several developable land parcels for approximately $233 million: $201 million in cash, a $10 million mortgage on one of the properties and subordinated equity interests in each of the properties being sold with capital accounts aggregating $22 million.   The purchasers of the Pennsylvania office portfolio will be joint ventures to be formed between the Company and affiliates of the Keystone Property Group (the “Keystone Affiliates”). The mortgage loan will have a term of two years with a one year extension option and bears interest at LIBOR plus six percent.  The Company's equity interests in the joint ventures will be subordinated to Keystone Affiliates receiving a 15 percent internal rate of return (“IRR”) after which the Company will receive a ten percent IRR on its subordinated equity and then all profit will be split equally.

 

As part of the transaction, the Company will have rights to own, after zoning-approval-subdivision, land at the 150 Monument Road Property located in Bala Cynwyd, Pennsylvania, for a contemplated multi-family residential development (the “Bala Rights”).  If the Keystone Affiliates are unable to secure a mortgage loan prior to closing which will provide for the non-encumbrance of the Bala Rights, then the Company has agreed to provide a $16.5 million mortgage loan, to be secured by the 150 Monument Property and having a two year term with an interest rate of LIBOR plus six percent, in lieu of the corresponding amount of the cash portion of the purchase price.  The loan may be extended for one year at the option of the Company.

 

In addition, the Company anticipates that, in exchange for agreeing to provide a non-recourse, carve-out guaranty on an existing approximate $50 million mortgage loan secured by unrelated properties owned by the Keystone Affiliates, the Company will obtain a majority interest in a contemplated multi-family residential development site located at One Presidential Boulevard in Bala Cynwyd, Pennsylvania.

 

The transaction is subject to the buyer’s completion of due diligence by August 19, 2013 which date may be extended under certain conditions.  The agreement provides for the sale to close after the completion of due diligence, subject to normal and customary closing conditions.

 

At June 30, 2013, as a result of management’s current intentions regarding their potential disposition, the Company estimated that the carrying value of the Company’s five office properties located in Blue Bell, Pennsylvania, Lower Providence, Pennsylvania and Plymouth Meeting, Pennsylvania, aggregating 462,378 square feet, may not be recoverable over their anticipated holding periods.  In order to reduce the carrying value of the five properties to their estimated fair market values (categorized on a level 3 basis as provided by ASC 820, Fair Value Measurements and Disclosures), the Company recorded impairment charges of $23.9 million at June 30, 2013.