Real Estate

9 Months Ended

Sep. 30, 2022

Acquisitions

On April 21, 2022, the Company purchased its partner's 10% joint venture interest in HICO Avalon, LLC and HICO Avalon II, LLC, which own the 8000 and 10000 Avalon office properties. This transaction did not result in a change in control and any difference between the purchase price of $43.4 million, which included a promote to our partner related to increases in fair value in excess of cost, and the $15.7 million book value of the outside partner's non-controlling interest is recorded as additional paid in capital in the equity section of the Company's consolidated balance sheet. The Company's consolidated basis in Avalon's assets and liabilities was unchanged by this transaction.

On September 27, 2021, the Company acquired a 0.15 acre land parcel in Atlanta for a gross purchase price of $3.1 million related to a potential future development in Midtown Atlanta.

On July 28, 2021, the Company acquired 725 Ponce, a 372,000 square foot office building in Midtown Atlanta, for $300.8 million, including acquisition costs. The Company accounted for this transaction as an acquisition of an asset, and the following table summarizes the allocation of the purchase price of this property (in thousands):


	725 Ponce
Tangible assets:
Operating properties	$	292,946
Tangible assets	292,946

Intangible assets:
In-place leases	12,788
Above market leases	1,770
Intangible assets	14,558

Intangible liabilities:
Above market leases	(6,739)
Intangible liabilities	(6,739)
Total net assets acquired	$	300,765

On March 12, 2021, a 95% owned consolidated joint venture acquired a 0.24 acre land parcel in Atlanta for a gross purchase price of $8.0 million.

Dispositions

On July 23, 2021, the Company sold One South at the Plaza in Charlotte for a gross sales price of $271.5 million and recorded a gain of $12.7 million.

On July 1, 2021, the Company sold 0.7 acres of land in Phoenix, adjacent to our 100 Mill development, to a hotel developer for $6.4 million. Net proceeds approximated our book value.

On April 7, 2021, the Company sold Burnett Plaza in Fort Worth for a gross sales price of $137.5 million and recorded a gain of $80,000.

Impairment

The Company tests buildings held for investment, by disposal groups, for impairment whenever changes in circumstances indicate a disposal group’s carrying value may not be recoverable. The test is conducted using undiscounted cash flows for the shorter of the building’s estimated hold period or its remaining useful life. When testing for recoverability of value of buildings held for investment, projected cash flows are used over its expected hold period. If the expected hold period includes some likelihood of shorter-term hold period from a potential sale, the probability of a sale is layered into the analysis. If any building's held-for-investment analysis were to fail the impairment test, its book value would be written down to its then current estimated fair value, before any selling expense, and that building would continue to depreciate over its remaining useful life. None of the Company’s held-for-investment buildings were impaired during any periods presented in the accompanying statement of operations while under the held-for-investment classification.

The Company also reviews held-for-sale buildings, if any, for impairments. If book value is in excess of estimated fair value less estimated selling costs, we impair those assets to fair value less estimated selling costs. There were no held-for-sale buildings impaired during any periods presented in the accompanying statements of operations.

The Company also reviews land and projects under development for impairment whenever changes in circumstances indicate the assets' carrying value may not be recoverable. None of the Company's investments in land or projects under development were impaired during any periods presented in the accompanying statement of operations.

The Company may record impairment charges in future periods if the economy and the office industry weakens, the operating results of individual buildings are materially different from our forecasts, or we shorten our contemplated hold period for any operating buildings.