Real Estate, Net

3 Months Ended

Mar. 31, 2018

Real Estate [Abstract]

Real Estate, Net

Note 3 – Real Estate, Net

As of March 31, 2018 and December 31, 2017, real estate, net, includes the following (in thousands):

	March 31, 2018		December 31, 2017
Real estate under development	$	79,904	$	69,783
Building and building improvements		5,817		5,817
Tenant improvements		606		606
Land		2,452		2,452
		88,779		78,658
Less: accumulated depreciation		2,451		2,389
	$	86,328	$	76,269

Real estate under development as of March 31, 2018 and December 31, 2017 consisted of the 77 Greenwich and Paramus, New Jersey properties. Building and building improvements, tenant improvements and land at both dates consisted of the West Palm Beach, Florida property.

Depreciation expense amounted to approximately $62,000 and $60,000 for the three months ended March 31, 2018 and March 31, 2017, respectively. The increase in depreciation expense for the three months ended March 31, 2018 related to the West Palm Beach, Florida property.

 

In September 2017, a wholly-owned subsidiary of ours entered into an agreement pursuant to which it acquired an option to purchase a newly built 105-unit, 12-story apartment building located at 237 11th Street, Brooklyn, New York for a purchase price of $81.0 million.  We exercised the option on March 9, 2018. We paid an initial deposit of $8.1 million, which is included in restricted cash on the condensed consolidated balance sheets, upon entering into the agreement. The purchase price will be funded through acquisition financing and cash on hand. The acquisition of this property, which is subject to customary closing conditions, is expected to close in the second quarter of 2018.

 

Through a wholly-owned subsidiary, we also entered into an agreement with the New York City School Construction Authority (the "SCA"), whereby we will construct a school that will be sold to the SCA as part of our condominium development at the 77 Greenwich property. Pursuant to the agreement, the SCA will pay us $41.5 million, which has been allocated to land, and reimburse us for the costs associated with constructing the school (including a construction supervision fee of approximately $5.0 million). Payments for construction will be made by the SCA to the general contractor in installments as construction on their condominium progresses. Payments for the land and development fee started in January 2018 and continue through September 2019. Upon Substantial Completion, as defined, the SCA shall close on the purchase of the school condominium unit at which point the title will transfer to the SCA. We are required to substantially complete construction of the school by September 6, 2023. To secure our obligations, the 77 Greenwich property has been ground leased to the SCA and leased back to us until title to the school is transferred to the SCA. We have also guaranteed certain obligations with respect to the construction of the school.

 

Revenue relating to the ultimate sale of the condominium unit will not be recognized until control of the asset is transferred to the buyer. This generally will include transfer of title to the property. As payments from the SCA are received, the amounts will be recorded on the balance sheet as deferred real estate deposits until sales criteria are satisfied.