REAL ESTATE INVESTMENTS (Tables)

12 Months Ended

Dec. 31, 2020

Real Estate [Abstract]

Gross Carrying Value of Operating Properties

As of December 31, 2020 and 2019, the gross carrying value of the operating properties was as follows (in thousands):

	December 31, 2020		December 31, 2019
Land	$	407,514	$	489,702
Building and improvements	2,665,232		3,049,395
Tenant improvements	401,363		467,362
Total	$	3,474,109	$	4,006,459

Capitalized Construction Costs

The following table shows the amount of compensation costs (including bonuses and benefits) capitalized for the years presented (in thousands):

	December 31,
	2020		2019		2018
Development	$	4,802	$	3,047	$	3,185
Redevelopment	543		775		968
Tenant Improvements	3,021		3,609		2,811
Total	$	8,366	$	7,431	$	6,964

Schedule of Acquisitions

The following table summarizes the property acquisitions during the year ended December 31, 2020 (dollars in thousands):

Property/Portfolio Name	Acquisition Date	Location	Property Type	Rentable Square Feet/Acres	Purchase Price (a)
145 King of Prussia Road	February 27, 2020	Radnor, PA	Land	7.75 acres	$	11,250
1505-11 Race Street	November 5, 2020	Philadelphia, PA	Office	119,763	$	9,700
250 King of Prussia Road (b)	November 30, 2020	Radnor, PA	Office	169,843	$	20,250

(a)Exclusive of transaction costs and price adjustments. See purchase price allocation table below for a breakout of the net purchase price for wholly owned properties.

(b)This property was placed into redevelopment and is therefore included within Construction-in-progress on the consolidated balance sheets.

Schedule of Asset Acquisition

The acquisition values have been allocated as follows (in thousands):

	1505-11 Race Street
Building, land and improvements	$	9,723
Intangible assets acquired	2,422
Below market lease liabilities assumed	(2,193)
Total unencumbered acquisition value	9,952
Amortization period of intangible assets	1.5 years
Amortization period of below market liabilities assumed	1.5 years

Schedule of Purchase Price Allocation

The acquisition values have been allocated as follows (in thousands):

	Quarry Lake II		Austin Venture Portfolio		Four Tower Bridge
Acquisition Date	12/19/2018		12/11/2018		1/5/2018
Building, land and improvements	$	35,120	$	457,390	$	20,734
Intangible assets acquired	5,809		76,925		3,144
Below market lease liabilities assumed	(1,524)		(13,769)		(182)
Deferred gain (a)	—		14,594		—
Total unencumbered acquisition value	$	39,405	$	535,140	$	23,696
Mortgage debt assumed - at fair value (b)	—		—		(9,940)
Total encumbered acquisition value	$	39,405	$	535,140	$	13,756
Total unencumbered acquisition value	39,405		535,140		23,696
Mortgage debt assumed - at fair value (b)	—		—		(9,940)
Mortgage debt repaid at settlement (c)	—		(115,461)		—
Investment in unconsolidated real estate ventures	—		(14,594)		(3,502)
Gain on promoted interest in unconsolidated real estate venture	—		(28,283)		—
Gain on real estate venture transactions	—		(103,847)		(11,633)
Purchase price reduction for note receivable (d)	—		(130,742)		—
Net working capital assumed	(368)		(24,865)		1,379
Total cash payment at settlement	$	39,037	$	117,348	$	—
Weighted average amortization period of intangible assets	0		5.5 years		4.1 years
Weighted average amortization period of below market liabilities assumed	3.0 years		4.6 years		4.8 years

(a)Represents a deferred gain recognized at settlement, which resulted in a reduction of the acquisition value.

(b)The outstanding principal balance on mortgage debt for Four Tower Bridge, assumed on January 5, 2018, was $9.7 million.

(c)On December 11, 2018, the Company assumed $115.5 million of mortgage debt which was repaid in full at settlement.

(d)Represents a note receivable due from the DRA Austin Venture that represents a purchase price reduction.

Schedule of Pro Forma Information

The unaudited pro forma information below summarizes the Company’s combined results of operations for the years ended December 31, 2018 and December 31, 2017, respectively, as though the acquisition of the Austin Venture Portfolio was completed on January 1, 2017. The supplemental pro forma operating data is not necessarily indicative of what the actual results of operations would have been assuming the transaction had been completed as set forth above, nor do they purport to represent the Company’s results of operations for future periods (in thousands).

	December 31,
	2018		2017
Pro forma revenue	$	602,713	$	582,244
Pro forma net income	134,142		115,475
Pro forma net income available to common shareholders	134,142		115,475

Summary of Gain on Sale for Each Land Parcel

The following table summarizes the property dispositions during the years ended December 31, 2020, 2019 and 2018 (dollars in thousands):

Property/Portfolio Name	Disposition Date	Location	Property Type	Rentable Square Feet/Acres	Sales Price		Gain/(Loss) on Sale (a)
Mid-Atlantic Office Portfolio (b) (g)	December 21, 2020	Various	Office	1,128,645	$	192,943	$	15,164
One and Two Commerce Square (c)	July 21, 2020	Philadelphia, PA	Office	1,896,142	$	115,000	$	271,905
Keith Valley	June 15, 2020	Horsham, PA	Land	14.0 Acres	$	4,000	$	201
52 East Swedesford Road	March 19, 2020	Malvern, PA	Office	131,077	$	18,000	$	2,336
1900 Gallows Rd	September 11, 2019	Vienna, VA	Office	210,632	$	36,400	$	(367)
9 Presidential Boulevard	March 15, 2019	Bala Cynwyd, PA	Land	2.7 Acres	$	5,325	$	751
Subaru National Training Center (d)	December 21, 2018	Camden, NJ	Mixed-use	83,000	$	45,300	$	2,570
Rockpoint Portfolio (e)	December 20, 2018	Herndon, VA	Office	1,293,197	$	312,000	$	397
20 East Clementon Road	June 21, 2018	Gibbsboro, NJ	Office	38,260	$	2,000	$	(35)
Garza Ranch - Office (f)	March 16, 2018	Austin, TX	Land	6.6 acres	$	14,571	$	1,515
Westpark Land	January 10, 2018	Durham, NC	Land	13.1 acres	$	485	$	22

(a)Gain/(Loss) on Sale is net of closing and other transaction related costs.

(b)The Company sold a 60% equity interest in a portfolio of twelve suburban office properties containing an aggregate of 1.1 million square feet ("Mid-Atlantic Office Portfolio"), nine of which are located in the Pennsylvania suburbs and three of which are located in Maryland, to an unrelated third party for a gross sales price of $192.9 million. The transaction resulted in deconsolidation of the properties and formation of PA/MD NNN Office JV, LLC ("Mid-Atlantic Office JV"). The Company recorded its investment at fair value and recognized a gain of $15.2 million in "Net gain on disposition of real estate" on the Consolidated Statements of Operations. See Note 4, ''Investment in Unconsolidated Real Estate Ventures," for further information.

(c)The Company sold a 30% preferred equity interest in two office buildings located in Philadelphia, Pennsylvania, to an unrelated third party for $115.0 million (the "Commerce Square Venture Transaction"), which resulted in deconsolidation of the properties and formation of Brandywine Commerce I LP and Brandywine Commerce II LP (collectively, the "Commerce Square Venture"). The transaction valued the properties at $600.0 million. The Company recorded its investment at fair value and recognized a gain of $271.9 million in "Net gain on disposition of real estate" on the Consolidated Statements of Operations. See Note 4, ''Investment in Unconsolidated Real Estate Ventures," for further information.

(d)During the third quarter of 2018, the tenant, Subaru, exercised its purchase option for the Subaru National Training Center Development. The lease with Subaru was classified as a direct finance lease within "Other assets" on the consolidated balance sheets. In connection with the lease, the Company recognized $1.6 million in interest income during the twelve months ended December 31, 2018, in accordance with accounting guidance for direct finance leases under ASC 840.

(e)For information related to this transaction, see the “Herndon Innovation Center Metro Portfolio Venture, LLC” section in Note 4, “Investment in Unconsolidated Real Estate Ventures.”

(f)The Company had continuing involvement in this property through a completion guaranty, which required the Company, as developer, to complete certain infrastructure improvements on behalf of the buyers of the land parcel. The Company recorded the cash received at settlement as “Deferred income, gains and rent” on the consolidated balance sheet. The Company subsequently recognized the land sale and the $3.0 million gain on sale during the twelve months ended December 31, 2018 upon substantial completion of the infrastructure improvements and transfer of control to the buyer.

(g)The sales price includes $4.1 million of variable consideration held in escrow that will be released to the Company over a six to nine month holdback period if certain tenants remain in compliance with certain payment terms of their lease agreements. The Company estimated the amount of the variable consideration that it deemed probable of collection and included such amount in the transaction price. The Company will continue to evaluate the probability of collection and recognize any changes to the amount deemed probable as incremental gain on sale.