Real Estate

12 Months Ended

Dec. 31, 2019

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)	2019		2018

The Waycroft	$	255,443	$	162,176
7316 Wisconsin Avenue	44,638		—
Ashbrook Marketplace	19,128		11,124
Other	16,435		12,672
Total	$	335,644	$	185,972

Acquisitions

Burtonsville Town Square

In January 2017, the Company purchased for $76.4 million, including acquisition costs, Burtonsville Town Square located in Burtonsville, Maryland.

Olney Shopping Center

In March 2017, the Company purchased for $3.1 million, including acquisition costs, the land underlying Olney Shopping Center. The land was previously leased by the Company with an annual rent of approximately $56,000. The purchase price was funded by the revolving credit facility.

Ashbrook Marketplace

In May 2018, the Company acquired from the Saul Trust, in exchange for 176,680 limited partnership units, approximately 13.7 acres of land located at the intersection of Ashburn Village Boulevard and Russell Branch Parkway in Loudoun County, Virginia. Based on the closing price of the Company's common stock, the land and the limited partnership units were recorded at a value of $8.8 million. Acquisition costs related to the transaction totaled approximately $0.2 million.

7316 Wisconsin Avenue

In September 2018, the Company purchased for $35.5 million, plus $0.7 million of acquisition costs, an office building and the underlying ground located at 7316 Wisconsin Avenue in Bethesda, Maryland. In December 2018, the Company purchased for $4.5 million, including acquisition costs, an interest in an adjacent parcel of land and retail building. The purchase price was funded through the Company's credit facility. The Company has executed lease termination agreements with the final two office tenants and, effective September 1, 2019, the asset was removed from service and transferred to construction in progress at its carrying value of $42.6 million.

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.

During 2018, the Company acquired properties that had an aggregate cost of $49.5 million, including acquisition costs. The purchase price was allocated to assets acquired and liabilities assumed based on their relative fair values as shown in the following table.



(in thousands)	Ashbrook Marketplace		7316 Wisconsin Avenue			Total
Land	$	8,776	$	38,662		$	47,438
Buildings	—		979			979
In-place Leases	—		886			886
Above Market Rent	—		168			168
Below Market Rent	—		(21		)	(21		)
Total Purchase Price	$	8,776	$	40,674		$	49,450

During 2017, the Company purchased one property, Burtonsville Town Square, at a cost of $76.4 million, including acquisition costs. Of the total acquisition cost, $28.4 million was allocated to land, $45.8 million was allocated to buildings, $2.2 million was allocated to in-place leases, $0.6 million was allocated to above-market rent, and $(0.6) million was allocated to below-market rent, based on their relative fair values.

The gross carrying amount of lease intangible assets included in deferred leasing costs as of December 31, 2019 and 2018 was $11.7 million and $12.5 million, respectively, and accumulated amortization was $8.5 million and $8.1 million, respectively. Amortization expense totaled $0.9 million, $1.3 million and $1.1 million, for the years ended December 31, 2019, 2018, and 2017, respectively. The gross carrying amount of below market lease intangible liabilities included in deferred income as of December 31, 2019 and 2018 was $24.1 million and $24.8 million, respectively, and accumulated amortization was $13.9 million and $13.1 million, respectively. Accretion income totaled $1.5 million, $1.7 million, and $1.7 million, for the years ended December 31, 2019, 2018, and 2017, respectively. The gross carrying amount of above market lease intangible assets included in accounts receivable as of December 31, 2019 and 2018 was $0.6 million and $0.8 million, respectively, and accumulated amortization was $108,300 and $143,900, respectively. Amortization expense totaled $109,600, $110,500 and $31,600, for the years ended December 31, 2019, 2018 and 2017, respectively. The remaining weighted-average amortization period as of December 31, 2019 is 4.5 years, 7.6 years, and 5.3 years for lease acquisition costs, above market leases and below market leases, respectively.

As of December 31, 2019, 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
2020	$	708	$	43	$	1,434
2021	535		33		1,409
2022	383		33		1,306
2023	317		33		1,297
2024	198		33		878
Thereafter	996		343		3,853
Total	$	3,137	$	518	$	10,177