Real Estate Dispositions, Held for Sale, and Impairment Charges |
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| Real Estate Dispositions, Held for Sale, and Impairment Charges | Real Estate Dispositions, Held for Sale, and Impairment Charges Real Estate Dispositions
During the year ended December 31, 2021, we continued to execute our capital recycling program, whereby we sold properties outside of our core markets and redeployed proceeds to either fund property acquisitions in our target secondary growth markets, or repay outstanding debt. We expect to continue to execute our capital recycling plan and sell non-core properties as reasonable disposition opportunities become available. During the year ended December 31, 2021, we sold three non-core properties, located in Rancho Cordova, California, Champaign, Illinois, and Richmond, Virginia, which are summarized in the table below (dollars in thousands):
Our 2021 dispositions were not classified as discontinued operations because they did not represent a strategic shift in operations, nor will they have a major effect on our operations and financial results. Accordingly, the operating results of these properties are included within continuing operations for all periods reported.
The table below summarizes the components of operating income from the real estate and related assets disposed of during the years ended December 31, 2021, 2020, and 2019, respectively (dollars in thousands):
(1)Includes a $1.1 million loss on sale of real estate, net, from three property sales.
Real Estate Held for Sale
At December 31, 2021, we had no properties classified as held for sale.
At December 31, 2020, we had three properties classified as held for sale, located in Boston Heights, Ohio, Rancho Cordova, California, and Champaign, Illinois. Two of these properties were sold during the year ended December 31, 2021. Our Boston Heights, Ohio property is classified as held and used as of December 31, 2021, as this property no longer meets the held for sale criteria.
The table below summarizes the components of the assets and liabilities held for sale reflected on the accompanying consolidated balance sheet (dollars in thousands):
Impairment Charges
We evaluated our portfolio for triggering events to determine if any of our held and used assets were impaired during the year ended December 31, 2021 and did not recognize an impairment charge.
During the year ended December 31, 2020, we identified three held and used assets, located in Blaine, Minnesota, Champaign, Illinois, and Rancho Cordova, California, which were impaired by an aggregate of $3.6 million when we determined the carrying value of these assets was unrecoverable based on an undiscounted cash flow analysis. As a result, we recorded an impairment charge to reflect the fair market value of these assets. The Rancho Cordova property was further impaired when we classified the property as held for sale as of December 31, 2020 to record the carrying value equal to the fair value less costs of sale and recorded an impairment charge to our Rancho Cordova, California asset of $0.7 million, which is reflected in the aggregate impairment charge of $3.6 million, as the fair market value minus selling costs was less than the carrying value.
Fair market value for this asset was calculated using Level 3 inputs (defined in Note 6 “Mortgage Notes Payable and Credit Facility”), which were determined using a negotiated sales price from an executed purchase and sale agreement with a third party. We continue to evaluate our properties on a quarterly basis for changes that could create the need to record impairment. Future impairment losses may result, and could be significant, should market conditions deteriorate in the markets in which we hold our assets or we are unable to secure leases at terms that are favorable to us, which could impact the estimated cash flow of our properties over the period in which we plan to hold our properties. Additionally, changes in management’s decisions to either own and lease long-term or sell a particular asset will have an impact on this analysis.
The fair values for the above properties were calculated using Level 3 inputs which were calculated using an estimated sales price, less estimated costs to sell. The estimated sales price was determined using executed purchase and sale agreements.
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