Corporate Office Properties Trust turned over two buildings in Northern Virginia to a lender to satisfy a mortgage loan that was in default, the Columbia-based real estate investment trust said Tuesday.
The previously disclosed transfer removes $150 million in debt from the company's balance sheet and will lead to an accounting gain of $83 million, announced COPT, which specializes in offices for federal agencies and government contractors.
COPT said in filings with the Securities and Exchange Commission that it opted not to make payments on the loan, which was originally slated to mature in 2017, because the fair value of the properties was less than what was owed.
The loan was issued in 2007, "at the height of financial frothiness," spokeswoman Michelle Layne said in a statement. But the building's financials changed after tenants hit by sequestration left.
Income from the properties has been going to the lender since last year, when COPT defaulted and a court-appointed receiver took control of the buildings.
"While COPT has the money to repay the loan, it is not the right value decision for our shareholders," Layne said in a statement.
The buildings at 15000 and 15010 Conference Center Drive in Chantilly represented a total of 665,000 square feet, of which 25 percent was occupied at the end of June, COPT said last month.
COPT recently acquired the Transamerica building in downtown Baltimore for $121 million and wants to transform a stretch of Canton waterfront into a new mixed-use urban center for about $1 billion.
Its proposal would add five or six office buildings, a hotel, restaurants and shopping, a marina and potentially residences to about 10 acres of land surrounding the CareFirst building. COPT acquired the site in 2009 as part of a $125 million deal that included what was then the 1st Mariner Bank tower.