Real Estate Investments

6 Months Ended

Jun. 30, 2025

3. Real Estate Investments

Disposition of Real Estate Property

Superior Pointe

On January 14, 2025, the Company sold the Superior Pointe property in Denver, Colorado for a gross sales price of $12.0 million. No gain or loss was recognized on the sale as the property was carried at fair value less cost to sell on the date of disposition.

Cascade Station

On June 27, 2024, the Company entered into an assignment in lieu of foreclosure agreement to transfer possession and control of the Cascade Station property to the lender as a result of an event of default as defined in the property’s non-recourse loan agreement. Given the terms of the assignment in lieu of foreclosure agreement, the Company assessed whether the entity holding the property should be reassessed for consolidation as a Variable Interest Entity (“VIE”) in accordance with ASC 810 – Consolidation.

Based on its analysis, the Company concluded that it is not the primary beneficiary of the VIE and therefore deconsolidated the property as of June 27, 2024. The Company deconsolidated the net carrying value of real estate assets of $17.9 million, the mortgage loan of $20.6 million, cash and restricted cash of $2.5 million and net current assets of $1.7 million. For the three months ended June 30, 2024, the Company recognized a loss on deconsolidation of $1.5 million, which has been included within net loss on disposition of real estate property on the Company’s condensed consolidated statement of operations and statement of cash flows.

Assets Held for Sale

On June 18, 2025, the Company entered into a purchase and sale agreement (the “Phoenix Sale Agreement”) to sell Block 23, Pima Center, 5090 N 40th St, SanTan, Papago Tech, The Quad, and Camelback Square (the “Phoenix Portfolio”) for $296.0 million, which excludes closing costs and credits. The Company determined that the Phoenix Portfolio met the criteria for classification as held for sale as of June 30, 2025. Upon classification as held for sale, the Company recognized an impairment of $102.2 million to lower the carrying amount of the Phoenix Portfolio to its estimated fair value less cost to sell. Refer to “Impairment of Real Estate” below. As of June 30, 2025, the Company had received an initial deposit of $2.0 million, which was recorded in restricted cash along with a corresponding liability in other liabilities on the Company’s condensed consolidated balance sheets. Subsequent to June 30, 2025, the Company received an additional deposit of $18.0 million and upon receipt, the total of the two deposits became non-refundable. The sale is subject to customary closing conditions and the sale of Block 23 and Pima Center are separately subject to the successful reassignment of their respective ground leases.

The properties were classified as held for sale as of June 30, 2025 (in thousands):


Phoenix Portfolio	June 30, 2025
Real estate properties, net	$	261,507
Deferred leasing costs, net		5,801
Acquired lease intangibles assets, net		3,277
Rents receivable, prepaid expenses and other assets		25,582
Assets held for sale	$	296,167
Acquired lease intangibles liability, net		1,081
Accounts payable, accrued liabilities, deferred rent, tenant rent deposits, and other liabilities		15,735
Liabilities related to assets held for sale	$	16,816

On November 1, 2024, the Company entered into a purchase and sale agreement to sell the Superior Pointe property for
$12.0 million, which excludes closing costs and credits. The Company determined that the property met the criteria for classification
as held for sale as of December 31, 2024. Upon classification as held for sale, the Company recognized an impairment of $8.5 million
to lower the carrying amount of the property to its estimated fair value less cost to sell. Refer to “Impairment of Real Estate” below.
As of December 31, 2024, the Company had received a deposit of $0.3 million, which was recorded in restricted cash along with a
corresponding liability in other liabilities on the Company’s condensed consolidated balance sheets. On January 14, 2025, the Company completed the sale of the Superior Pointe property.

The property was classified as held for sale as of December 31, 2024 (in thousands):


Superior Pointe	December 31, 2024
Real estate properties, net	$	10,637
Deferred leasing costs, net		382
Rents receivable, prepaid expenses and other assets		1,569
Assets held for sale	$	12,588
Accounts payable, accrued liabilities, deferred rent, tenant rent deposits, and other liabilities		2,176
Liabilities related to assets held for sale	$	2,176

Impairment of Real Estate

During the three and six months ended June 30, 2025, the Company recognized an impairment of real estate of $102.2 million to lower the carrying amount of the Phoenix Portfolio to its estimated fair value less cost to sell.

There was no impairment of real estate during the six months ended June 30, 2024.

City Office REIT, Inc. 10-Q