Basis of Presentation and Summary of Significant Accounting Policies (Policy) | 6 Months Ended |
Jun. 30, 2014 |
Accounting Policies [Abstract] | ' |
Principles of Consolidation | ' |
Principles of Consolidation |
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The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries, partnerships and limited liability companies it controls, and variable interest entities (“VIEs”) for which the Company has determined itself to be the primary beneficiary. All material intercompany transactions and balances have been eliminated. The Company consolidates entities the Company controls and records a noncontrolling interest for the portions not owned by the Company. Control is determined, where applicable, by the sufficiency of equity invested and the rights of the equity holders, and by the ownership of a majority of the voting interests, with consideration given to the existence of approval or veto rights granted to the minority stockholder. If the minority stockholder holds substantive participating rights, it overcomes the presumption of control by the majority voting interest holder. In contrast, if the minority stockholder simply holds protective rights (such as consent rights over certain actions), it does not overcome the presumption of control by the majority voting interest holder. |
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Assets and liabilities of subsidiaries outside the United States with non-U.S. dollar functional currencies are translated into U.S. dollars using exchange rates as of the balance sheet dates. Income and expenses are translated using the average exchange rates for the reporting period. Foreign currency translation adjustments are recorded as a component of other comprehensive income. For the three months ended June 30, 2014 and 2013, total revenues from properties outside the United States were $4.9 million and $4.5 million, respectively, which represented 2.9% and 2.8% of the Company's total revenues during the respective periods. For the six months ended June 30, 2014 and 2013, total revenues from properties outside the United States were $9.7 million and $9.0 million, respectively, which represented 2.8% of the Company's total revenues during each period. The Company’s net investments in properties outside the United States were $193.7 million and $190.2 million at June 30, 2014 and December 31, 2013, respectively. |
Investments in Partnerships and Limited Liability Companies | ' |
Investments in Partnerships and Limited Liability Companies |
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The Company has determined that it is the primary beneficiary in six VIEs (excluding certain VIEs associated with tax credits discussed below), consisting of properties in which a tenant has a fixed-price purchase option, which are consolidated and reflected in the accompanying consolidated financial statements. Selected financial data of these VIEs at June 30, 2014 and December 31, 2013 consist of the following (in thousands): |
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| June 30, | | December 31, | | | | |
2014 | 2013 | | | | |
Investment in real estate, net | $ | 442,050 | | | $ | 336,832 | | | | | |
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Total assets | 501,774 | | | 375,443 | | | | | |
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Total debt | 191,872 | | | 143,067 | | | | | |
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Total liabilities | 208,347 | | | 154,953 | | | | | |
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Historic Tax Credits and New Market Tax Credits |
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The Company is a party to certain contractual arrangements with tax credit investors (“TCIs”) that were established to enable the TCIs to receive the benefits of historic tax credits (“HTCs”) and/or new market tax credits (“NMTCs”) for certain properties owned by Wexford. At June 30, 2014, Wexford owned nine properties that had syndicated HTCs or NMTCs, or both, to TCIs. |
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Capital contributions are made by TCIs into special purpose entities that ultimately invest these funds in the entity that owns the subject property that generates the tax credits. The TCIs are allocated substantially all of the tax credits and hold only a noncontrolling interest in the economic risk and rewards of the special purpose entities. HTCs are delivered to the TCI upon substantial completion of the project. NMTCs are allowed for up to 39% of a qualified investment and are delivered to the TCI after the investment has been funded and spent on a qualified business. HTCs are subject to 20% recapture per year beginning one year after the completion of the historic rehabilitation of the subject property. NMTCs are subject to 100% recapture until the end of the seventh year following the qualifying investment. The Company has provided the TCIs with certain guarantees which protect the TCIs from loss should a tax credit recapture event occur. The contractual arrangements with the TCIs include a put/call provision whereby the Company may be obligated or entitled to repurchase the ownership interest of the TCIs in the special purpose entities at the end of the tax credit recapture period. The Company anticipates that either the TCIs will exercise their put rights or the Company will exercise its call rights; however, the Company believes that the put rights are more likely to be exercised. |
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The Company has determined that the special purpose entities are VIEs, since there is insufficient capital to finance their activities without further subordinated financial support. The Company has determined that it is the primary beneficiary of these VIEs, because it has the authority to direct the activities which most significantly impact their economic performance. |
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The portion of the TCI’s capital contribution that is attributed to the put is recorded at fair-value at inception and is accreted to the expected put price as interest expense in the consolidated statement of income. At June 30, 2014, approximately $4.3 million of put liabilities were included in other liabilities in the consolidated balance sheets. The remaining balance of the TCI’s capital contribution is initially recorded in other liabilities in the consolidated balance sheets and is reclassified, upon delivery of the tax credit to the TCI, to reduce the carrying value of the subject property, net of allocated expenses. Direct and incremental costs incurred in structuring the transaction, consisting of third-party legal, accounting and other professional fees are deferred and will be recognized as an increase in the cost basis of the subject property upon the recognition of the related tax credit as discussed above. During the six months ended June 30, 2014, $22.6 million of tax credits, net of costs and estimated put payments, were contributed by TCIs and recorded as other liabilities in the consolidated balance sheets and $25.8 million in tax credits were delivered to the TCIs and reclassified as a reduction of the carrying value of the subject property. |
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The Company has determined that certain special purpose entities owning properties under development are VIEs, since there is insufficient capital to finance the remaining development activities without further subordinated financial support. The Company has determined it is the primary beneficiary of these VIEs, because it has the authority to direct the activities which most significantly impact their economic performance. Selected financial data of the VIEs at June 30, 2014 and December 31, 2013 consisted of the following (in thousands): |
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| June 30, | | December 31, | | | | |
2014 | 2013 | | | | |
Investment in real estate, net | $ | 190,567 | | | $ | 177,901 | | | | | |
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Total assets | 206,557 | | | 198,968 | | | | | |
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Total liabilities | 68,310 | | | 60,197 | | | | | |
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Investments in Real Estate, Net | ' |
Investments in Real Estate, Net |
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Investments in real estate, net consisted of the following (in thousands): |
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| June 30, | | December 31, | | | | |
2014 | 2013 | | | | |
Land | $ | 706,887 | | | $ | 713,955 | | | | | |
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Land under development | 155,206 | | | 119,325 | | | | | |
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Buildings and improvements | 4,957,038 | | | 4,854,175 | | | | | |
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Construction in progress | 542,970 | | | 316,025 | | | | | |
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| 6,362,101 | | | 6,003,480 | | | | | |
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Accumulated depreciation | (887,453 | ) | | (785,578 | ) | | | | |
| $ | 5,474,648 | | | $ | 5,217,902 | | | | | |
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Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed | ' |
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed |
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The Company reviews long-lived assets and certain identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The review of recoverability is based on an estimate of the future undiscounted cash flows (excluding interest charges) expected to result from the long-lived asset’s use and eventual disposition. These cash flows consider factors such as expected future operating income, trends and prospects, as well as the effects of leasing demand, competition and other factors. If impairment exists due to the inability to recover the carrying value of a long-lived asset, an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair-value of the property. The Company is required to make subjective assessments as to whether there are impairments in the values of its investments in long-lived assets. These assessments have a direct impact on the Company’s net income because recording an impairment loss results in an immediate negative adjustment to net income. The evaluation of anticipated cash flows is highly subjective and is based in part on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results in future periods. Although the Company’s strategy is to hold its properties over the long-term, if the Company’s strategy changes or market conditions otherwise dictate an earlier sale date, an impairment loss may be recognized to reduce the property to the lower of the carrying amount or fair-value, and such loss could be material. As of and for the three and six months ended June 30, 2014, no assets have been identified as impaired and no such impairment losses have been recognized. |
Deferred Leasing Costs, Net | ' |
Deferred Leasing Costs, Net |
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Leasing commissions and other direct costs associated with obtaining new or renewal leases are recorded at cost and amortized on a straight-line basis over the terms of the respective leases, with remaining terms ranging from less than one year to approximately 20 years as of June 30, 2014. Deferred leasing costs also include the net carrying value of acquired in-place leases and acquired management agreements. |
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Deferred leasing costs, net at June 30, 2014 consisted of the following (in thousands): |
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| Balance at | | Accumulated | | |
| June 30, 2014 | | Amortization | | Net |
Acquired in-place leases | $ | 417,593 | | | $ | (252,549 | ) | | $ | 165,044 | |
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Acquired management agreements | 25,801 | | | (20,891 | ) | | 4,910 | |
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Deferred leasing and other direct costs | 101,377 | | | (34,483 | ) | | 66,894 | |
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| $ | 544,771 | | | $ | (307,923 | ) | | $ | 236,848 | |
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Deferred leasing costs, net at December 31, 2013 consisted of the following (in thousands): |
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| Balance at | | Accumulated | | |
| December 31, 2013 | | Amortization | | Net |
Acquired in-place leases | $ | 365,753 | | | $ | (233,935 | ) | | $ | 131,818 | |
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Acquired management agreements | 25,801 | | | (20,053 | ) | | 5,748 | |
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Deferred leasing and other direct costs | 91,142 | | | (30,641 | ) | | 60,501 | |
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| $ | 482,696 | | | $ | (284,629 | ) | | $ | 198,067 | |
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Investments | ' |
Investments |
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Investments in equity securities, which are included in other assets on the accompanying consolidated balance sheets, consisted of the following (in thousands): |
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| June 30, | | December 31, | | | | |
2014 | 2013 | | | | |
Available-for-sale securities, historical cost | $ | 7,141 | | | $ | 8,543 | | | | | |
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Unrealized gain, net | 18,204 | | | 11,023 | | | | | |
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Available-for-sale securities, fair-value (1) | 25,345 | | | 19,566 | | | | | |
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Privately-held securities, cost basis | 23,356 | | | 18,485 | | | | | |
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Total equity securities | $ | 48,701 | | | $ | 38,051 | | | | | |
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-1 | Determination of fair-value is classified as Level 1 in the fair-value hierarchy based on the use of quoted prices in active markets. | | | | | | | | | | |
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The Company holds investments in available-for-sale securities of certain publicly-traded companies. Changes in the fair-value of investments classified as available-for-sale are recorded in comprehensive income. The fair-value of the Company's equity investments in publicly-traded companies are based upon the closing trading price of the equity security as of the balance sheet date. At June 30, 2014, none of these investments have fair-values less than the Company’s cost basis, net of previous other -than-temporary impairment. However, management will continue to periodically evaluate whether for any investment, the fair-value of which is less than the Company’s cost basis, should be considered other-than-temporarily impaired. If other-than-temporary impairment is considered to exist, the related unrealized loss will be reclassified from accumulated other comprehensive loss and recorded as a reduction of net income. |
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The Company also holds investments in securities of certain privately-held companies and funds, which are recorded at cost basis due to the Company’s lack of control or significant influence over such companies and funds. |
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During the six months ended June 30, 2014, the Company recorded a $1.3 million impairment charge, which is included in other expense in the consolidated statements of income. The impairment charge related to the Company’s investment in a privately-held company. Other than this investment there were no identified events or changes in circumstances that may have a significant adverse effect on the carrying value of the Company’s cost basis investments and therefore, no evaluation of impairment was performed during the six months ended June 30, 2014 on the Company’s remaining cost basis investments. |
Construction Loan Receivable | ' |
Construction Loan Receivable |
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The Company had a $255.0 million interest in a $355.0 million construction loan secured by first priority mortgages on a 1.1 million square foot laboratory, office and retail development project located in Boston, Massachusetts, which is 95% leased to Vertex Pharmaceuticals Incorporated to serve as its new corporate headquarters (the "Construction Loan"). As of December 31, 2013, the Company had invested approximately $151.8 million in the Construction Loan, which is included in other assets on the Company's consolidated balance sheets. In May 2014, the borrower repaid the then outstanding principal and accrued interest balance prior to maturity, of which the Company's portion was approximately $191.2 million. The Company also received prepayment fees of approximately $8.1 million, resulting in other revenue of $7.5 million, net of deferred loan fees write-offs. |
Lease Termination | ' |
Lease Termination |
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During the six months ended June 30, 2014 and 2013, the Company recorded lease termination revenue, net of write-offs of lease intangibles, included in other revenue on the consolidated statements of income of approximately $6.5 million and $41.3 million, respectively. Lease termination revenue for the six months ended June 30, 2014 primarily related to the early termination of leases at the Company's 4570 Executive Drive property. Lease termination revenue for the six months ended June 30, 2013 primarily related to the termination of a lease with Elan Corporation at the Company’s Science Center at Oyster Point property for which Elan paid the Company $46.5 million. The impact of the Elan lease termination was recognized through the date of the termination of the lease in April 2013. |
Management's Estimates | ' |
Management’s Estimates |
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Management has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reporting of revenue and expenses during the reporting period to prepare these consolidated financial statements in conformity with GAAP. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and reported amounts of revenue and expenses that are not readily apparent from other sources. Actual results could differ from those estimates under different assumptions or conditions. |