Investments in Real Property | 6 Months Ended |
Jun. 30, 2014 |
Investments in Real Property [Abstract] | ' |
Investments in Real Property | ' |
3. INVESTMENTS IN REAL PROPERTY |
Our consolidated investments in real property consist of investments in office, industrial and retail properties. The following tables summarize our consolidated investments in real property as of June 30, 2014 and December 31, 2013 (amounts in thousands): |
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Real Property | | Land | | | Building and Improvements | | | Intangible Lease Assets | | | Total Investment Amount | | | Intangible Lease Liabilities | | | Net Investment Amount |
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As of June 30, 2014: | | | | | | | | | | | | | | | | | |
Office | $ | 226,091 | | $ | 759,612 | | $ | 357,043 | | $ | 1,342,746 | | $ | -15,799 | | $ | 1,326,947 |
Industrial | | 30,619 | | | 202,538 | | | 51,999 | | | 285,156 | | | -41,011 | | | 244,145 |
Retail | | 232,617 | | | 434,559 | | | 81,167 | | | 748,343 | | | -52,460 | | | 695,883 |
Total gross book value | | 489,327 | | | 1,396,709 | | | 490,209 | | | 2,376,245 | | | -109,270 | | | 2,266,975 |
Accumulated depreciation/amortization | | - | | | -180,526 | | | -308,747 | | | -489,273 | | | 34,877 | | | -454,396 |
Total net book value | $ | 489,327 | | $ | 1,216,183 | | $ | 181,462 | | $ | 1,886,972 | | $ | -74,393 | | $ | 1,812,579 |
As of December 31, 2013: | | | | | | | | | | | | | | | | | |
Office | $ | 232,117 | | $ | 769,654 | | $ | 365,314 | | $ | 1,367,085 | | $ | -15,861 | | $ | 1,351,224 |
Industrial (1) | | 51,678 | | | 359,800 | | | 66,877 | | | 478,355 | | | -46,626 | | | 431,729 |
Retail | | 227,218 | | | 420,070 | | | 77,752 | | | 725,040 | | | -51,059 | | | 673,981 |
Total gross book value | | 511,013 | | | 1,549,524 | | | 509,943 | | | 2,570,480 | | | -113,546 | | | 2,456,934 |
Accumulated depreciation/amortization | | - | | | -207,966 | | | -294,881 | | | -502,847 | | | 35,997 | | | -466,850 |
Total net book value | $ | 511,013 | | $ | 1,341,558 | | $ | 215,062 | | $ | 2,067,633 | | $ | -77,549 | | $ | 1,990,084 |
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| -1 | | Includes $21.1 million in land, $157.7 million in building and improvements, $14.9 million in intangible lease assets, and $5.6 million in intangible lease liabilities, before accumulated depreciation on assets of $50.6 million and accumulated amortization of intangible lease liabilities of $2.5 million, related to 12 industrial properties classified as held for sale in the accompanying balance sheet as of December 31, 2013. | | | | | | | | | | | | | | |
Acquisitions |
On May 28, 2014, we acquired a 100% interest in a 138,000 square foot retail property in the Boston market (“Durgin Square”). As of June 30, 2014, we have made an allocation of the fair value of the acquired assets and liabilities of Durgin Square to land, building, improvements and intangible lease assets and liabilities. Based on this allocation of the $24.7 million in estimated fair value of the acquired net assets of Durgin Square, we attributed approximately $7.2 million to land, approximately $16.0 million to building and improvements, approximately $5.1 million to intangible lease assets, and approximately $3.6 million to intangible lease liabilities. The weighted-average amortization periods for the intangible lease assets and intangible lease liabilities were approximately 5.4 years and 17.3 years, respectively, at the acquisition date. We have not made any material adjustments related to this acquisition since the acquisition date. |
For the three and six months ended June 30, 2014, our consolidated statement of income includes aggregate revenue of $256,000 and net operating income (as defined in Note 10) of $202,000 attributable to Durgin Square. |
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Dispositions |
During the six months ended June 30, 2014, we disposed of the following properties (dollar amounts and square footage in thousands): |
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Type of Property | Market | DPF Ownership | Building Square Feet | Disposition Date | Gain on Sale | | | | | | | | | | | |
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2014 Dispositions | | | | | | | | | | | | | | | | | |
Industrial Portfolio | Various(1) | 92.50% | 3,387 | 22-Jan-14 | $ | 29,545 | | | | | | | | | | | |
Retail | Boston, MA | 100.00% | 110 | 18-Feb-14 | | 2,276 | | | | | | | | | | | |
Office | Little Rock, AR | 100.00% | 102 | 25-Feb-14 | | 1,350 | | | | | | | | | | | |
Land Parcel | Denver, CO | 100.00% | - | 14-Apr-14 | | 93 | | | | | | | | | | | |
Office | East Bay, CA | 100.00% | 60 | 13-Jun-14 | | 2,755 | | | | | | | | | | | |
| | | 3,659 | | $ | 36,019 | | | | | | | | | | | |
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(1)Industrial portfolio included twelve properties located in the following markets: Atlanta, GA, Central Pennsylvania, Cincinnati, OH, Columbus, OH, Dallas, TX, Indianapolis, IN, and Minneapolis/St. Paul, MN. |
Discontinued Operations |
We present the results of operations and the respective aggregate net gains (losses), of (i) any property or group of properties that were disposed or classified as held for sale as of December 31, 2013 when the operations and cash flows have been (or will be) eliminated from our ongoing operations and we will not have any significant continuing involvement, and (ii) any property or group of properties, the disposal of which would represent a strategic shift that has (or will have) a major effect on our operations and financial results, when such property (or group of properties) have been disposed of or classified as held for sale, as discontinued operations in our accompanying statements of income. Interest expense is included in discontinued operations only if it is directly attributable to these operations or properties. Discontinued operations for the three and six months ended June 30, 2014 include the results of operations and net gain on the disposition of 12 properties classified as held for sale as of December 31, 2013. Properties sold or classified as held for sale after December 31, 2013 are not classified as discontinued operations unless the sale or classification as held for sale meets the new accounting requirements. Discontinued operations for the three and six months ended June 30, 2013 include (i) the results of operations of the 13 properties disposed of during the year ended 2013, (ii) the results of operations of the 12 properties classified as held for sale as of December 31, 2013 and subsequently disposed of, and (iii) the aggregate net gain on dispositions recorded during the three and six months ended June 30, 2013. The following table summarizes amounts recorded as discontinued operations (amounts in thousands): |
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| | For the Three Months Ended June 30, | | For the Six Months Ended June 30, | | | | | |
| | | 2014 | | | 2013 | | | 2014 | | | 2013 | | | | | |
Revenues | | $ | -26 | | $ | 12,801 | | $ | 969 | | $ | 28,839 | | | | | |
Rental expense | | | 27 | | | -5,004 | | | -340 | | | -11,436 | | | | | |
Real estate depreciation and amortization expense | | | - | | | -6,960 | | | - | | | -16,224 | | | | | |
Interest expense | | | - | | | -4,060 | | | -296 | | | -9,661 | | | | | |
Other expenses | | | -8 | | | -33 | | | -12 | | | -100 | | | | | |
Income (loss) from discontinued operations | | | -7 | | | -3,256 | | | 321 | | | -8,582 | | | | | |
Gain on disposition, net of taxes | | | 149 | | | 22,017 | | | 29,678 | | | 23,230 | | | | | |
Discontinued operations, net of taxes | | | 142 | | | 18,761 | | $ | 29,999 | | $ | 14,648 | | | | | |
Discontinued operations attributable to noncontrolling interests | | | -10 | | | -1,324 | | | -4,462 | | | -970 | | | | | |
Discontinued operations attributable to common stockholders | | $ | 132 | | $ | 17,437 | | $ | 25,537 | | $ | 13,678 | | | | | |
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The following table summarizes capital expenditures and significant operating and investing noncash items related to our discontinued operations (amounts in thousands): |
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| | For the Three Months Ended June 30, | | For the Six Months Ended June 30, | | | | | |
| | | 2014 | | | 2013 | | | 2014 | | | 2013 | | | | | |
Capital expenditures | | $ | - | | $ | 2,608 | | $ | - | | $ | 5,406 | | | | | |
Noncash items: | | | | | | | | | | | | | | | | | |
Straight-line rent adjustments | | | - | | | 1,237 | | | -41 | | | 2,520 | | | | | |
Amortization of above-market lease assets | | | - | | | -135 | | | - | | | -335 | | | | | |
Amortization of below-market lease liabilities | | | - | | | 339 | | | - | | | 820 | | | | | |
Non-cash disposition of real property | | | - | | | 193,066 | | | 80,361 | | | 193,066 | | | | | |
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The following table summarizes the carrying amounts of the major classes of assets and liabilities included in our discontinued operations and classified as held for sale as of December 31, 2013. We did not have any assets or related liabilities classified as held for sale as of June 30, 2014 (amounts in thousands): |
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| | As of December 31, 2013 | | | | | | | | | | | | | | |
Land | | $ | 21,060 | | | | | | | | | | | | | | |
Building and improvements | | | 157,679 | | | | | | | | | | | | | | |
Intangible lease assets | | | 14,877 | | | | | | | | | | | | | | |
Accumulated depreciation | | | -50,625 | | | | | | | | | | | | | | |
Other assets, net | | | 3,185 | | | | | | | | | | | | | | |
Assets held for sale | | $ | 146,176 | | | | | | | | | | | | | | |
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Mortgage notes and other secured borrowings | | $ | 80,428 | | | | | | | | | | | | | | |
Intangible lease liabilities, net | | | 3,136 | | | | | | | | | | | | | | |
Other liabilities | | | 3,104 | | | | | | | | | | | | | | |
Liabilities related to assets held for sale | | $ | 86,668 | | | | | | | | | | | | | | |
Rental Revenue |
The following table summarizes the adjustments to rental revenue related to the amortization of above-market lease assets, below-market lease liabilities, and straight-line rental adjustments for the three and six months ended June 30, 2014 and 2013. In addition, the following table includes tenant recovery income received from tenants for real estate taxes, insurance and other property operating expenses and recognized as rental revenue (amounts in thousands): |
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| | For the Three Months Ended June 30, | | For the Six Months Ended June 30, | | | | | |
| | 2014 | | 2013 | | 2014 | | 2013 | | | | | |
Straight-line rent adjustments | | $ | 485 | | $ | 2,759 | | $ | 1,790 | | $ | 5,727 | | | | | |
Above-market lease assets | | | -1,713 | | | -1,859 | | | -3,437 | | | -3,784 | | | | | |
Below-market lease liabilities | | | 1,561 | | | 1,943 | | | 3,392 | | | 4,045 | | | | | |
Total increase to rental revenue | | $ | 333 | | $ | 2,843 | | $ | 1,745 | | $ | 5,988 | | | | | |
Tenant recovery income (1) | | $ | 7,682 | | $ | 8,553 | | $ | 15,884 | | $ | 17,342 | | | | | |
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(1)Tenant recovery income presented in this table excludes real estate taxes that were paid directly by our tenants that are subject to triple net lease contracts. The amount of such payments were approximately $3.1 million and $3.2 million during the three months ended June 30, 2014 and 2013, respectively, and $6.2 million and $6.4 million during the six months ended June 30, 2014 and 2013, respectively. |
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