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Investment in Real Estate | 3 Months Ended
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Mar. 31, 2012
Investment in Real Estate [Abstract] |
Investment in Real Estate | 3. Investment in Real Estate Acquisitions During the three months ended March 31, 2012, we acquired one industrial property comprising approximately 0.4 million square feet of GLA through the purchase of the 85% equity interest in one property from the institutional investor in the 2003 Net Lease Joint Venture (see Note 4) and one land parcel. The gross agreed-upon fair value for the industrial property was $21,819, excluding costs incurred in conjunction with the acquisition of the industrial property. The acquisition was funded through the assumption of a mortgage loan, which was subsequently paid off on the date of acquisition and whose carrying value approximated fair market value, in the amount of $12,026 and a cash payment of $8,324 (85% of the net fair value of the acquisition). We accounted for this transaction as a step acquisition utilizing the purchase method of accounting. Due to the change in control that occurred, we recorded a gain of approximately $776 related to the difference between our carrying value and fair value of our equity interest on the acquisition date. The purchase price of the land parcel was approximately $1,224, excluding costs incurred in conjunction with the acquisition of the land parcel. Intangible Assets (Liabilities) Subject to Amortization in the Period of Acquisition The fair value at the date of acquisition of in-place leases, tenant relationships and below market leases recorded due to the real estate property acquired during the three months ended March 31, 2012 and 2011, which is recorded as deferred leasing intangibles, is as follows:
|  | Three Months Ended March 31, 2012 |  |  | Three Months Ended March 31, 2011 |
In-Place Leases |  | $ | 1,750 |  |  |  | N/A |
Tenant Relationships |  | $ | 1,012 |  |  |  | N/A |
Below Market Leases |  | $ | (102 | ) |  |  | N/A |
The weighted average life in months of in-place leases, tenant relationships and below market leases recorded at the time of acquisition as a result of the real estate property acquired during the three months ended March 31, 2012 and 2011 is as follows:
|  | Three Months Ended March 31, 2012 |  |  | Three Months Ended March 31, 2011 |
In-Place Leases |  |  | 118 |  |  |  | N/A |
Tenant Relationships |  |  | 178 |  |  |  | N/A |
Below Market Leases |  |  | 118 |  |  |  | N/A |
Sales and Discontinued Operations During the three months ended March 31, 2012, we sold three industrial properties comprising approximately 0.7 million square feet of GLA. Gross proceeds from the sales of the three industrial properties were approximately $20,127. The gain on sale of real estate was approximately $6,199, all of which is shown in discontinued operations. The three sold industrial properties meet the criteria to be included in discontinued operations. Therefore the results of operations and gain on sale of real estate for the three industrial properties sold are included in discontinued operations. At March 31, 2012, we had 15 industrial properties comprising approximately 2.7 million square feet of GLA and one land parcel held for sale. The results of operations of the 15 industrial properties held for sale at March 31, 2012 are included in discontinued operations. There can be no assurance that such industrial properties or land parcel held for sale will be sold. Income from discontinued operations for the three months ended March 31, 2011 reflects the results of operations of the three industrial properties that were sold during the three months ended March 31, 2012, the results of operations of 36 industrial properties that were sold during the year ended December 31, 2011, the results of operations of the 15 industrial properties identified as held for sale at March 31, 2012 and the gain on sale of real estate relating to 13 industrial properties that were sold during the three months ended March 31, 2011. The following table discloses certain information regarding the industrial properties included in our discontinued operations for the three months ended March 31, 2012 and 2011:
|  | Three Months Ended March 31, 2012 |  |  | Three Months Ended March 31, 2011 |
Total Revenues |  | $ | 1,848 |  |  | $ | 4,522 |
Property Expenses |  |  | (773 | ) |  |  | (1,996 | )
Impairment of Real Estate |  |  | (1,260 | ) |  |  | (2,727 | )
Depreciation and Amortization |  |  | (129 | ) |  |  | (864 | )
Interest Expense |  |  | — |  |  |  | (63 | )
Gain on Sale of Real Estate |  |  | 6,199 |  |  |  | 3,804 |
Provision for Income Taxes |  |  | — |  |  |  | (509 | )
Income from Discontinued Operations |  | $ | 5,885 |  |  | $ | 2,167 |
At March 31, 2012 and December 31, 2011, we had notes receivable outstanding of approximately $47,511 and $55,502, net of a discount of $303 and $319, respectively, which are included as a component of Prepaid Expenses and Other Assets, Net. At March 31, 2012 and December 31, 2011, the fair value of the notes receivable was $51,754 and $58,734, respectively. The fair value of our notes receivable was determined by discounting the future cash flows using current rates at which similar loans with similar remaining maturities would be made to other borrowers. The current market rates we utilized were internally estimated; therefore, we have concluded that our determination of fair value of our notes receivable was primarily based upon Level 3 inputs, as discussed below. Impairment Charges Fifteen industrial properties comprising approximately 2.7 million square feet of GLA and one land parcel comprising approximately 55.9 acres were classified as held for sale as of March 31, 2012. The net impairment charges for assets that qualify to be classified as held for sale at March 31, 2012 were calculated as the difference of the carrying value of the properties and land parcel over the fair value less costs to sell. On the date an asset no longer qualifies to be classified as held for sale, the carrying value must be reestablished at the lower of the estimated fair market value of the asset or the carrying value of the asset prior to held for sale classification, adjusted for any depreciation and amortization that would have been recorded if the asset had not been classified as held for sale. Catch-up depreciation and amortization has been recorded during the three months ended March 31, 2012, if applicable, for certain assets that are no longer classified as held for sale. The net impairment charges recorded during the three months ended March 31, 2012 are due to updated fair market values for certain industrial properties whose estimated fair market values have changed since December 31, 2011 and are either classified as held for sale at March 31, 2012 or were classified as held for sale at December 31, 2011, but no longer qualify to be classified as held for sale at March 31, 2012. During the three months ended March 31, 2012 and 2011, we recorded the following net non-cash impairment charges:
|  | Three Months Ended March 31, 2012 |  |  | Three Months Ended March 31, 2011 |
Operating Properties—Held for Sale and Sold Assets |  | $ | 1,260 |  |  | $ | 2,727 |
Impairment—Discontinued Operations |  | $ | 1,260 |  |  | $ | 2,727 |
Land Parcels—Held for Sale and Sold Assets |  | $ | — |  |  | $ | — |
Operating Properties—Held for Use |  |  | (14 | ) |  |  | (2,184 | )
Land Parcels—Held for Use |  |  | — |  |  |  | (595 | )
Impairment—Continuing Operations |  | $ | (14 | ) |  | $ | (2,779 | )
Total Net Impairment |  | $ | 1,246 |  |  | $ | (52 | )
The guidance for the fair value measurement provisions for the impairment of long lived assets recorded at fair value establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets for identical assets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The fair market values were determined using widely accepted valuation techniques including discounted cash flow analyses using expected cash flows, internal valuations of real estate and third party offers. For operational real estate assets, the most significant assumptions used in the discounted cash flow analyses included the discount rate, projected occupancy levels, market rental rates, capital expenditures, and the terminal capitalization rate. For the valuation of land parcels, we reviewed recent comparable sales transactions, to the extent available, or if not available, we considered older comparable transactions, adjusted upward or downward to reflect management’s assumptions about current market conditions. In all cases, members of our management team that were responsible for the individual markets where the land parcels were located determined the internal valuations. Valuations based on third party offers include bona fide contract prices and letter of intent amounts that we believe are indicative of fair value. The following tables present information about our assets that were measured at fair value on a non-recurring basis during the three months ended March 31, 2012 and 2011. The tables indicate the fair value hierarchy of the valuation techniques we utilized to determine fair value.
|  |  |  |  | Fair Value Measurements on a Non-Recurring Basis Using: |  |  |  |
Description |  | Three Months Ended March 31, 2012 |  |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  |  | Significant Other Observable Inputs (Level 2) |  |  | Unobservable Inputs (Level 3) |  |  | Total Impairment |
Long-lived Assets Held for Sale* |  | $ | 20,470 |  |  |  | — |  |  |  | — |  |  | $ | 20,470 |  |  | $ | (1,360 | )
Long-lived Assets Held and Used* |  | $ | 16,290 |  |  |  | — |  |  |  | — |  |  | $ | 16,290 |  |  |  | (190 | )
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | (1,550 | )
|  |  |  |  | Fair Value Measurements on a Non-Recurring Basis Using: |  |  |  |
Description |  | Three Months Ended March 31, 2011 |  |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  |  | Significant Other Observable Inputs (Level 2) |  |  | Unobservable Inputs (Level 3) |  |  | Total Impairment |
Long-lived Assets Held for Sale** |  | $ | 42,945 |  |  |  | — |  |  |  | — |  |  | $ | 42,945 |  |  | $ | (2,755 | )
Long-lived Assets Held and Used** |  | $ | 95,120 |  |  |  | — |  |  |  | — |  |  | $ | 95,120 |  |  |  | 1,894 |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | (861 | )
* | Excludes industrial properties for which an impairment reversal of $304 was recorded during the three months ended March 31, 2012, since the related assets are recorded at carrying value, which is lower than estimated fair value at March 31, 2012.
** | Excludes industrial properties and land parcels for which an impairment reversal of $913 was recorded during the three months ended March 31, 2011, since the related assets are recorded at carrying value, which is lower than estimated fair value at March 31, 2011.
The following table presents quantitative information about the Level 3 fair value measurements at March 31, 2012.
Quantitative Information about Level 3 Fair Value Measurements:
Description |  | Fair Value at March 31, 2012 |  |  | Valuation Technique |  | Unobservable Inputs |  | Range
One Industrial Property comprising approximately 0.01 million square feet of GLA |  | $ | 585 |  |  | Discounted Cash Flow |  | Discount Rate |  | 11.75%
|  |  |  |  |  |  |  | Market Rent Growth Rate |  | 2%
|  |  |  |  |  |  |  | Expense Growth Rate |  | 2%
|  |  |  |  |  |  |  | Rental Rates Per Square Foot (A) |  | $4.25
|  |  |  |  |  |  |  | Terminal Capitalization Rate |  | 10.00%
Fourteen Industrial Properties comprising approximately 2.1 million square feet of GLA |  | $ | 36,175 |  |  | 3 rd Party Pricing |  | (B) |  | N/A
(A) | Estimates for market rental rates upon stabilization of the property.
(B) | The fair value for the properties is based upon the value of either a third party purchase contract or third party letters of intent, both of which are subject to our corroboration for reasonableness. Certain of the properties are included in portfolios whereby the letter of intent pricing relates to the respective portfolio. The estimated purchase price for the portfolio was allocated to the individual properties within the portfolio based upon their relative fair value.

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- Definition The entire disclosure for certain real estate investment financial statements, real estate investment trust operating support agreements, real estate owned, retail land sales, time share transactions, as well as other real estate related disclosures. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 04 -Paragraph c -Subparagraph Schedule III -Article 5 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 67 -Paragraph 4, 5, 6, 7 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 03 -Paragraph 11 -Article 9 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Statement of Position (SOP) -Number 04-2 -Paragraph 41, 63, 64 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher OTS -Name Federal Regulation (FR) -Number Title 12 -Chapter V -Section 563c.102 -Paragraph 11 -Subsection I -LegacyDoc This is a non-GAAP reference that was included in the 2009 taxonomy. It will be removed from future versions of this taxonomy. Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 970 -SubTopic 360 -Section S99 -Paragraph 1 -Subparagraph (SX 210.12-28) -URI http://asc.fasb.org/extlink&oid=6590653&loc=d3e638233-123024 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 154 -Paragraph 22 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 43 -Chapter 3 -Section A -Paragraph 9 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 15 -Paragraph 28 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. 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Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 28 -Article 12 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name FASB Interpretation (FIN) -Number 46R -Paragraph 23, 24 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 03 -Paragraph 10 -Subparagraph 4 -Article 9 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Audit and Accounting Guide (AAG) -Number AAG-DEP -Chapter 11 -Paragraph 2, 6, 9-11, 18, 20 -IssueDate 2006-05-01 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 66 -Paragraph 4, 5, 37, 50, 59, 65, 95, 97 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 6 -Subparagraph a -Article 5 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Statement of Position (SOP) -Number 75-2 -Paragraph 47, 51, 52 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. 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