Real Estate

As discussed in Note 4, upon closing of the Combination on January 31, 2018, the Company contributed its interests in the CLNY Investment Entities to Colony Credit and deconsolidated these entities, including $219.7 million of primarily net lease properties.

The Company's real estate held for investment was as follows:



(In thousands)	December 31, 2018			December 31, 2017
Land	$	1,950,412		$	2,011,794
Buildings and improvements	11,895,642			12,403,794
Tenant improvements	163,397			134,709
Furniture, fixtures and equipment	389,969			383,855
Construction in progress	155,511			108,403
	14,554,931			15,042,555
Less: Accumulated depreciation	(935,917		)	(578,297		)
Real estate assets, net	$	13,619,014		$	14,464,258

Real Estate Sales

Results from sales of real estate were as follows:



	Year Ended December 31,
(In thousands)	2018		2017		2016
Proceeds from sales of real estate	$	864,347	$	1,607,806	$	390,943
Gain on sale of real estate	167,231		137,370		73,616

Real estate sold or classified as held for sale during the years ended December 31, 2018 and 2017 did not constitute discontinued operations, other than the sale of a manufactured housing portfolio in 2017 that was acquired through the Merger and certain properties in the THL Hotel Portfolio which qualified as held for sale upon acquisition in July 2017, as discussed in Note 18.

Real estate held for sale is presented in Note 10.

Real Estate Acquisitions

The following table summarizes the Company's real estate acquisitions, excluding real estate acquired as part of business combinations discussed in Note 3.



($ in thousands)						Purchase Price Allocation ⁽¹⁾
	Acquisition Date	Property Type and Location	Number of Buildings	Purchase Price ⁽¹⁾		Land and Improvements		Building and Improvements		Lease Intangible Assets		Lease Intangible Liabilities
Year Ended December 31, 2018
Asset Acquisitions⁽²⁾
	September	Healthcare—United Kingdom⁽³⁾	1	$	24,444	$	10,506	$	12,458	$	1,480	$	—
	November	Office and Industrial—France	220	478,844		125,949		314,661		38,234		—
	Various	Industrial—Various in U.S.⁽⁴⁾	40	569,442		131,334		412,900		30,183		(4,975		)
				$	1,072,730	$	267,789	$	740,019	$	69,897	$	(4,975	)
Year Ended Ended December 31, 2017
Asset Acquisitions
	January	Industrial—Spain	2	$	10,374	$	3,855	$	5,564	$	955	$	—
	June	Office—Los Angeles, CA ⁽⁵⁾	1	455,699		93,577		314,590		50,518		(2,986		)
	Various	Industrial—Various in U.S.	55	636,690		137,005		472,747		31,512		(4,574		)
				$	1,102,763	$	234,437	$	792,901	$	82,985	$	(7,560	)



($ in thousands)						Purchase Price Allocation ⁽¹⁾
	Acquisition Date	Property Type and Location	Number of Buildings	Purchase Price ⁽¹⁾		Land and Improvements		Building and Improvements		Lease Intangible Assets		Lease Intangible Liabilities
Year Ended Ended December 31, 2016
Business Combinations ⁽⁶⁾
	January	Industrial—Spain	23	$	94,403	$	33,265	$	56,585	$	5,318	$	(765	)
	April	Industrial—Massachusetts, U.S.	1	34,900		5,235		27,731		1,934		—
	May	Office—France	1	18,203		14,150		3,815		388		(150		)
	Various	Industrial—Various in U.S.	18	201,635		36,974		151,689		16,063		(3,091		)
Asset Acquisitions
	Various	Industrial—Various in U.S.	12	113,200		20,749		84,724		8,398		(671		)
				$	462,341	$	110,373	$	324,544	$	32,101	$	(4,677	)

__________


⁽¹⁾	Dollar amounts of purchase price and allocation to assets acquired and liabilities assumed are translated using foreign exchange rates as of the respective dates of acquisition, where applicable.


⁽²⁾	Useful life of real estate acquired in 2018 is 5 to 51 years for buildings, 6 to 14 years for site improvements and 4 months (based on remaining lease terms) to 10 years for both tenant improvements and lease intangibles.


⁽³⁾	Net leased senior housing acquired pursuant to a purchase option under the Company's development facility to the healthcare operator at a purchase price equivalent to the outstanding loan balance.


⁽⁴⁾	Includes acquisition of $13.1 million of land for co-development with operating partners.


⁽⁵⁾	In September 2017, 90% of equity in the property holding entity was syndicated to third party investors. The new equity partners were granted certain participation rights in the business, resulting in a deconsolidation of the investment. The interest retained by the Company is reflected as an equity method investment.


⁽⁶⁾	Prior to adoption of the new definition of a business effective October 1, 2016, real estate acquisitions with existing leases generally met the definition of a business combination.

Depreciation and Impairment

Depreciation expense on real estate was $471.6 million, $453.3 million and $108.3 million for the years ended December 31, 2018, 2017 and 2016, respectively.

Refer to Note 14 for discussion of impairment on real estate.

Property Operating Income

The components of property operating income were as follows:



	Year Ended December 31,
(In thousands)	2018		2017		2016
Rental income	$	623,785	$	672,292	$	276,404
Tenant reimbursements	143,759		138,433		65,657
Resident fee income ⁽¹⁾	275,911		286,818		—
Hotel operating income	1,204,285		1,016,294		29,021
	$	2,247,740	$	2,113,837	$	371,082

__________


⁽¹⁾	Healthcare properties that operate through management agreements with independent third-party operators through structures permitted by the REIT Investment Diversification and Empowerment Act of 2007 (“RIDEA”) allow us, through a TRS, to have direct exposure to resident fee income and incur customary related operating expenses.

Future Minimum Rents

The Company has operating leases with tenants that expire at various dates through 2061. Future contractual minimum rental payments to be received under noncancelable operating leases for real estate held for investment as of December 31, 2018 are as follows.



Year Ending December 31,	(In thousands)
2019	$	495,765
2020	464,229
2021	413,416
2022	372,432
2023	327,836
2024 and thereafter	1,123,879
Total ⁽¹⁾	$	3,197,557

__________


⁽¹⁾	Excludes hotel operating income and rents from short-term leases.

Commitments and Contractual Obligations

Purchase Commitments—At December 31, 2018, the Company had funded aggregate deposits of $6.1 million with remaining unfunded purchase commitments totaling $1.3 billion for the acquisition of 61 buildings in the industrial segment, of which four are under construction. The Company also funded a deposit of $25.1 million with remaining unfunded purchase commitment of $0.3 billion for the acquisition of a distressed hotel operator and its portfolio of six hotels in France alongside the Company's sponsored credit fund.

Guarantee Agreements—In connection with the THL Hotel Portfolio, the Company entered into guarantee agreements with various hotel franchisors, pursuant to which the Company guaranteed the payment of its obligations as a franchisee, including payments of franchise fees and marketing fees for the term of the agreements, which expire between 2027 and 2032. In the event of default or termination of the franchise agreements, the Company is liable for liquidated damages not to exceed $81 million. The Company had similar provisions related to its core hotel portfolio in the hospitality segment, but has met the required minimum payments under the respective franchise agreements and no longer has an obligation to the franchisors.

Ground Lease Obligation—In connection with real estate acquisitions, the Company assumed certain noncancelable operating ground leases as lessee or sublessee. Rents on certain ground leases are paid directly by the tenants or operators. Ground rent expense, including contingent rent, was $8.2 million, $6.7 million and $0.3 million for the years ended December 31, 2018, 2017 and 2016, respectively.

At December 31, 2018, future minimum rental payments on noncancelable ground leases, excluding any contingent rent payments, on real estate held for investment were as follows.



Year Ending December 31,	(In thousands)
2019	$	5,236
2020	5,318
2021	5,487
2022	5,877
2023	5,821
2024 and thereafter	89,276
Total	$	117,015