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Basis of Presentation and Summary of Significant Accounting Policies | 6 Months Ended
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Jun. 30, 2017
Accounting Policies [Abstract] |
Basis of Presentation and Summary of Significant Accounting Policies | Basis of Presentation and Recently Issued Accounting Pronouncements The accompanying consolidated financial statements reflect the consolidated financial position of the Company as of June 30, 2017 and December 31, 2016 and the consolidated results of its operations and cash flows for the three and six months ended June 30, 2017 and 2016. These consolidated financial statements have been prepared in accordance with GAAP which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates, judgments and assumptions are required in a number of areas, including, but not limited to, evaluating the impairment of long-lived assets, allocating the purchase price of acquired assets, determining the fair value of debt and evaluating the collectability of accounts receivable. The Company bases these estimates, judgments and assumptions on historical experience and various other factors that the Company believes to be reasonable under the circumstances. Actual results may differ from these estimates. Reclassifications Certain reclassifications have been made to the consolidated statements of operations and comprehensive income (loss) for the three and six months ended June 30, 2016 to conform to the 2017 presentation. These are as follows:
• | the reclassification of fees earned from providing property management, asset management, leasing commissions and other services to our unconsolidated joint venture partnerships from other income to other fee income for the three and six months ended June 30, 2016 of $988 and $2,082, respectively; and
• | the reclassification of depreciation and amortization incurred on corporate level assets from general and administrative expenses to depreciation and amortization of $241 and $474 for the three and six months ended June 30, 2016, respectively, of which $28 and $60 was included as part of net income (loss) from discontinued operations for the three and six months ended June 30, 2016, respectively.
In addition, certain reclassifications have been made to the consolidated statements of operations and comprehensive income (loss) for the three and six months ended June 30, 2016 to reflect the results of Highlands (spun off on April 28, 2016) and University House (sold on June 21, 2016) as discontinued operations. Recently Issued Accounting Pronouncements Adopted In January 2017, the FASB issued ASU No. 2017-01, Clarifying the Definition of a Business, with the objective of providing guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The revised guidance will result in many real estate transactions being classified as asset acquisitions with transaction costs being capitalized. The guidance is effective beginning January 1, 2018. Early adoption is permitted. The Company early adopted ASU No. 2017-01 effective as of October 1, 2016. In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation, which outlines improvements to Employee Share-Based Payment Accounting. The new standard impacts certain aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statements of cash flows. The Company has concluded that its adoption of ASU No. 2016-09, as issued, did not have a significant impact on the consolidated financial statements. Recently Issued Accounting Pronouncements Not Yet Adopted In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in GAAP when it becomes effective, although it will not affect the accounting for revenue deemed to be related to lease components of contracts. In April 2015, the FASB approved an amendment to the ASU, deferring the effective date one year to annual reporting periods beginning after December 15, 2017 for public entities. The standard permits the use of either the retrospective or cumulative effect transition method. Early adoption is prohibited. Most significantly for the real estate industry, revenue deemed to be related to non-lease components of contracts is within the scope of the new standard. A majority of the Company’s tenant-related revenue is related to lease components, and will be governed by the recently issued leasing guidance discussed below. As a result, while the total revenue recognized over time would not differ under the new guidance, the recognition pattern and presentation of revenue related to non-lease components would be different. The Company anticipates expanded quantitative and qualitative disclosures regarding revenue recognition will be required for contracts that are subject to this guidance. However, the Company may elect certain practical expedients of the recently issued leasing guidance. As a result, the Company may generally not need to revisit historical accounting for leases executed prior to the leasing guidance effective date, which will be effective for annual reporting periods beginning after December 15, 2018. The Company is continuing to evaluate this guidance and it does not expect its adoption will have a significant impact on the consolidated financial statements. The Company is also evaluating whether it will adopt this guidance on a retrospective basis or a modified retrospective basis. In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which revises an entity's accounting related to: (i) the classification and measurement of investments in equity securities; (ii) the presentation of certain fair value changes for financial liabilities measured at fair value; and (iii) amends certain disclosure requirements associated with the fair value of financial instruments, including eliminating the requirement for public business entities to disclose the method and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The Company is continuing to evaluate this guidance and does not expect its adoption will have a significant impact on the consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases, amending the existing accounting standards for lease accounting for both parties to a lease contract (i.e. lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset ("ROU") and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. ASU No. 2016-02 will be effective for annual reporting periods beginning after December 15, 2018, and early adoption is permitted as of the standard's issuance date. The new standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain practical expedients available. On June 21, 2017 the FASB met to discuss an implementation question related to the adoption of ASU No. 2014-09 and ASU No. 2016-02. The FASB clarified that companies will not need to revisit the allocation of contract consideration to lease and non-lease components within the scope of ASU No. 2016-02 when an entity adopts ASU No. 2014-09. This clarification is limited to situations where companies decide not to early adopt ASU No. 2016-02 coincident with ASU No. 2014-09. Based on this clarification, if the Company elects the package of practical expedients, it will not need to revisit historical accounting for leases. Therefore, ASU No. 2016-02 would only apply to new leases executed after the effective date of January 1, 2019. The Company will continue to evaluate the impact this guidance will have on its financial position and results of operations prior to it becoming effective. As a lessee, the Company does not expect this standard will have a material effect on the consolidated financial statements. While the Company continues to assess the effect of adoption as a lessee, it currently believes the most significant change relates to the recognition of a new ROU asset and lease liability on the consolidated balance sheets for its corporate office leases, as well as the ground lease agreement the Company is the lessee for land underneath a building at a multi-tenant retail asset (see Note 12). Currently, the Company accounts for both the office and the ground lease arrangement as operating leases and they are not material to the Company’s consolidated financial statements. As a lessor, the Company believes substantially all of the Company's leases will continue to be classified as operating leases under the new standard. Common area maintenance ("CAM"), utility recovery services, and non-routine major maintenance provided for in real estate contracts will be accounted for as non-lease components within the scope of the new revenue standard. As a result, we will be required to recognize revenues associated with real estate leases separately from revenues associated with CAM, utility recovery services, or non-routine major maintenance. The Company also has certain lease arrangements with its tenants for space at its retail assets in which the contractual amounts due under the lease from the lessee are not allocated between the rental and expense reimbursement components ("Gross Leases"). The aggregate revenue earned under Gross Leases is presented as rental income in the consolidated statements of operations. Under the new standard, the Company anticipates it will be required to allocate the embedded revenue associated with these reimbursements under its Gross Leases, which represent an immaterial portion of the Company’s lease portfolio, and separately present such amounts in its consolidated statements of operations. The Company is continuing to evaluate whether the variable payment provisions in the new lease standard, or the allocation and recognition provisions of the new revenue standard, will affect the timing of recognition for the Company’s lease and non-lease revenue. Lastly, due to the new standard’s narrowed definition of initial direct costs, the Company expects to expense as incurred certain lease origination costs currently capitalized and amortized to expense over the lease term. However, the Company does not believe this change will have a material impact on its consolidated financial statements. The Company has not selected an adoption date and will continue to evaluate the impact of this guidance until it is adopted. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows. The new guidance is intended to reduce the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The core principle of the ASU requires the classification of eight specific issues identified under ASC 230, Statement of Cash Flows, to be presented as either financing, investing or operating, or some combination thereof, depending upon the nature of the cash flows. ASU No. 2016-15 will be effective for annual reporting periods, including interim periods within those annual periods, beginning after December 15, 2017, and early adoption is permitted. Entities are required to use a retrospective transition approach for each period presented. The presentation of distributions from equity method investments may be impacted as a result of the Company adopting this guidance. The Company is continuing to evaluate this guidance and does not expect its adoption will have a significant impact on the consolidated financial statements. The Company expects to adopt this guidance on January 1, 2018. In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows. This new guidance is intended to reduce the existing diversity in practice in how certain transfers between cash and restricted cash are classified as operating, investing, or financing activities within the statement of cash flows. ASU No. 2016-18 will be effective for annual reporting periods beginning after December 31, 2017, and interim periods within those fiscal years. Early adoption is permitted. This guidance requires a retrospective transition method of adoption for each period presented. The Company is continuing to evaluate this guidance and does not expect its adoption will have a significant impact on the consolidated financial statements. The Company expects to adopt this guidance on January 1, 2018.

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