Investment in Real Estate

The following table summarizes the Company’s investment in real estate, at cost as of:



	December 31, 2017		December 31, 2016
Land	$	1,302,907	$	1,155,037
Building and improvements	4,480,993		4,069,005
Tenant improvements	411,706		354,940
Furniture and fixtures	8,608		4,264
Property under development	219,227		295,234
Investment in real estate, at cost⁽¹⁾	$	6,423,441	$	5,878,480

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(1)	Excludes balances related to properties that have been classified as held for sale.

Acquisitions

The following table summarizes the information on the acquisitions completed in 2017 and 2016:

Property

Submarket

Segment

Month of Acquisition

Square Feet

Purchase Price⁽¹⁾(in millions)

Sunset Las Palmas Studios⁽²⁾

Hollywood

Media and Entertainment

May 2017

369,000

200.0

11601 Wilshire land⁽³⁾

West Los Angeles

Office

June 2017

N/A

50.0

6666 Santa Monica⁽⁴⁾

Hollywood

Media and Entertainment

June 2017

4,150

3.2

Total acquisitions in 2017

373,150

253.2

11601 Wilshire⁽⁵⁾

West Los Angeles

Office

July 2016

500,475

311.0

Hill7⁽⁶⁾

South Lake Union

Office

October 2016

285,680

179.8

Page Mill Hill⁽⁷⁾

Palo Alto

Office

December 2016

182,676

150.0

Total acquisitions in 2016

968,831

640.8

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(1)	Represents purchase price before certain credits, prorations and closing costs.

(2)

The property consists of stages, production office and support space on 15 acres near Sunset Gower Studios and Sunset Bronson Studios. The purchase price above does not include equipment purchased by the Company for $2.8 million, which was transacted separately from the studio acquisition. In April 2017, the Company drew $150.0 million under the unsecured revolving credit facility to fund the acquisition.


(3)	On July 1, 2016 the Company purchased a partial interest in land held as a tenancy in common in conjunction with its acquisition of the 11601 Wilshire property. The land interest held as a tenancy in common was accounted for as an equity method investment. On June 15, 2017, the Company purchased the remaining interest, which was fair valued and allocated to land and building.


(4)	This parcel is adjacent to the Sunset Las Palmas Studios property.


(5)	Previously owned by an affiliate of Blackstone, the property has served as the Company’s corporate headquarters since its IPO. The Company funded this acquisition with proceeds from the unsecured revolving credit facility.


(6)	The Company purchased the property through a joint venture with the Canadian Pension Plan Investment Board. The Company has a 55% ownership interest in the consolidated joint venture. In conjunction with the acquisition, the joint venture closed a secured non-recourse loan in the amount of $101.0 million.


(7)	The Company funded this acquisition with proceeds from the unsecured revolving credit facility.

The Company’s acquisitions in 2017 did not meet the definition of a business and were therefore accounted for as asset acquisitions. In accordance with asset acquisitions, the purchase price includes capitalized acquisition costs. The following table represents the Company’s final aggregate purchase price accounting, as of the respective acquisition dates, for each of the Company’s acquisitions completed in 2017:



	Sunset Las Palmas Studios⁽¹⁾		11601 Wilshire land		6666 Santa Monica		Total
Investment in real estate	$	202,723	$	50,034	$	3,091	$	255,848
Deferred leasing costs and in-place lease intangibles⁽²⁾	1,741		—		145		1,886
Total assets assumed	$	204,464	$	50,034	$	3,236	$	257,734

_____________


(1)	The purchase price allocation includes equipment purchased by the Company of $2.8 million.


(2)	Represents weighted-average amortization period of 1.2 years.

The following table represents the final purchase price accounting for each of the Company’s acquisitions completed in 2016:



	11601 Wilshire			Hill7			Page Mill Hill			Total
Investment in real estate, net	$	292,382		$	173,967		$	131,402		$	597,751
Land interest⁽¹⁾	7,836			—			—			7,836
Above-market leases⁽²⁾	167			—			307			474
Below-market ground leases⁽³⁾	212			—			12,125			12,337
Deferred leasing costs and lease intangibles⁽⁴⁾	13,884			7,617			14,697			36,198
Below-market leases⁽⁵⁾	(6,562		)	(1,417		)	(8,636		)	(16,615		)
Net asset and liabilities assumed	$	307,919		$	180,167		$	149,895		$	637,981

_____________


(1)	Represents the fair value of the Company’s interest in the land which was included in investment in unconsolidated entities in the Consolidated Balance Sheets at December 31, 2016. On June 15, 2017, the Company purchased the remaining interest, which was fair valued and allocated to land and building. Refer to the 2017 acquisitions above for details.


(2)	Represents weighted-average amortization period of 5.4 years.


(3)	Represents weighted-average amortization period of 33.2 years.


(4)	Represents weighted-average amortization period of 5.8 years.


(5)	Represents weighted-average amortization period of 6.4 years.

Dispositions

The following table summarizes the properties sold in 2017, 2016 and 2015. These properties were considered non-strategic to the Company’s portfolio:



Property	Month of Disposition	Square Feet	Sales Price⁽¹⁾ (in millions)
222 Kearny	February 2017	148,797	$	51.8
3402 Pico	March 2017	50,687	35.0
Pinnacle I and Pinnacle II⁽²⁾	November 2017	623,777	350.0
Total dispositions in 2017		823,261	$	436.8

Bayhill Office Center	January 2016	554,328	$	215.0
Patrick Henry	April 2016	70,520	19.0
One Bay Plaza	June 2016	195,739	53.4
12655 Jefferson	November 2016	100,756	80.0
Total dispositions in 2016⁽³⁾		921,343	$	367.4

First Financial	March 2015	223,679	$	89.0
Bay Park Plaza	September 2015	260,183	90.0
Total dispositions in 2015⁽⁴⁾		483,862	$	179.0

_____________


(1)	Represents gross sales price before certain credits, prorations and closing costs.


(2)	The consolidated joint venture that owned Pinnacle I and Pinnacle II sold the properties to affiliates of Blackstone. In conjunction with the sale, the $216.0 million debt secured by these properties was assumed by the purchasers.


(3)	Excludes the sale of an option to acquire land at 9300 Culver on December 6, 2016.


(4)	Excludes the 45% ownership interest in 1455 Market completed on January 7, 2015.

The disposition of these properties resulted in gains of $45.6 million, $30.4 million and $30.5 million for the years ended December 31, 2017, 2016 and 2015, respectively. Included in gains on sale of real estate line item on the Consolidated Statements of Operations in 2016 is a gain of $7.5 million related to a sale of an option to purchase land at 9300 Culver.

Held for sale

As of December 31, 2017, the Company had four properties that met the criteria to be classified as held for sale. The following table summarizes properties classified as held for sale as of December 31, 2017:



Property	Purchase and Sale Executed	Square Feet	Sales Price⁽¹⁾ (in millions)
2180 Sand Hill	November 2017	45,613	$	82.5
2600 Campus Drive (building 6 of Peninsula Office Park)	December 2017	63,050	22.5
Embarcadero Place	December 2017	197,402	136.0
9300 Wilshire	December 2017	61,422	13.8
Total		367,487	$	254.8

____________


(1)	Represents gross sales price before certain credits, prorations and closing costs.

As of December 31, 2016, the Company had eight properties that met the criteria to be classified as held for sale which includes the properties sold during 2017.

The following table summarizes the components of assets and liabilities associated with real estate held for sale as of:



	December 31, 2017		December 31, 2016
ASSETS
Investment in real estate, net	$	204,895	$	580,261
Accounts receivable, net	85		183
Straight-line rent receivables, net	2,234		8,849
Deferred leasing costs and lease intangible assets, net	4,063		23,078
Prepaid expenses and other assets, net	58		2,803
Assets associated with real estate held for sale	$	211,335	$	615,174

LIABILITIES
Notes payable, net	$	—	$	214,684
Accounts payable and accrued liabilities	782		8,816
Lease intangible liabilities, net	95		6,890
Security deposits and prepaid rent	1,339		6,233
Liabilities associated with real estate held for sale	$	2,216	$	236,623