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Investment in Real Estate
 9 Months Ended
Sep. 30, 2018
Real Estate [Abstract]  
Investment in Real Estate Investment in Real Estate
Real estate held for investment

The following table summarizes the Company’s investment in real estate, at cost as of:
September 30, 2018December 31, 2017
Land $1,365,387 $1,204,700 
Building and improvements 4,593,702 4,389,846 
Tenant improvements 469,556 397,012 
Furniture and fixtures 8,965 8,576 
Property under development 252,764 219,227 
INVESTMENT IN REAL ESTATE, AT COST(1)
$6,690,374 $6,219,361 
_____________ 
1. Excludes balances related to properties that have been classified as held for sale.

Acquisitions

The Company’s acquisitions are accounted for using the acquisition method. The results of operations for each of these acquisitions are included in the Company’s Consolidated Statements of Operations from the date of acquisition.

The Company evaluates each acquisition to determine if the integrated set of assets and activities acquired meet the definition of a business and need to be accounted for as a business combination in accordance with ASC 805, Business Combinations. An integrated set of assets and activities would fail to qualify as a business if either (i) substantially all of the fair value of the gross assets acquired is concentrated in either a single identifiable asset or a group of similar identifiable assets or (ii) the integrated set of assets and activities is lacking, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs (i.e., revenue generated before and after the transaction). An acquired process is considered substantive if (i) the process includes an organized workforce (or includes an acquired contract that provides access to an organized workforce) that is skilled, knowledgeable and experienced in performing the process, (ii) the process cannot be replaced without significant cost, effort, or delay or (iii) the process is considered unique or scarce.

The Company assesses fair value based on Level 2 and Level 3 inputs within the fair value framework, which includes estimated cash flow projections that utilize appropriate discount, capitalization rates, renewal probability and available market information, which includes market rental rate and market rent growth rates. Estimates of future cash flows are based on a number of factors, including historical operating results, known and anticipated trends and market and economic conditions.

The fair value of tangible assets of an acquired property considers the value of the property as if it were vacant. The fair value of acquired “above- and below-” market leases are based on the estimated cash flow projections utilizing discount rates that reflect the risks associated with the leases acquired. The amount recorded is based on the present value of the difference between (i) the contractual amounts to be paid pursuant to each in-place lease and (ii) management’s estimate of fair market lease rates for each in-place lease, measured over a period equal to the remaining term of the lease for above-market leases and the initial term plus the extended below-market term for any leases with below-market renewal options. Other intangible assets acquired include amounts for in-place lease values that are based on the Company’s evaluation of the specific characteristics of each tenant’s lease. Factors considered include estimates of carrying costs during hypothetical expected lease-up periods, market conditions and costs to execute similar leases. In estimating carrying costs, the Company includes estimates of lost rents at market rates during the hypothetical expected lease-up periods, which are dependent on local market conditions. In estimating costs to execute similar leases, the Company considers leasing commissions, legal and other related costs. The fair value of any favorable/unfavorable mark-to-market adjustment of debt assumed is based on the estimated cash flow projections utilizing interest rates available for the issuance of debt with similar terms and remaining maturities. The amount recorded is based on the present value of the difference between (i) the contractual amounts to be paid pursuant to the assumed debt terms (ii) management’s estimate of fair market, measured over a period equal to the remaining term of the debt.
The following table summarizes the information on the acquisitions completed during the nine months ended September 30, 2018:
Property
Submarket
Segment
Date of Acquisition
Square Feet (unaudited)
Purchase Price(1) (in millions)
6605 Eleanor Avenue(2)
Hollywood Studio 6/7/201822,823 $18.0 
1034 Seward Street(2)
Hollywood
Studio
6/7/201818,673 12.0 
One Westside and 10850 Pico(3)
West Los Angeles Office 8/31/2018595,987 190.0 
TOTAL ACQUISITIONS
637,483 $220.0 
_____________ 
1. Represents purchase price before certain credits, prorations and closing costs.
2. The properties are adjacent to, and now form part of, the Sunset Las Palmas Studios property and consist of sound stages, production office and support space.
3. The Company purchased the property through a joint venture with Macerich. The Company owns 75% of the ownership interest in the consolidated joint venture.

The Company’s acquisitions 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 the nine months ended September 30, 2018:
6605 Eleanor Avenue 1034 Seward Street One Westside and 10850 Pico 
Total
Total consideration 
Cash consideration for real estate investments $18,071 $12,095 $40,986 $71,152 
Cash consideration for U.S. Government securities — — 149,176 149,176 
Debt assumed — — 139,003 139,003 
Redeemable non-controlling interest in consolidated real estate entity — — 12,749 12,749 
TOTAL CONSIDERATION $18,071 $12,095 $341,914 $372,080 
Allocation of consideration 
Investment in real estate $18,071 $12,095 $196,444 $226,610 
U.S. Government securities — — 149,176 149,176 
Deferred leasing costs and in-place lease intangibles(1)
— — 826 826 
Above-market leases(2)
— — 605 605 
Below-market leases(3)
— — (5,137)(5,137)
TOTAL $18,071 $12,095 $341,914 $372,080 
_____________ 
1. Represents weighted-average amortization period of 4.22 years.  
2. Represents weighted-average amortization period of 5.42 years.
3. Represents weighted-average amortization period of 17.19 years.

On October 9, 2018, the Company purchased, through a joint venture with Allianz, the Ferry Building property located in San Francisco, California. On October 23, 2018, the Company purchased the 6660 Santa Monica property located in Hollywood, California. See Note 19 for details.
Dispositions

The following table summarizes the properties sold during the nine months ended September 30, 2018. These properties were non-strategic assets to the Company’s portfolio:
Property
Date of Disposal
Approximate Square Feet
Sales Price(1) 
(in millions)
Embarcadero Place 1/25/2018197,402 $136.0 
2600 Campus Drive (building 6 of Peninsula Office Park)
1/31/201863,050 22.5 
2180 Sand Hill 3/1/2018 45,613 82.5 
9300 Wilshire
4/10/201861,422 13.8 
Peninsula Office Park 7/27/2018447,739 210.0 
TOTAL DISPOSITIONS 815,226 $464.8 
_________________ 
1. Represents gross sales price before certain credits, prorations and closing costs.

These dispositions met the criteria in ASC 610 for recognizing gains of $3.7 million and $43.3 million for the three and nine months ended September 30, 2018, which is included in the gains on sale of real estate line item in the Consolidated Statements of Operations.

Held for Sale

The Company had five properties classified as held for sale as of December 31, 2017. All five properties have been disposed of during 2018. The Company had no properties classified as held for sale as of September 30, 2018.

The following table summarizes the components of assets and liabilities associated with real estate held for sale as of:
September 30, 2018December 31, 2017
ASSETS 
Investment in real estate, net $— $396,846 
Accounts receivable, net  — 213 
Straight-line rent receivables, net — 5,225 
Deferred leasing costs and lease intangible assets, net — 9,589 
Prepaid expenses and other assets, net — 58 
ASSETS ASSOCIATED WITH REAL ESTATE HELD FOR SALE $— $411,931 
LIABILITIES 
Accounts payable, accrued liabilities and other $— $1,808 
Lease intangible liabilities, net — 485 
Security deposits and prepaid rent — 2,610 
LIABILITIES ASSOCIATED WITH REAL ESTATE HELD FOR SALE $— $4,903 

Impairment of Long-Lived Assets

No impairment indicators have been noted and the Company recorded no impairment charges for the nine months ended September 30, 2018.