Real Estate

The Company's real estate assets were comprised of the following ($ in thousands):



	Net Lease			Operating Properties			Total
As of December 31, 2015
Land and land improvements, at cost	$	306,172		$	133,275		$	439,447
Buildings and improvements, at cost	1,183,723			427,371			1,611,094
Less: accumulated depreciation	(377,416		)	(79,142		)	(456,558		)
Real estate, net	1,112,479			481,504			1,593,983
Real estate available and held for sale ⁽¹⁾	—			137,274			137,274
Total real estate	$	1,112,479		$	618,778		$	1,731,257
As of December 31, 2014
Land and land improvements, at cost	$	311,890		$	146,417		$	458,307
Buildings and improvements, at cost	1,240,593			578,013			1,818,606
Less: accumulated depreciation	(364,323		)	(96,159		)	(460,482		)
Real estate, net	1,188,160			628,271			1,816,431
Real estate available and held for sale ⁽¹⁾	4,521			162,782			167,303
Total real estate	$	1,192,681		$	791,053		$	1,983,734

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(1)	As of December 31, 2015 and 2014 the Company had $137.3 million and $155.8 million, respectively, of residential properties available for sale in its operating properties portfolio.

Real Estate Available and Held for Sale—During the year ended December 31, 2015, the Company transferred net lease assets with a carrying value of $8.2 million to held for sale due to executed contracts with third parties.

During the year ended December 31, 2015, the Company transferred a commercial operating property held for sale with a carrying value of $2.9 million to held for investment due to a change in business strategy.

During the year ended December 31, 2014, the Company transferred units with a carrying value of $56.7 million to held for sale due to the conversion of hotel rooms to residential units to be sold. The Company also transferred net lease assets with a carrying value of $4.0 million to held for sale due to executed contracts with third parties.

Acquisitions—The following acquisitions of real estate were reflected in the Company's consolidated statements of cash flows for the years ended December 31, 2015, 2014 and 2013 ($ in thousands):



	For the Years Ended December 31,
	2015		2014⁽¹⁾		2013⁽²⁾
Acquisitions of real estate assets	$	—	$	4,666	$	102,364

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(1)	During the year ended December 31, 2014, the Company purchased two condominium units for $3.0 million and one land parcel for $1.7 million.

(2)

During the year ended December 31, 2013, the Company acquired a net lease asset for a purchase price of $93.6 million, including intangible assets of $36.1 million, intangible liabilities of $11.9 million and acquisition-related costs of $0.2 million, which was leased back to the seller. The Company concluded that the transaction was a real estate asset acquisition and capitalized the acquisition-related costs. The intangible assets were included in "Deferred expenses and other assets, net" and the intangible liabilities were included in "Accounts payable, accrued expenses and other liabilities" on the Company's consolidated balance sheets. The lease was classified as an operating lease. During the year ended December 31, 2014, the net lease asset was sold to the Net Lease Venture for net proceeds of $93.7 million, which approximated carrying value.

During the year ended December 31, 2015, the Company acquired, via deed-in-lieu, title to a residential property, which had a total fair value of $13.4 million and previously served as collateral for loans receivable held by the Company. No gain or loss was recorded in connection with this transaction.

During the year ended December 31, 2014, the Company acquired, via deed-in-lieu, title to three commercial operating properties which had a total fair value of $72.4 million and previously served as collateral for loans receivable held by the Company. No gain or loss was recorded in connection with these transactions. The following unaudited table summarizes the Company's pro forma revenues and net income for the years ended December 31, 2014 and 2013, as if the acquisition of the properties acquired during the year ended December 31, 2014 was completed on January 1, 2013 ($ in thousands):



	For the Years Ended December 31,
	2014			2013
	(unaudited)
Pro forma total revenues	$	466,327		$	399,885
Pro forma net income (loss)	15,351		(as revised)	(112,355		)

From the date of acquisition in May 2014 through December 31, 2014, $8.3 million in total revenues and $2.9 million in net loss of the acquiree are included in the Company’s consolidated statements of operations. The pro forma revenues and net income are presented for informational purposes only and may not be indicative of what the actual results of operations of the Company would have been assuming the transaction occurred on January 1, 2013, nor do they purport to represent the Company’s results of operations for future periods.

During the year ended December 31, 2013, the Company acquired, via foreclosure, title to a residential operating property which previously served as collateral for loans receivable held by the Company. The Company contributed the residential operating property, which had a fair value of $25.5 million, to an entity of which it owns 63%. Based on the control provisions in the partnership agreement, the Company consolidates the entity and reflects its partner's 37% share of equity in "Noncontrolling interests" on the Company's consolidated balance sheets. The acquisition was accounted for at fair value. No gain or loss was recorded in connection with this transaction.

Dispositions—During the years ended December 31, 2015, 2014 and 2013, the Company sold residential condominiums for total net proceeds of $127.9 million, $236.2 million and $269.7 million, respectively, and recorded income from sales of real estate totaling $40.1 million, $79.1 million and $82.6 million, respectively.

During the year ended December 31, 2015, the Company sold net lease assets with a carrying value of $60.8 million resulting in a net gain of $40.1 million.

During the year ended December 31, 2015, the Company sold a commercial operating property for $68.5 million to a newly formed unconsolidated entity in which the Company owns a 50.0% equity interest (refer to Note 7). The Company recognized a gain on sale of $13.6 million, reflecting the Company's share of the interest sold, which was recorded as "Income from sales of real estate" in the Company's consolidated statements of operations.

During the year ended December 31, 2015, the Company, through a consolidated entity, sold a leasehold interest in a commercial operating property for net proceeds of $93.5 million and simultaneously entered into a ground lease with an initial term of 99 years. In connection with this transaction, the Company recorded a lease incentive asset of $38.1 million, which is included in "Deferred expenses and other assets, net" on the Company's consolidated balance sheets, and deferred a gain of $5.3 million, which is included in "Accounts payable, accrued expenses and other liabilities" on the Company's consolidated balance sheets. In December 2015, the Company acquired the noncontrolling interest in the entity for $6.4 million.

During the year ended December 31, 2015, the Company sold three commercial operating properties with an aggregate carrying value of $5.3 million for net proceeds that approximated carrying value.

During the year ended December 31, 2014, the Company sold net lease assets with a carrying value of $8.0 million resulting in a gain of $6.2 million. The Company also sold a commercial operating property with a carrying value of $29.4 million resulting in a gain of $4.6 million. These gains were recorded as "Income from sales of real estate" in the Company's consolidated statements of operations. Additionally, during the same period, the Company sold a net lease asset for net proceeds of $7.8 million. The Company recorded an impairment loss of $3.0 million in connection with the sale.

During the year ended December 31, 2014, the Company sold its 72% interest in a previously consolidated entity, which owned a net lease asset subject to a non-recourse mortgage of $26.0 million at the time of sale, to the Net Lease Venture for net proceeds of $10.1 million that approximated carrying value.

Additionally, during the year ended December 31, 2013, the Company sold five net lease assets with a carrying value of $18.7 million resulting in a net gain of $2.2 million. During the same period, the Company sold six commercial operating properties with a carrying value of $72.6 million resulting in a net gain of $18.6 million. These gains were recorded as "Gain from discontinued operations" in the Company's consolidated statements of operations. The Company also sold residential lots with a carrying value of $18.9 million for proceeds that approximated carrying value and sold other land assets with a carrying value of $14.8 million resulting in a gain of $0.6 million.

During the year ended December 31, 2013, the Company sold land for net proceeds of $21.4 million to a newly formed entity in which the Company also received a preferred partnership interest and a 47.5% equity interest. The Company recognized a gain of $3.4 million, reflecting the proportionate share of the sold interest, which was recorded as “Income from sales of real estate” in the Company’s consolidated statements of operations.

Discontinued Operations—The Company has elected to early adopt ASU 2014-08 beginning with disposals and classifications of assets as held for sale that occurred after December 31, 2013. During the years ended December 31, 2015 and 2014, there were no disposals or assets classified as held for sale which were individually significant or represented a strategic shift that has (or will have) a major effect on the Company's operations and financial results.

The following table summarizes income (loss) from discontinued operations for the year ended December 31, 2013 ($ in thousands):



Revenues	$	5,545
Total expenses	(3,138		)
Impairment of assets	(1,763		)
Income (loss) from discontinued operations	$	644

Impairments—During the year ended December 31, 2015, 2014 and 2013, the Company recorded impairments on real estate assets totaling $5.9 million, $11.8 million and $13.6 million, respectively. The impairments recorded in 2015 resulted from a change in business strategy for two commercial operating properties and unfavorable local market conditions for one residential property. The impairments recorded in 2014 resulted from changes in business strategy for a residential property, unfavorable local market conditions for two real estate properties and from the sale of net lease assets. The impairments recorded in 2013 resulted from changes in local market conditions and business strategy for certain assets. For the year ended December 31, 2013, $1.8 million has been recorded in "Income (loss) from discontinued operations" in the Company's consolidated statements of operations due to the assets being sold as of December 31, 2013 (see above).

Tenant Reimbursements—The Company receives reimbursements from tenants for certain facility operating expenses including common area costs, insurance, utilities and real estate taxes. Tenant expense reimbursements were $26.8 million, $30.0 million and $31.8 million for the years ended December 31, 2015, 2014 and 2013, respectively. These amounts are included in "Operating lease income" in the Company's consolidated statements of operations.

Redeemable Noncontrolling Interest—As of December 31, 2015 and December 31, 2014, the Company had a redeemable noncontrolling interest of $7.2 million and $9.9 million, respectively, which is not currently redeemable, for which the Company records changes in the fair value over the redemption periods. As of December 31, 2015 and December 31, 2014, this interest had an estimated redemption value of $9.2 million and $23.6 million, respectively.

Allowance for Doubtful Accounts—As of December 31, 2015 and December 31, 2014, the allowance for doubtful accounts related to real estate tenant receivables was $1.9 million and $1.3 million, respectively, and the allowance for doubtful accounts related to deferred operating lease income was $1.5 million and $2.4 million, respectively. These amounts are included in "Accrued interest and operating lease income receivable, net" and "Deferred operating lease income receivable, net", respectively, on the Company's consolidated balance sheets.

Future Minimum Operating Lease Payments—Future minimum operating lease payments to be collected under non-cancelable leases, excluding customer reimbursements of expenses, in effect as of December 31, 2015, are as follows ($ in thousands):



Year	Net Lease Assets		Operating Properties
2016	$	121,168	$	46,438
2017	117,110		46,358
2018	115,158		42,010
2019	113,969		37,990
2020	112,483		34,281