Real Estate

9 Months Ended

Sep. 30, 2019

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



	Net Lease⁽¹⁾			Operating Properties			Total
As of September 30, 2019
Land, at cost	$	201,197		$	106,187		$	307,384
Buildings and improvements, at cost	1,342,319			106,821			1,449,140
Less: accumulated depreciation	(213,618		)	(12,790		)	(226,408		)
Real estate, net	1,329,898			200,218			1,530,116
Real estate available and held for sale ⁽²⁾	—			12,688			12,688
Total real estate	$	1,329,898		$	212,906		$	1,542,804
As of December 31, 2018
Land, at cost	$	336,740		$	133,599		$	470,339
Buildings and improvements, at cost	1,487,270			118,724			1,605,994
Less: accumulated depreciation	(287,516		)	(17,798		)	(305,314		)
Real estate, net	1,536,494			234,525			1,771,019
Real estate available and held for sale ⁽²⁾	1,055			21,496			22,551
Total real estate	$	1,537,549		$	256,021		$	1,793,570

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(1)	In May 2019, the Company modified certain of its leases. As a result of these modifications, the Company is required to account for the leases as sales-type leases and recorded $424.1 million in "Net investment in leases" and derecognized $193.4 million from "Real estate, net" and "Real estate available and held for sale" on its consolidated balance sheet (refer to Note 5).


(2)	As of September 30, 2019 and December 31, 2018, the Company had $11.7 million and $20.6 million, respectively, of residential condominiums available for sale in its operating properties portfolio.

Acquisitions—During the nine months ended September 30, 2019, the Company acquired a net lease asset for $11.5 million. In addition, the Company acquired the leasehold interest in a net lease asset for $98.2 million, inclusive of closing costs, and simultaneously entered into a new 98-year Ground Lease with SAFE (refer to Note 8) and also acquired the leasehold interest in a net lease asset for $110.6 million and simultaneously entered into a new 99-year Ground Lease with SAFE (refer to Note 8).

Dispositions—The following table presents the net proceeds and income recognized for properties sold, by property type ($ in millions):



	Nine Months Ended September 30,
	2019		2018
Operating Properties
Proceeds⁽¹⁾	$	80.2	$	228.7
Income from sales of real estate⁽¹⁾	10.2		54.5

Net Lease
Proceeds⁽²⁾	$	452.7	$	38.4
Income from sales of real estate⁽²⁾	223.2		24.9

Total
Proceeds	$	532.9	$	267.1
Income from sales of real estate	233.4		79.4

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(1)

During the nine months ended September 30, 2019, the Company sold commercial and residential operating properties with an aggregate carrying value of $70.0 million and recognized gains of $10.2 million in "Income from sales of real estate" in the Company's consolidated statements of operations. During the nine months ended September 30, 2018, the Company sold commercial and residential operating properties and recognized $54.5 million of gains in "Income from sales of real estate" in the Company's consolidated statements of operations, of which $9.8 million was attributable to a noncontrolling interest at one of the properties.

(2)

During the nine months ended September 30, 2019, the Company sold a portfolio of net lease assets with an aggregate carrying value of $220.4 million and recognized gains of $219.7 million in "Income from sales of real estate" in the Company's consolidated statements of operations. In connection with the sale of this portfolio of assets the buyer assumed a $228.0 million non-recourse mortgage. During the nine months ended September 30, 2018, the Company sold net lease assets and recognized $24.9 million of gains in "Income from sales of real estate" in the Company's consolidated statements of operations.

Impairments—During the nine months ended September 30, 2019, the Company recorded an impairment of $3.3 million on a commercial operating property based on an executed purchase and sale agreement and recorded $0.6 million of impairments in connection with the sale of residential condominium units. During the nine months ended September 30, 2018, the Company recorded aggregate impairments of $9.9 million resulting from the determination that the Company's total recovery related to a net lease asset was less than its carrying value and from the sale of commercial and residential operating properties.

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 $4.9 million and $14.8 million for the three and nine months ended September 30, 2019, respectively, and $5.7 million and $16.3 million for the three and nine months ended September 30, 2018, respectively. These amounts are included in "Operating lease income" in the Company's consolidated statements of operations.

Allowance for Doubtful Accounts—As of September 30, 2019 and December 31, 2018, the allowance for doubtful accounts related to real estate tenant receivables was $1.2 million and $1.5 million, respectively, and the allowance for doubtful accounts related to deferred operating lease income was $1.1 million and $1.8 million as of September 30, 2019 and December 31, 2018, 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.