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Discontinued Operations, Properties Held for Sale and Impairment
 9 Months Ended
Sep. 30, 2014
Discontinued Operations, Properties Held for Sale and Impairment  
Discontinued Operations, Properties Held for Sale and Impairment

Note 5 - Discontinued Operations, Properties Held for Sale and Impairment

 

On February 3, 2014, the Company sold two properties located in Michigan for a total sales price of $5,177,000, net of closing costs.  At December 31, 2013, the Company recorded a $61,700 impairment charge representing the loss on the sale of these properties.  The following table summarizes the components of income from discontinued operations applicable to these properties (amounts in thousands):

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 

2014

 

2013

 

2014

 

2013

 

Rental income

 

$

—

 

$

244

 

$

141

 

$

730

 

Depreciation and amortization

 

—

 

36

 

—

 

108

 

Real estate expenses

 

—

 

—

 

17

 

1

 

Interest expense

 

—

 

64

 

111

 

196

 

Total expenses

 

—

 

100

 

128

 

305

 

Income from discontinued operations

 

$

—

 

$

144

 

$

13

 

$

425

 

 

On October 15, 2014, the Company sold a property located in Parsippany, New Jersey for approximately $38,600,000, net of closing costs. At September 30, 2014, the Company classified the net book value of the property’s land, building and building improvements of $25,589,000 as properties held for sale and classified the unbilled rent receivable, tenant origination costs and intangible lease assets of $2,836,000 as assets related to property held for sale in the accompanying consolidated balance sheet.  The sale resulted in a gain of approximately $10,000,000 for financial statement purposes, which will be included in net gain on sale of property during the year and three months ended December 31, 2014, and resulted in a gain of approximately $21,000,000 for federal tax purposes.  The Company is pursuing acquisitions which may allow it to defer all or part of the tax gain in accordance with Section 1031 of the Internal Revenue Code of 1986, as amended. In connection with the sale, the Company paid off the approximate $13,400,000 mortgage balance on this property and incurred a $1,580,000 mortgage prepayment penalty, which will also be reported during the year and three months ended December 31, 2014.

 

During the three months ended September 30, 2014, the Company determined there were indicators of impairment at its property located in Morrow, Georgia at which the tenant did not renew the lease which expired October 31, 2014, efforts to re-let the property were unsuccessful and the non-recourse mortgage on the property matured on November 1, 2014. The Company recorded an impairment charge of $1,093,000 at September 30, 2014 in the accompanying consolidated statement of income, does not intend to make any further payments on the mortgage, and intends to surrender the property to the mortgagee. The Company measured fair value of the property based on a sales comparison approach (as discussed in Note 14).  At September 30, 2014, the adjusted net book value of the property was $1,470,000.