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SALES OF PROPERTIES, DISCONTINUED OPERATIONS AND REAL ESTATE INVESTMENTS
 12 Months Ended
Dec. 31, 2014
SALE OF PROPERTIES, DISCONTINUED OPERATIONS AND IMPAIRMENT  
SALES OF PROPERTIES, DISCONTINUED OPERATIONS AND IMPAIRMENT

 

NOTE 4—SALES OF PROPERTIES, DISCONTINUED OPERATIONS AND IMPAIRMENT

Sales of Properties

        On October 15, 2014, the Company sold a property located in Parsippany, New Jersey for $38,611,000, net of closing costs, and the write-off of unbilled rent receivable, resulting in a gain of $10,180,000, which is recorded as Gain on sale of real estate, net for the year ended December 31, 2014. In connection with the sale, the Company paid off the $13,417,000 mortgage on this property. Additionally, the Company incurred a $1,581,000 mortgage prepayment charge, which is recorded as Prepayment costs on debt related to sale of real estate in the accompanying consolidated statement of income for the year ended December 31, 2014. For federal tax purposes, the sale resulted in an estimated net gain of $20,700,000.

        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. The net book value of the two properties was $5,177,000 (after recording an impairment charge of $61,700, representing the loss on sale of the properties) and is recorded as Properties held-for-sale on the accompanying consolidated balance sheet at December 31, 2013. The impairment charge is recorded in discontinued operations for the year ended December 31, 2013.

        During 2012, the Company sold two properties located in Florida and leased to Office Depot, two properties located in New York and a property located in Texas. The total sales prices aggregated $36,062,000, net of closing costs, and the Company realized aggregate gains of $19,413,000 which is recorded as Net gain on sales in discontinued operations for the year ended December 31, 2012.

Discontinued Operations

        As discussed in Note 2, in 2014, the Company adopted ASU 2014-08 which raises the threshold for disposals to qualify as discontinued operations. Accordingly, the property sold in October 2014 is not considered a discontinued operation. The following summarizes the components of income from discontinued operations which includes the two properties sold in February 2014 and the five properties sold in 2012 (amounts in thousands):

                                                                                                                                                                                                                 

 

 

Year Ended December 31,

 

 

 

2014

 

2013

 

2012

 

Rental income

 

$
141

 

$
973

 

$
2,690

 

​

​

​  

​  

​

​  

​  

​

​  

​  

​

Depreciation and amortization

 

 

—

 

 
125

 

 
402

 

Real estate expenses

 

 
17

 

 
12

 

 
106

 

Interest expense

 

 
111

 

 
259

 

 
615

 

​

​

​  

​  

​

​  

​  

​

​  

​  

​

Total expenses

 

 
128

 

 
396

 

 
1,123

 

​

​

​  

​  

​

​  

​  

​

​  

​  

​

Income from operations

 

 
13

 

 
577

 

 
1,567

 

Impairment charge

 

 

—

 

 
(62

)

 

—

 

Net gain on sales

 

 

—

 

 

—

 

 
19,413

 

​

​

​  

​  

​

​  

​  

​

​  

​  

​

Income from discontinued operations

 

$
13

 

$
515

 

$
20,980

 

​

​

​  

​  

​

​  

​  

​

​  

​  

​

​

​

​  

​  

​

​  

​  

​

​  

​  

​  

Property Held-for-Sale

        On January 13, 2015, a consolidated joint venture of the Company sold a property located in Cherry Hill, New Jersey for approximately $16,025,000, net of closing costs. At December 31, 2014, the Company classified the net book value of the property's land, building and building improvements of $10,176,000 as properties held-for-sale and the unbilled rent receivable of $120,000 related to this property is included in Unbilled rent receivable in the accompanying consolidated balance sheet. The sale resulted in a gain of approximately $5,400,000, which will be included in Gain on sale of real estate, net for the three months ended March 31, 2015. In connection with the sale, the Company paid off the $7,376,000 mortgage balance on this property and incurred a $478,000 expense related to the swap termination and will write off the deferred mortgage costs of $249,000 during the three months ended March 31, 2015. The non-controlling interest's share of income from the transaction is approximately $1,300,000.

Impairment of Property

        During the year ended December 31, 2014, the Company determined there were indicators of impairment at its property located in Morrow, Georgia. 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. Management determined that the undiscounted cash flows in the test for recoverability are less than the property's carrying amount, and that the fair value of the property is less than its carrying amount. Accordingly, the Company recorded an impairment charge of $1,093,000 which is included in the accompanying consolidated statement of income for the year ended December 31, 2014. The property was acquired by the mortgagee on January 6, 2015 through a foreclosure proceeding. At December 31, 2014, the adjusted net book value of the property was $1,470,000.