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Discontinued Operations
 9 Months Ended
Sep. 30, 2012
Discontinued Operations  
Discontinued Operations

8.     Discontinued Operations

 

In December 2011, the Company discontinued the activities of the investment banking segment.  The Company also classifies properties sold or held for sale as discontinued operations.

 

During the three months ended September 30, 2012, the Company reached a decision to classify its office property located in Southfield, Michigan as an asset held for sale.  In evaluating the Southfield, Michigan property, management considered various subjective factors, including the time, cost and likelihood of successfully leasing the property, the affect of the property’s results on its unencumbered asset value, which is part of the leverage ratio used to calculate interest rates in the 2012 Credit Facility and future capital costs to upgrade and reposition the multi-tenant property and to lease up the building, recent leasing and economic activity in the local area, and offers to purchase the property.  The Company concluded that selling the property was the more prudent decision and outweighed the potential future benefit of continuing to hold the property.   The property is expected to sell within one year at a loss, which was recorded as a provision for loss on a property held for sale of   $14.3 million net of applicable income taxes and was classified as an asset held for sale at September 30, 2012.  The Company estimated the fair value of the property, less estimated costs to sell using the offers to purchase the property made by third parties (Level 3 inputs, as there is no active market). The Company sold an industrial property located in Savage, Maryland on June 24, 2011 and in 2010 reached an agreement to sell a commercial property, located in Falls Church, Virginia, which was sold on January 21, 2011.  Both properties were sold at gains and have been classified as discontinued for all periods presented.

 

The Company reports the results of operations of its properties either sold or held for sale as discontinued operations in its consolidated statements of income, which includes rental income, rental operating expenses, real estate taxes and insurance, depreciation and amortization.  In addition, in December 2011, the Company announced it would no longer sponsor the syndication of newly-formed Sponsored REITs and cash flows related to this activity will be eliminated from ongoing operations.  Accordingly, the Company reported the investment banking activities as discontinued operations in its consolidated statements of income, which includes syndication and transaction fee revenues, selling, general and administrative expenses, commission expenses, depreciation and amortization, interest income and income tax benefits.  There were no assets of the investment banking segment included in the consolidated balance sheets at September 30, 2012 and December 31, 2011, respectively.

 

The assets held for sale are summarized below:

 

 

September 30,

 

December 31,

 

(in thousands)

 

2012

 

2011

 

 

 

 

 

 

 

Land

 

  $

5,110

 

  $

5,110

 

Building

 

14,199

 

14,182

 

Furniture & Fixtures

 

25

 

25

 

 

 

19,334

 

19,317

 

Less accumulated depreciation

 

19,011

 

4,321

 

 

 

323

 

14,996

 

Straight-line rent receivable

 

86

 

43

 

Deferred leasing comissions, net of accumulated amortization of $200

 

276

 

316

 

 

 

  $

685

 

  $

15,355

 

 

The operating results for discontinued operations are summarized below.

 

 

 

For the
Three Months Ended
September 30,

 

For the
Nine Months Ended
September 30,

 

(in thousands)

 

2012

 

2011

 

2012

 

2011

 

Rental revenue

 

  $

255

 

  $

273

 

  $

879

 

  $

1,571

 

Related party revenue:

 

 

 

 

 

 

 

 

 

Syndication fees

 

-    

 

532

 

-    

 

4,022

 

Transaction fees

 

-    

 

470

 

-    

 

3,846

 

Rental operating expenses

 

(284

)

(437

)

(888

)

(1,237

)

Real estate taxes and insurance

 

(71

)

(71

)

(271

)

(306

)

Selling, general and administrative

 

-    

 

(758

)

-    

 

(2,276

)

Commissions

 

-    

 

(349

)

-    

 

(2,192

)

Depreciation and amortization

 

(171

)

(206

)

(576

)

(640

)

Interest income

 

-    

 

4

 

-    

 

9

 

Net income (loss) from discontinued operations

 

  $

(271

)

  $

(542

)

  $

(856

)

  $

2,797