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Discontinued Operations
 12 Months Ended
Dec. 31, 2013
Discontinued Operations  
Discontinued Operations

11.            Discontinued Operations

 

The Company accounts for sale of properties and assets held for sale as discontinued operations. In December 2011, the Company also discontinued the activities of the investment banking segment.

 

Dispositions of Property

 

The Company sold an office property located in Richardson, Texas on October 29, 2013 at a $2.2 million gain.

 

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 effect 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 was 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 of $0.7 million 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 the property on December 21, 2012 for $0.3 million resulting in a total loss of $14.8 million.

 

The Company sold an industrial property located in Savage, Maryland on June 24, 2011 at a $2.3 million gain and in 2010 reached an agreement to sell a commercial property, located in Falls Church, Virginia, which was sold on January 21, 2011 at a $19.6 million gain.

 

All property dispositions have been classified as discontinued for all periods presented.

 

There was no asset held for sale at December 31, 2013. The asset held for sale at December 31, 2012 is summarized below:

 

 

 

December 31,

 

(in thousands)

 

2012

 

 

 

 

 

Land

 

$

2,791

 

Building

 

5,216

 

 

 

8,007

 

Less accumulated depreciation

 

167

 

 

 

7,840

 

Straight-line rent receivable

 

67

 

Deferred leasing comissions, net of accumulated amortization of $859

 

3,779

 

 

 

 

 

Acquired unfavorable leases, net of accumulated amortization of $252

 

(1,111

)

 

 

$

10,575

 

 

The Company reports the results of operations of its properties classified 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 were 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. Selling, general and administrative expenses include $378,000 of severance costs and professional fees related to discontinuing investment banking activities. There were no assets of the investment banking segment included in the consolidated balance sheet at December 31, 2013, 2012 and 2011.

 

The operating results for discontinued operations are summarized below.

 

 

 

For the Year Ended

 

 

 

December 31,

 

(in thousands)

 

2013

 

2012

 

2011

 

Rental revenue

 

$

991

 

$

2,334

 

$

2,134

 

Related party revenue:

 

 

 

 

 

 

 

Syndication fees

 

—

 

—

 

4,670

 

Transaction fees

 

—

 

—

 

4,454

 

Other income

 

—

 

—

 

42

 

Rental operating expenses

 

—

 

(1,089

)

(1,616

)

Real estate taxes and insurance

 

—

 

(340

)

(377

)

Selling, general and administrative

 

—

 

—

 

(3,488

)

Commissions

 

—

 

—

 

(2,535

)

Depreciation and amortization

 

(616

)

(1,396

)

(1,070

)

Income tax benefit

 

—

 

—

 

—

 

Interest income

 

—

 

—

 

14

 

Net income (loss) from discontinued operations

 

$

375

 

$

(491

)

$

2,228