Acquisitions and Dispositions

9 Months Ended

Sep. 30, 2014

Business Combinations [Abstract]

Acquisitions and Dispositions

Acquisitions and Dispositions

2014 Acquisitions

We acquired three industrial properties, a building in Atlanta, Georgia, a building in the Lehigh Valley region of Pennsylvania, and a building in Phoenix, Arizona during the nine months ended September 30, 2014. The following table summarizes the fair value of amounts recognized for each major class of asset and liability (in thousands) for these acquisitions:

Real estate assets	$	86,988
Lease related intangible assets	12,450
Total acquired assets	99,438
Other liabilities	54
Total assumed liabilities	54
Fair value of acquired net assets	$	99,384

The leases in the acquired properties had an average remaining life at acquisition of approximately 8.7 years.

We have included $3.2 million in rental revenues and $45,000 in earnings from continuing operations during 2014 for these properties since their respective dates of acquisition.

Fair Value Measurements

The fair value estimates used in allocating the aggregate purchase price of each acquisition among the individual components of real estate assets and liabilities were determined primarily through calculating the "as-if vacant" value of each building, using the income approach, and relied significantly upon internally determined assumptions. We have determined these estimates to have been primarily based upon Level 3 inputs, which are unobservable inputs based on our own assumptions. The range of most significant assumptions utilized in making the lease-up and future disposition estimates used in calculating the "as-if vacant" value of each building acquired during the nine months ended September 30, 2014 were as follows:

	Low		High
Discount rate	7.38	%	9.96	%
Exit capitalization rate	5.98	%	8.36	%
Lease-up period (months)	12		12
Net rental rate per square foot – Industrial	$2.75		$9.36

Acquisition-Related Activity

The acquisition-related activity in our Consolidated Statements of Operations and Comprehensive Income for the nine months ended September 30, 2014 and 2013 consisted of transaction costs related to completed acquisitions, which are expensed as incurred, as well as gains or losses related to acquisitions where we had a pre-existing non-controlling ownership interest. We expensed $871,000 and $3.5 million, respectively, for acquisition-related transaction costs incurred in the nine months ended September 30, 2014 and 2013. During the nine months ended September 30, 2013, we also recognized a gain of $962,000 on the pre-existing ownership interest that we held in an industrial property we acquired in that period.

Dispositions

We disposed of 23 consolidated income-producing real estate assets and 159 acres of undeveloped land during the nine months ended September 30, 2014. We received net cash proceeds from property and land dispositions of $386.2 million and $330.7 million during the nine months ended September 30, 2014 and 2013, respectively.

Income tax expense from continuing operations of $2.6 million was the result of the sale of a property, prior to the adoption of ASU 2014-08, which was partially owned by our taxable REIT subsidiary. Due to continuing involvement in managing the property, it was not classified as a discontinued operation. Income tax expense included in discontinued operations of $3.0 million was also the result of the sale of a property, also prior to the adoption of ASU 2014-08, that was partially owned by our taxable REIT subsidiary where we have no continuing involvement.

During the nine months ended September 30, 2014, five office properties and 11 industrial properties were sold by four of our unconsolidated joint ventures, for which our capital distributions totaled $70.1 million and our share of gains, which are included in equity in earnings, totaled $75.5 million. These five office properties included a 436,000 square foot office tower in Atlanta, Georgia and a three-building portfolio sale in central Florida totaling 415,000 square feet. The industrial disposition activity related to a sale from an unconsolidated joint venture, in which we did not hold a significant ownership interest, totaling 2.1 million square feet.