Discontinued Operations and Assets Held for Sale

12 Months Ended

Dec. 31, 2019

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations and Assets Held for Sale

Real Estate Assets, Discontinued Operations, Assets Held-for-Sale and Impairments

Real Estate Assets

Real estate assets, excluding assets held-for-sale, consisted of the following (in thousands):

	December 31, 2019		December 31, 2018
Buildings and tenant improvements	$	5,295,336	$	4,980,003
Land and improvements	2,532,541		2,268,343
Other real estate investments (1)	165,500		—
Real estate assets	$	7,993,377	$	7,248,346

(1) Includes real estate assets that we intend to redevelop within a relatively short time frame that are under leaseback to the seller(s) and generating income.

Discontinued Operations

All of the properties sold during the year ended December 31, 2017 and included in discontinued operations are medical office properties. Because of the size of the Medical Office Portfolio Disposition, and the fact that it represented our exit from the medical office product type, we determined that the disposition represented a strategic shift that would have a major effect on our operations and financial results. As such, the consolidated in-service properties in this portfolio met the criteria to be classified within discontinued operations. As the result of its classification within discontinued operations, operating results pertaining to the properties classified within discontinued operations were reclassified to discontinued operations for all periods presented in our Consolidated Statements of Operations and Comprehensive Income.

The following table illustrates the number of sold or held-for-sale properties included in, or excluded from, discontinued operations:

	Held-for-Sale at December 31, 2019	Sold in 2019	Sold in 2018	Sold in 2017	Total
Industrial	—	—	—	—	—
Non-Reportable Rental Operations	—	—	—	81	81
Total properties included in discontinued operations	—	—	—	81	81
Properties excluded from discontinued operations	1	28	15	17	61
Total properties sold or classified as held-for-sale	1	28	15	98	142

Properties sold in 2017 but excluded from discontinued operations included four properties under development, which were disposed as part of the Medical Office Portfolio Disposition, as these properties did not meet the criteria to be included in discontinued operations.

For the properties that were classified in discontinued operations, we allocated interest expense to discontinued operations and have included such interest expense in computing income from discontinued operations. Interest expense allocable to discontinued operations includes interest on any secured debt for properties included in discontinued operations and an allocable share of our consolidated unsecured interest expense for unencumbered properties. The allocation of unsecured interest expense to discontinued operations was based upon the gross book value of the unencumbered real estate assets included in discontinued operations as it related to the total gross book value of our unencumbered real estate assets. There were no additional properties classified as discontinued operations during the years ended December 31, 2019 and 2018 and, as such, no interest expense was allocated to discontinued operations during those periods.

The following table illustrates the operational results of the buildings reflected in discontinued operations for the years ended December 31, 2019, 2018 and 2017, respectively (in thousands):

 

	2019		2018			2017
Revenues	$	—	$	117		$	87,185
Operating expenses	—		(9		)	(28,102		)
Depreciation and amortization	—		—			(25,911		)
Operating income	—		108			33,172
Interest expense	—		—			(14,736		)
Income before gain on sales and income taxes	—		108			18,436
Gain on sale of depreciable properties	445		3,792			1,357,778
Income from discontinued operations before income taxes	445		3,900			1,376,214
Income tax expense	—		—			(12,465		)
Income from discontinued operations	$	445	$	3,900		$	1,363,749

Income tax expense included in discontinued operations relates to the sale of certain properties owned by our taxable REIT subsidiary. The amounts classified in discontinued operations for the years ended December 31, 2019 and 2018 were comprised of true-up activity related to properties sold in previous years that were classified as discontinued operations.

There were no capital expenditures for properties classified within discontinued operations for the years ended December 31, 2019 and 2018. Capital expenditures on a cash basis for the year ended December 31, 2017 were $20.9 million for properties classified within discontinued operations.

Allocation of Noncontrolling Interests - General Partner

The following table illustrates the General Partner's share of the income attributable to common shareholders from continuing operations and discontinued operations, reduced by the allocation of income between continuing and discontinued operations to noncontrolling interests, for the years ended December 31, 2019, 2018 and 2017, respectively (in thousands):

	2019		2018		2017
Income from continuing operations attributable to common shareholders	$	428,531	$	379,865	$	288,075
Income from discontinued operations attributable to common shareholders	441		3,864		1,346,356
Net income attributable to common shareholders	$	428,972	$	383,729	$	1,634,431

Allocation of Noncontrolling Interests - Partnership

Substantially all of the income from discontinued operations for all periods presented in the Partnership's Consolidated Statements of Operations and Comprehensive Income is attributable to the common unitholders.

Assets Held-for-Sale

At December 31, 2019, one in-service property was classified as held-for-sale, but did not meet the criteria to be classified within discontinued operations. The following table illustrates aggregate balance sheet information for all properties and land held-for-sale (in thousands):

	Held-for-Sale Properties Included in Continuing Operations
	December 31, 2019			December 31, 2018
Land and improvements	$	4,561		$	—
Buildings and tenant improvements	18,840			—
Undeveloped land	—			1,966
Accumulated depreciation	(7,132		)	(884		)
Deferred leasing and other costs, net	2,100			—
Other assets	94			—
Total assets held-for-sale	$	18,463		$	1,082
Total liabilities held-for-sale	$	887		$	—

Impairment Charges

The following table illustrates impairment charges recognized during the years ended December 31, 2019, 2018 and 2017, respectively (in thousands):

	2019		2018		2017
Impairment charges - land	$	—	$	—	$	3,622
Impairment charges - building	—		—		859
Impairment charges	$	—	$	—	$	4,481

Primarily as the result of changes in our intended use for certain of our undeveloped land holdings, we recognized impairment charges of $3.6 million for the year ended December 31, 2017. The various land holdings written down to fair value totaled 12 acres for the year ended December 31, 2017. The fair value of the land upon which we recognized impairment charges was estimated based on asset-specific offers to purchase, comparable transactions and, in certain cases, estimates made by national and local independent real estate brokers who were familiar with the land parcels subject to evaluation as well as with conditions in the specific markets where the various land parcels are located. In all cases when estimates from brokers were utilized, members of our senior management who were responsible for the individual markets where the land parcels are located, and members of the Company’s accounting and financial management team, reviewed the broker’s estimates for factual accuracy and reasonableness. In all cases, we were ultimately responsible for all valuation estimates made in determining the extent of the impairment. Our valuation estimates primarily relied upon Level 3 inputs.