4. Investment in equipment and leases, net:

The Partnership’s investments in equipment and leases consist of the following (in thousands):


	Balance December 31, 2010		Reclassifications & Additions/ Dispositions			Depreciation/ Amortization Expense or Amortization of Leases			Balance September 30, 2011
Net investment in operating leases	$	7,817	$	292		$	(794	)	$	7,315
Net investment in direct financing leases		522		—			(80	)		442
Assets held for sale or lease, net		421		(341	)		(1	)		79
Total	$	8,760	$	(49	)	$	(875	)	$	7,836

Impairment of investments in leases and assets held for sale or lease:

Management periodically reviews the carrying values of its assets on leases and assets held for lease or sale. Impairment losses are recorded as an adjustment to the net investment in operating leases. No impairment losses were recorded during the three and nine months ended September 30, 2011 and 2010.

The Partnership utilizes a straight line depreciation method over the term of the equipment lease for equipment on operating leases currently in its portfolio. Depreciation expense on the Partnership’s equipment was approximately $186 thousand and $411 thousand for the three months ended September 30, 2011 and 2010, and was $795 thousand and $1.2 million for the respective nine months ended September 30, 2011 and 2010.

All of the property subject to leases was acquired in the years 1997 through 2002.

Operating leases:

Property on operating leases consists of the following (in thousands):


	Balance December 31, 2010			Additions			Reclassifications or Dispositions			Balance September 30, 2011
Transportation	$	26,526		$	—		$	3,720		$	30,246
Marine vessels/barges		16,638			150			(1,113	)		15,675
Construction		431			—			—			431
Materials handling		83			—			—			83
Other		135			—			(135	)		—
		43,813			150			2,472			46,435
Less accumulated depreciation		(35,996	)		(794	)		(2,330	)		(39,120	)
Total	$	7,817		$	(644	)	$	142		$	7,315

The average estimated residual value for assets on operating leases was 14% and 15% of the assets’ original cost at September 30, 2011 and December 31, 2010, respectively.

The Partnership earns revenues from its marine vessels and certain lease assets based on utilization of such assets or through fixed term leases. Contingent rentals (i.e., short-term, operating charter hire payments) and the associated expenses are recorded when earned and/or incurred. The revenues associated with these rentals are included as a component of Operating Lease Revenues. Prior to 2011, the most significant sources of contingent rentals were the Partnership’s two largest marine vessels. Such vessels were converted to fixed term leases in August 2010 and March 2011. Contingent rentals totaled $30 thousand and $1.1 million for the respective three months ended September 30, 2011 and 2010, and were $208 thousand and $1.3 million for the respective nine months ended September 30, 2011 and 2010.

There were no operating leases in non-accrual status at September 30, 2011 and December 31, 2010.

Direct financing leases:

As of September 30, 2011 and December 31, 2010, investment in direct financing leases primarily consists of various transportation, ground support and manufacturing equipment. The components of the Partnership’s investment in direct financing leases as of September 30, 2011 and December 31, 2010 are as follows (in thousands):


	September 30, 2011			December 31, 2010
Total minimum lease payments receivable	$	630		$	921
Estimated residual values of leased equipment (unguaranteed)		75			75
Investment in direct financing leases		705			996
Less unearned income		(263	)		(474	)
Net investment in direct financing leases	$	442		$	522

There were no net investments in direct financing leases in non-accrual status as of September 30, 2011 and December 31, 2010.

At September 30, 2011, the aggregate amounts of future minimum lease payments are as follows (in thousands):


	Operating Leases		Direct Financing Leases		Total
Three months ending December 31, 2011	$	839	$	97	$	936
Year ending December 31, 2012		2,521		368		2,889
2013		1,059		165		1,224
2014		323		—		323
2015		320		—		320
2016		27		—		27
	$	5,089	$	630	$	5,719