4. Investment in equipment and leases, net:

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


	Balance December 31, 2011		Reclassifications & Additions/ Dispositions			Depreciation/ Amortization Expense or Amortization of Leases			Balance September 30, 2012
Net investment in operating leases	$	7,075	$	(1,270	)	$	(363	)	$	5,442
Net investment in direct financing leases		405		(10	)		(140	)		255
Assets held for sale or lease, net		69		1,213			—			1,282
Total	$	7,549	$	(67	)	$	(503	)	$	6,979

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, 2012 and 2011.

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 $120 thousand and $186 thousand for the respective three months ended September 30, 2012 and 2011, and was $363 thousand and $795 thousand for the respective nine months ended September 30, 2012 and 2011.

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, 2011			Additions			Reclassifications or Dispositions			Balance September 30, 2012
Transportation	$	29,707		$	—		$	(933	)	$	28,774
Marine vessels/barges		15,675			—			(8,275	)		7,400
Materials handling		83			—			—			83
Construction		156			—			(156	)		—
		45,621			—			(9,364	)		36,257
Less accumulated depreciation		(38,546	)		(363	)		8,094			(30,815	)
Total	$	7,075		$	(363	)	$	(1,270	)	$	5,442

The average estimated residual value for assets on operating leases was 14% of the assets’ original cost at September 30, 2012 and December 31, 2011.

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. The revenues associated with these rentals are included as a component of Operating Lease Revenues, and totaled $25 thousand and $30 thousand for the respective three months ended September 30, 2012 and 2011, and was $83 thousand and $208 thousand for the respective nine months ended September 30, 2012 and 2011.

As of September 30, 2012, certain operating leases with a total book value of $135 thousand continue to be in non-accrual status. Such leases were originally placed on non-accrual status during the first quarter of 2012 as a result of a lessee bankruptcy. No impairment was deemed necessary as the carrying amount of the underlying equipment was well below estimated scrap value.

Direct financing leases:

As of September 30, 2012 and December 31, 2011, investment in direct financing leases consists primarily of various transportation, ground support and manufacturing equipment. The components of the Partnership’s investment in direct financing leases as of September 30, 2012 and December 31, 2011 are as follows (in thousands):


	September 30, 2012			December 31, 2011
Total minimum lease payments receivable	$	254		$	533
Estimated residual values of leased equipment (unguaranteed)		65			75
Investment in direct financing leases		319			608
Less unearned income		(64	)		(203	)
Net investment in direct financing leases	$	255		$	405

There were no net investments in direct financing leases in non-accrual status as of September 30, 2012 and December 31, 2011.

At September 30, 2012, the aggregate amounts of future minimum lease payments are as follows (in thousands):


	Operating Leases		Direct Financing Leases		Total
Three months ending December 31, 2012	$	593	$	89	$	682
Year ending December 31, 2013		1,134		165		1,299
2014		398		—		398
2015		321		—		321
2016		27		—		27
	$	2,473	$	254	$	2,727