Goodwill and Other Intangibles

12 Months Ended

Dec. 31, 2016

Goodwill And Intangible Assets Liabilities Disclosure [Abstract]

We have recorded net lease and internal-use software development intangibles that are being amortized over periods ranging from one year to 40 years. In addition, we have several ground lease intangibles that are being amortized over periods of up to 99 years. In-place lease and tenant relationship intangibles are included in In-place lease and tenant relationship intangible assets, net in the consolidated financial statements. Above-market rent intangibles are included in Above-market rent intangible assets, net in the consolidated financial statements. Below-market ground lease (as lessee), trade name, management contracts, and internal-use software development intangibles are included in Other assets, net in the consolidated financial statements. Below-market rent, above-market ground lease (as lessee), and below-market purchase option intangibles are included in Below-market rent and other intangible liabilities, net in the consolidated financial statements.

In connection with our investment activity during 2016, we recorded net lease intangibles comprised as follows (life in years, dollars in thousands):



	Weighted-Average Life	Amount
Finite-Lived Intangible Assets
In-place lease ^(a)	21.2	$	124,742
Above-market rent	20.0	35,576
		$	160,318

Finite-Lived Intangible Liabilities
Below-market rent	20.1	$	(604	)

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(a)	Includes intangible assets totaling $29.8 million related to a deferred tax liability that we recorded in connection with an acquisition completed in 2016. We recorded a corresponding increase to the asset value of the acquisition, since we assumed the tax basis of the acquired entities as part of the acquisition of the shares of these entities.

In connection with the CPA^®:16 Merger and the CPA^®:15 Merger, we recorded goodwill as a result of the merger considerations exceeding the fair values of the assets acquired and liabilities assumed (Note 3). The goodwill was attributed to our Owned Real Estate reporting unit as it relates to the real estate assets we acquired in the CPA^®:16 Merger and CPA^®:15 Merger. The following table presents a reconciliation of our goodwill (in thousands):



	Owned Real Estate			Investment Management		Total
Balance at January 1, 2014	$	286,601		$	63,607	$	350,208
Acquisition of CPA^®:16 – Global	346,642			—		346,642
Foreign currency translation adjustments and other	(14,258		)	—		(14,258		)
Other business combinations ^(a)	13,585			—		13,585
Allocation of goodwill to the cost basis of properties sold or classified as held for sale ^(b)	(3,762		)	—		(3,762		)
Balance at December 31, 2014	628,808			63,607		692,415
Foreign currency translation adjustments	(10,548		)	—		(10,548		)
Allocation of goodwill to the cost basis of properties sold or classified as held for sale ^(b)	(1,762		)	—		(1,762		)
Other business combinations	1,704			—		1,704
Balance at December 31, 2015	618,202			63,607		681,809
Allocation of goodwill to the cost basis of properties sold or classified as held for sale ^(b)	(34,405		)	—		(34,405		)
Impairment charges (Note 9)	(10,191		)	—		(10,191		)
Foreign currency translation adjustments	(1,293		)	—		(1,293		)
Balance at December 31, 2016	$	572,313		$	63,607	$	635,920

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(a)	Primarily relates to acquisition of an investment in Norway (Note 5).


(b)	Goodwill is allocated to the cost basis of the properties based on the relative fair value of goodwill at the time the properties are sold or classified as held for sale.

Current accounting guidance requires that we test for the recoverability of goodwill at the reporting unit level. The test for recoverability must be conducted at least annually, or more frequently if events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable. We performed our annual test for impairment during the fourth quarter of 2016 for goodwill recorded in both segments, and no impairment was indicated.

Intangible assets, intangible liabilities, and goodwill are summarized as follows (in thousands):



	December 31,
	2016									2015
	Gross Carrying Amount			Accumulated Amortization			Net Carrying Amount			Gross Carrying Amount			Accumulated Amortization			Net Carrying Amount
Finite-Lived Intangible Assets
Internal-use software development costs	$	18,568		$	(5,068	)	$	13,500		$	18,188		$	(2,038	)	$	16,150
Management contracts	—			—			—			32,765			(32,765		)	—
	18,568			(5,068		)	13,500			50,953			(34,803		)	16,150
Lease Intangibles:
In-place lease and tenant relationship	1,148,232			(322,119		)	826,113			1,205,585			(302,737		)	902,848
Above-market rent	632,383			(210,927		)	421,456			649,035			(173,963		)	475,072
Below-market ground lease	23,140			(1,381		)	21,759			25,403			(889		)	24,514
	1,803,755			(534,427		)	1,269,328			1,880,023			(477,589		)	1,402,434
Indefinite-Lived Goodwill and Intangible Assets
Goodwill	635,920			—			635,920			681,809			—			681,809
Trade name	3,975			—			3,975			3,975			—			3,975
Below-market ground lease	866			—			866			895			—			895
	640,761			—			640,761			686,679			—			686,679
Total intangible assets	$	2,463,084		$	(539,495	)	$	1,923,589		$	2,617,655		$	(512,392	)	$	2,105,263

Finite-Lived Intangible Liabilities
Below-market rent	$	(133,137	)	$	38,231		$	(94,906	)	$	(171,199	)	$	44,873		$	(126,326	)
Above-market ground lease	(12,948		)	2,362			(10,586		)	(13,052		)	1,774			(11,278		)
	(146,085		)	40,593			(105,492		)	(184,251		)	46,647			(137,604		)
Indefinite-Lived Intangible Liabilities
Below-market purchase option	(16,711		)	—			(16,711		)	(16,711		)	—			(16,711		)
Total intangible liabilities	$	(162,796	)	$	40,593		$	(122,203	)	$	(200,962	)	$	46,647		$	(154,315	)

Net amortization of intangibles, including the effect of foreign currency translation, was $163.8 million, $180.8 million, and $174.0 million for the years ended December 31, 2016, 2015, and 2014, respectively. Amortization of below-market rent and above-market rent intangibles is recorded as an adjustment to Lease revenues; amortization of management contracts, internal-use software development, and in-place lease and tenant relationship intangibles is included in Depreciation and amortization; and amortization of above-market ground lease and below-market ground lease intangibles is included in Property expenses, excluding reimbursable tenant costs.

Based on the intangible assets and liabilities recorded at December 31, 2016, scheduled annual net amortization of intangibles for each of the next five calendar years and thereafter is as follows (in thousands):



Years Ending December 31,	Net Decrease in Lease Revenues		Increase to Amortization/ Property Expenses		Total
2017	$	49,925	$	98,909	$	148,834
2018	47,663		95,452		143,115
2019	44,630		91,543		136,173
2020	36,950		83,386		120,336
2021	32,459		76,529		108,988
Thereafter	114,923		404,967		519,890
Total	$	326,550	$	850,786	$	1,177,336

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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