Goodwill and Other Intangibles

12 Months Ended

Dec. 31, 2017

Goodwill And Intangible Assets Liabilities Disclosure [Abstract]

We have recorded net lease, internal-use software development, and trade name 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 below-market ground lease (as lessee) intangibles, at cost are included in In-place lease and other intangible assets in the consolidated financial statements. Above-market rent intangibles, at cost are included in Above-market rent intangible assets in the consolidated financial statements. Accumulated amortization of in-place lease, below-market ground lease (as lessee), and above-market rent intangibles is included in Accumulated depreciation and amortization in the consolidated financial statements. Internal-use software development and trade name 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 both the CPA:16 Merger and the CPA:15 Merger, we recorded goodwill as a result of the merger consideration exceeding the fair values of the assets acquired and liabilities assumed (Note 2). 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, 2015	$	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 ^(a)	(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 ^(a)	(34,405		)	—		(34,405		)
Impairment charges (Note 8)	(10,191		)	—		(10,191		)
Foreign currency translation adjustments	(1,293		)	—		(1,293		)
Balance at December 31, 2016	572,313			63,607		635,920
Foreign currency translation adjustments	8,040			—		8,040
Balance at December 31, 2017	$	580,353		$	63,607	$	643,960

__________


(a)	Following our adoption of ASU 2017-01 on January 1, 2017, goodwill that was previously allocated to businesses that were sold or held for sale will no longer be allocated and written off upon sale if future sales are deemed to be sales of assets and not businesses (Note 2).

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. In connection with our Board’s decision to exit non-traded retail fundraising activities in June 2017 (Note 1), we performed a test for impairment during the second quarter of 2017 on goodwill recorded in both segments, and no impairment was indicated.

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



	December 31,
	2017									2016
	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	$	18,649		$	(7,862	)	$	10,787		$	18,568		$	(5,068	)	$	13,500
Trade name	3,975			(401		)	3,574			3,975			—			3,975
	22,624			(8,263		)	14,361			22,543			(5,068		)	17,475
Lease Intangibles:
In-place lease	1,194,055			(421,686		)	772,369			1,148,232			(322,119		)	826,113
Above-market rent	640,480			(276,110		)	364,370			632,383			(210,927		)	421,456
Below-market ground lease	18,936			(1,855		)	17,081			23,140			(1,381		)	21,759
	1,853,471			(699,651		)	1,153,820			1,803,755			(534,427		)	1,269,328
Indefinite-Lived Goodwill and Intangible Assets
Goodwill	643,960			—			643,960			635,920			—			635,920
Below-market ground lease	985			—			985			866			—			866
	644,945			—			644,945			636,786			—			636,786
Total intangible assets	$	2,521,040		$	(707,914	)	$	1,813,126		$	2,463,084		$	(539,495	)	$	1,923,589

Finite-Lived Intangible Liabilities
Below-market rent	$	(135,704	)	$	48,657		$	(87,047	)	$	(133,137	)	$	38,231		$	(94,906	)
Above-market ground lease	(13,245		)	3,046			(10,199		)	(12,948		)	2,362			(10,586		)
	(148,949		)	51,703			(97,246		)	(146,085		)	40,593			(105,492		)
Indefinite-Lived Intangible Liabilities
Below-market purchase option	(16,711		)	—			(16,711		)	(16,711		)	—			(16,711		)
Total intangible liabilities	$	(165,660	)	$	51,703		$	(113,957	)	$	(162,796	)	$	40,593		$	(122,203	)

During the year ended December 31, 2017, the U.S. dollar weakened against the euro, resulting in increases of $57.3 million and $3.1 million in the carrying value of our net intangible assets and liabilities, respectively, from December 31, 2016 to December 31, 2017. Net amortization of intangibles, including the effect of foreign currency translation, was $157.8 million, $163.8 million, and $180.8 million for the years ended December 31, 2017, 2016, and 2015, respectively. Amortization of below-market rent and above-market rent intangibles is recorded as an adjustment to Lease revenues; amortization of internal-use software development, trade name, and in-place lease 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, 2017, 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
2018	$	47,687	$	103,345	$	151,032
2019	44,887		95,296		140,183
2020	36,979		87,395		124,374
2021	32,747		81,705		114,452
2022	25,455		69,590		95,045
Thereafter	89,568		356,281		445,849
Total	$	277,323	$	793,612	$	1,070,935

- 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.

+ References + Details