Discontinued Operations

9 Months Ended

Sep. 30, 2014

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Discontinued Operations and Land Dispositions

Properties Held for Sale

As ofSeptember 30, 2014, the following properties were classified as held for sale:

Location	City/Submarket	Property Type	Number of Buildings	Rentable Square Feet (unaudited)
4040 Civic Center Dr, San Rafael, CA	San Rafael	Office	1	130,237
999 Town & Country Rd, Orange, CA	Orange	Office	1	98,551
Total properties held for sale			2	228,788

The major classes of assets and liabilities of the properties held for sale as of September 30, 2014 were as follows:

Real estate assets and other assets held for sale	(in thousands)
Land and improvements	$	18,077
Buildings and improvements	31,530
Total real estate held for sale	49,607
Accumulated depreciation and amortization	(5,046		)
Total real estate held for sale, net	44,561
Current receivables, net	56
Deferred rent receivables, net	1,241
Deferred leasing costs and acquisition-related intangible assets, net	3,754
Prepaid expenses and other assets, net	203
Real estate and other assets held for sale, net	$	49,815
Liabilities and deferred revenue of real estate assets held for sale
Accounts payable, accrued expenses and other liabilities	$	944
Deferred revenue and acquisition-related intangible liabilities, net	1,733
Rents received in advance and tenant security deposits	422
Liabilities and deferred revenue of real estate assets held for sale	$	3,099

Operating Property Dispositions

The following table summarizes the operating properties sold during the nine months ended September 30, 2014:

Location	Property Type	Month of Disposition	Number of Buildings	Rentable Square Feet
San Diego Properties, San Diego, CA (1)	Office	January	12	1,049,035
9785 & 9791 Towne Centre Drive, San Diego, CA	Office	June	2	126,000
111 Pacifica, Irvine, CA	Office	September	1	67,496
Total 2014 Dispositions			15	1,242,531

________________________ 

(1) The San Diego Properties included the following: 10020 Pacific Mesa Boulevard, 6055 Lusk Avenue, 5010 and 5005 Wateridge Vista Drive, 15435 and 15445 Innovation Drive, and 15051, 15073, 15231, 15253, 15333 and 15378 Avenue of Science. These properties were held for sale as of December 31, 2013.

Discontinued Operations

Discontinued operations for the three months ended September 30, 2014 includes the income of the property sold in September 2014 and the two properties classified as held for sale at September 30, 2014. For the nine months ended September 30, 2014 and 2013, discontinued operations also included the gains on dispositions of $110.4 million related to the June 2014 office property disposition and income of the twelve operating office properties sold in January 2014. The operations related to the June 2014 office property dispositions were immaterial for classification as discontinued operations. For the three and nine months ended September 30, 2013, discontinued operations also included the income from three operating office properties that were sold during those respective periods in 2013. The following table summarizes the revenue and expense components that comprise income from discontinued operations for the three and nine months ended September 30, 2014 and 2013:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
	(in thousands)
Revenues:
Rental income	$	1,982	$	8,189	$	6,361	$	23,692
Tenant reimbursements	70		918		247		2,420
Other property income	6		5,151		26		5,159
Total revenues	2,058		14,258		6,634		31,271
Expenses:
Property expenses	705		2,673		1,952		5,753
Real estate taxes	196		891		628		2,626
Depreciation and amortization	609		4,846		1,963		11,693
Total expenses	1,510		8,410		4,543		20,072
Income from discontinued operations before gains on dispositions of discontinued operations	548		5,848		2,091		11,199
Gains on dispositions of discontinued operations	5,587		—		110,391		423
Total income from discontinued operations	$	6,135	$	5,848	$	112,482	$	11,622

Land Disposition

During the nine months ended September 30, 2014, the Company sold a land parcel located at 10850 Via Frontera in the Rancho Bernardo submarket of San Diego, California for a gross sales price of $33.1 million, resulting in a gain on sale of $3.5 million. The land parcel noted above did not meet the criteria for classification as discontinued operations because the parcel did not have any significant operations prior to disposal. Therefore, the gain on sale is included on our consolidated statements of operations as gain on sale of land within continuing operations.

Restricted Cash Related to Dispositions

During the nine months ended September 30, 2014, the net cash proceeds from the office properties disposed of during the period were temporarily being held at qualified intermediaries, at our direction, for the purpose of facilitating Section 1031 Exchanges. During the nine months ended September 30, 2014, we successfully completed four Section 1031 Exchanges and all remaining cash proceeds related to these transactions were released from the qualified intermediaries upon completion.

As of December 31, 2013, approximately $32.2 million, respectively, of net cash proceeds related to the land and office properties disposed of during the year ended December 31, 2013 were temporarily being held at qualified intermediaries, at our direction, for the purpose of facilitating Section 1031 Exchanges. The cash proceeds are included in restricted cash on the consolidated balance sheet at December 31, 2013. In February 2014, we successfully completed one of the Section 1031 Exchanges and the $32.2 million cash proceeds were released from the qualified intermediary.