Acquisitions

Operating Properties

During the years ended December 31, 2014 and 2013, we acquired the nine operating office properties, listed below, from unrelated third parties. Unless otherwise noted, we funded these acquisitions with proceeds from the Company’s public offerings of common stock and the Company's at-the-market stock offering program (see Note 10 “Stockholders’ Equity of the Company”), borrowings under the unsecured line of credit (see Note 7 “Secured and Unsecured Debt of the Operating Partnership”), disposition proceeds (see Note 18 “Discontinued Operations”), the assumption of existing debt and/or the issuance of common units of the Operating Partnership.



Property	Date of Acquisition	Number of Buildings	Rentable Square Feet (unaudited)	Occupancy as of December 31, 2014 (unaudited)	Purchase Price (in millions) ⁽¹⁾
2014 Acquisitions
401 Terry Ave. N., Seattle, WA	March 13, 2014	1	140,605	100.0%	$	106.1
1310, 1315, 1320-1324, 1325-1327 Chesapeake Terrace, Sunnyvale, CA ⁽²⁾	November 5, 2014	4	266,982	86.0%	100.5
Total ⁽³⁾		5	407,587		$	206.6

2013 Acquisitions
320 Westlake Ave. N. and 321 Terry Ave. N., Seattle, WA ⁽⁴⁾⁽⁵⁾	January 16, 2013	2	320,398	100.0%	$	170.0
12780 and 12790 El Camino Real, San Diego, CA⁽⁶⁾	September 19, 2013	2	218,940	100.0%	126.4
Total ⁽⁷⁾		4	539,338		$	296.4

________________________


(1)	Excludes acquisition-related costs and non-lease related accrued liabilities assumed. Includes assumed unpaid leasing commissions and tenant improvements.


(2)	As of December 31, 2014, these properties, together the "Chesapeake Commons" project, were temporarily being held in a separate VIE to facilitate potential Section 1031 Exchanges (see Note 2 "Basis of Presentation and Significant Accounting Policies"). During January 2015, the Company closed out the Section 1031 Exchange related to this VIE.


(3)	The results of operations for the properties acquired during 2014 contributed $7.7 million and $2.8 million to revenues and net income from continuing operations, respectively, for the year ended December 31, 2014.


(4)	We acquired these properties through a special purpose entity wholly owned by the Finance Partnership.


(5)	In connection with this acquisition, we assumed secured debt with an outstanding principal balance of $83.9 million that was recorded at fair value on the acquisition date, resulting in a premium of approximately $11.6 million (see Note 7 “Secured and Unsecured Debt of the Operating Partnership” for additional information).

(6)

As of December 31, 2013, these properties, together the "Heights of Del Mar" project, were temporarily being held in a separate VIE to facilitate potential Section 1031 Exchanges (see Note 2 "Basis of Presentation and Significant Accounting Policies"). The $126.4 million purchase price includes $9.4 million for 4.2 acres of undeveloped land the Company acquired in connection with this acquisition.


(7)	The results of operations for the properties acquired during 2013 contributed $17.5 million and $0.9 million to revenues and net income from continuing operations, respectively, for the year ended December 31, 2013.

The related assets, liabilities and results of operations of the acquired properties are included in the consolidated financial statements as of the date of acquisition. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the respective acquisition dates for our 2014 and 2013 acquisitions:



Acquisitions	Total 2014 Acquisitions ⁽¹⁾		Total 2013 Acquisitions ⁽¹⁾
	(in thousands)
Assets
Land and improvements	$	81,430	$	53,790
Buildings and improvements ⁽²⁾	114,876		218,211
Undeveloped land and construction in progress⁽³⁾	—		9,360
Deferred leasing costs and acquisition-related intangible assets ⁽⁴⁾	17,259		30,789
Total assets acquired	213,565		312,150
Liabilities
Deferred revenue and acquisition-related intangible liabilities ⁽⁵⁾	6,990		4,190
Secured debt, net ⁽⁶⁾	—		95,496
Accounts payable, accrued expenses and other liabilities	2,029		422
Total liabilities assumed	9,019		100,108
Net assets and liabilities acquired ⁽⁷⁾	$	204,546	$	212,042

_______________


(1)	The purchase price of the two acquisitions completed during the year ended December 31, 2014, and the two acquisitions completed during the year ended December 31, 2013 were individually less than 5% and in aggregate less than 10% of the Company’s total assets as of December 31, 2014 and December 31, 2013, respectively.


(2)	Represents buildings, building improvements and tenant improvements.


(3)	In connection with one of the 2013 acquisitions, we acquired undeveloped land of approximately 4.2 acres that was added to the Company's future development pipeline upon acquisition.

(4)

Represents in-place leases (approximately $12.3 million with a weighted average amortization period of 7.0 years) and leasing commissions (approximately $4.9 million with a weighted average amortization period of 7.0 years) for the year ended December 31, 2014. Represents in-place leases (approximately $19.6 million with a weighted average amortization period of 4.7 years), above-market leases (approximately $3.2 million with a weighted average amortization period of 6.1 years) and leasing commissions (approximately $7.9 million with a weighted average amortization period of 5.9 years) for the year ended December 31, 2013.


(5)	Represents below-market leases (approximately $7.0 million and $4.2 million with a weighted average amortization period of 6.1 years and 7.7 years) for the years ended December 31, 2014 and December 31, 2013, respectively.


(6)	Represents the mortgage loan, which includes an unamortized premium balance of approximately $11.6 million at the date of acquisition, assumed in connection with the properties acquired in January 2013 (see Note 7 “Secured and Unsecured Debt of the Operating Partnership” for additional information).


(7)	Reflects the purchase price net of assumed secured debt and other lease-related obligations.

Development and Redevelopment Project Sites

During the year ended December 31, 2014, we acquired the following undeveloped land sites listed below from unrelated third parties. The acquisitions were funded with proceeds from the Company’s at-the-market stock offering program (see Note 10 “Stockholders’ Equity of the Company” for additional information), borrowings under the unsecured line of credit (see Note 7 “Secured and Unsecured Debt of the Operating Partnership” for additional information), disposition proceeds (see Note 18 “Discontinued Operations” for additional information), and issuance of common stock.



Project	Date of Acquisition	Type	Purchase Price (in millions)
The Exchange on 16th, San Francisco, CA ⁽¹⁾	May 23, 2014	Development	$	95.0
Flower Mart, San Francisco, CA ⁽²⁾	October 23, 2014, December 19, 2014	Development	71.0
Total			$	166.0

_______________

(1)

In connection with this acquisition, we also assumed $2.3 million in accrued liabilities, which are not included in the purchase price above. As of December 31, 2014, the purchase price and assumed liabilities are included in undeveloped land and construction in progress and the assumed liabilities are included in accounts payable, accrued expenses and other liabilities on our consolidated balance sheets.

(2)

In the fourth quarter of 2014, the Company closed on two adjacent land sites for a total purchase price of $71.0 million and approximately $13.4 million in transaction costs and accrued liabilities, net (see Note 15 “Commitments and Contingencies” for additional information on a portion of accrued liabilities for this transaction). The acquisitions, which were completed through the execution of two merger transactions, were partially funded through the issuance of 351,476 shares of the Company’s common stock valued at approximately $21.6 million and the remainder was paid in cash.

During the year ended December 31, 2013, we acquired the following land site and land previously subject to a ground lease listed below from unrelated third parties. The acquisitions were funded with proceeds from the Company’s at-the-market stock offering program (see Note 10 “Stockholders’ Equity of the Company”), borrowings under the unsecured line of credit (see Note 7 “Secured and Unsecured Debt of the Operating Partnership”), and disposition proceeds (see Note 18 “Discontinued Operations”).



Project	Date of Acquisition	Type	Purchase Price (in millions)
Academy Project, Hollywood, CA ⁽¹⁾	November 15, 2013	Development	$	45.0
360 Third Street, San Francisco, CA ⁽²⁾	October 29, 2013	Land	27.5
Total			$	72.5

_______________


(1)	In connection with this acquisition, we also assumed $0.7 million in accrued liabilities, which are not included in the purchase price above. As of December 31, 2014 and 2013, the project is included in our future development pipeline and, as a result, the underlying assets were included as undeveloped land and construction in progress in our consolidated financial statements.


(2)	In November 2012, we exercised an option to purchase the land underlying the ground leases at this wholly owned property. This transaction closed in October 2013 and as of December 31, 2014 and 2013, the land was included as land and improvements in our consolidated financial statements.

Additionally, on June 27, 2013, the Company entered into an agreement with an unaffiliated third party and formed Redwood LLC, a new consolidated subsidiary. In connection with this transaction, the Company acquired a 0.35 acre land site, completing the first phase of the land assemblage for its plans to develop an approximate 300,000 square foot office project (the “Crossing/900” project) in Redwood City, California. In October 2013, the Company acquired a 2.0 acre undeveloped land parcel for $17.0 million, completing the final phase of the land assemblage for this project. The related assets, liabilities, and noncontrolling interest acquired in connection with this transaction are included in our consolidated financial statements as of the date of acquisition. The following table summarizes the allocation of the assets acquired and liabilities assumed at the acquisition dates (in thousands):



	Phase I		Phase II		Total
Assets
Undeveloped land and construction in progress	$	11,222	$	17,000	$	28,222
Total assets	11,222		17,000		28,222
Liabilities
Secured debt ⁽¹⁾	1,750		—		1,750
Accounts payable, accrued expenses and other liabilities	1,952		1,475		3,427
Total liabilities	3,702		1,475		5,177
Noncontrolling interest in consolidated subsidiary	4,885		—		4,885
Net assets and liabilities acquired	$	2,635	$	15,525	$	18,160

________________________


(1)	This note was repaid as of December 31, 2013.