Investment in Real Estate

9 Months Ended

Sep. 30, 2011

Investment in Real Estate [Abstract]

Investment in Real Estate

3. Investment in Real Estate

Acquisitions

During the nine months ended September 30, 2011, we acquired one industrial property comprising approximately 0.7 million square feet of GLA in connection with the purchase of the 85% equity interest in one property from the institutional investor in the 2003 Net Lease Joint Venture (see Note 5). The gross agreed-upon fair value of the industrial property was $30,625, excluding costs incurred in conjunction with the acquisition of the industrial property. The acquisition was funded through the assumption of a mortgage loan, whose carrying value approximated fair market value, in the amount of $24,417 and a cash payment of $5,277 (85% of the net fair value of the acquisition). We accounted for this transaction as a step acquisition utilizing the purchase method of accounting. Due to the change in control that occurred, we recorded a gain of approximately $689 related to the difference between our carrying value and fair value of our equity interest on the acquisition date.

During the nine months ended September 30, 2010, we acquired three industrial properties comprising approximately 0.5 million square feet of GLA, including one industrial property purchased from the 2005 Development/Repositioning Joint Venture. The purchase price of these acquisitions totaled approximately $22,408, excluding costs incurred in conjunction with the acquisition of the industrial properties.

Intangible Assets Subject to Amortization in the Period of Acquisition

The fair value at the date of acquisition of in-place leases, above market leases and tenant relationships recorded due to real estate properties acquired during the nine months ended September 30, 2011 and September 30, 2010, in deferred leasing intangibles, is as follows:

	Nine Months Ended September 30, 2011		Nine Months Ended September 30, 2010
In-Place Leases	$	2,511	$	1,782
Above Market Leases	$	2,883	$	239
Tenant Relationships	$	1,553	$	1,881

The weighted average life in months of in-place leases, above market leases and tenant relationships recorded as a result of the real estate properties acquired during the nine months ended September 30, 2011 and September 30, 2010 is as follows:

	Nine Months Ended September 30, 2011		Nine Months Ended September 30, 2010
In-Place Leases		56		100
Above Market Leases		56		88
Tenant Relationships		116		165

Sales and Discontinued Operations

During the nine months ended September 30, 2011, we sold 29 industrial properties comprising approximately 2.4 million square feet of GLA and one land parcel. Gross proceeds from the sales of the 29 industrial properties and one land parcel were approximately $70,464. Included in the 29 industrial properties sold, is one industrial property totaling approximately 0.4 million square feet of GLA that we transferred title to a lender in satisfaction of a non-recourse mortgage loan (See Note 6). The gain on sale of real estate was approximately $13,659, of which $12,289 is shown in discontinued operations. The 29 industrial properties sold meet the criteria to be included in discontinued operations. Therefore the results of operations and gain on sale of real estate for the 29 sold industrial properties are included in discontinued operations. The results of operations and gain on sale of real estate for the one land parcel that does not meet the criteria to be included in discontinued operations are included in continuing operations.

At September 30, 2011, we had 66 industrial properties comprising approximately 6.4 million square feet of GLA and several land parcels held for sale. The results of operations of the 66 industrial properties held for sale at September 30, 2011 are included in discontinued operations. There can be no assurance that such industrial properties or land parcels held for sale will be sold.

Income from discontinued operations for the nine months ended September 30, 2010, reflects the results of operations of the 29 industrial properties that were sold during the nine months ended September 30, 2011, the results of operations of 10 industrial properties and one land parcel that received ground rental revenues that were sold during the year ended December 31, 2010, the results of operations of the 66 industrial properties identified as held for sale at September 30, 2011 and the gain on sale of real estate relating to seven industrial properties and one land parcel that received ground rental revenues that were sold during the nine months ended September 30, 2010.

The following table discloses certain information regarding the industrial properties included in discontinued operations for the three and nine months ended September 30, 2011 and September 30, 2010:

	Three Months Ended September 30, 2011			Three Months Ended September 30, 2010			Nine Months Ended September 30, 2011			Nine Months Ended September 30, 2010
Total Revenues	$	6,158		$	7,895		$	19,968		$	23,848
Property Expenses		(2,635	)		(3,278	)		(8,312	)		(10,042	)
Impairment of Real Estate, Net		(2,925	)		(83,488	)		(6,975	)		(83,488	)
Depreciation and Amortization		(531	)		(3,503	)		(1,854	)		(10,768	)
Interest Expense		—			(67	)		(63	)		(202	)
Gain on Sale of Real Estate		6,010			892			12,289			8,511
Provision for Income Taxes		—			—			(1,959	)		—
Income (Loss) from Discontinued Operations	$	6,077		$	(81,549	)	$	13,094		$	(72,141	)

At September 30, 2011 and December 31, 2010, we had notes receivable outstanding of approximately $49,957 and $58,803, net of a discount of $335 and $383, respectively, which are included as a component of Prepaid Expenses and Other Assets, Net. At September 30, 2011 and December 31, 2010, the fair value of the notes receivable was $52,258 and $60,944, respectively. The fair value of our notes receivable was determined by discounting the future cash flows using current rates at which similar loans with similar remaining maturities would be made to other borrowers. The current market rates we utilized were internally estimated; therefore, we have concluded that our determination of fair value of our notes receivable was primarily based upon Level 3 inputs, as discussed below.

Impairment Charges

On October 22, 2010, we amended our unsecured revolving credit facility (as amended, the “Unsecured Credit Facility”). In conjunction with the amendment, management identified a pool of real estate assets (the “Non-Strategic Assets”) that it intends to sell. At September 30, 2011, the Non-Strategic Assets consisted of 119 industrial properties comprising approximately 10.2 million square feet of GLA and land parcels comprising approximately 492 acres. Sixty-four industrial properties comprising approximately 6.4 million square feet of GLA and land parcels comprising approximately 477 acres, of the Non-Strategic Assets were classified as held for sale as of September 30, 2011.

The net impairment charges for assets that qualify to be classified as held for sale at September 30, 2011 were calculated as the difference of the carrying value of the properties and land parcels over the fair value less costs to sell. The net impairment charges recorded during the three and nine months ended September 30, 2011 are due to updated fair market values for certain of the Non-Strategic Assets whose estimated fair market values have changed since December 31, 2010. On the date an asset no longer qualifies to be classified as held for sale, the carrying value must be reestablished at the lower of the estimated fair market value of the asset or the carrying value of the asset prior to held for sale classification, adjusted for any depreciation and amortization that would have been recorded if the asset had not been classified as held for sale. Impairment charges or reversals and/or catch-up depreciation and amortization were recorded during the three and nine months ended September 30, 2011, as applicable, for these assets that are no longer classified as held for sale. The fair market values were determined using widely accepted valuation techniques including discounted cash flow analyses on expected cash flows, internal valuations of real estate and third party offers.

During the three and nine months ended September 30, 2011 and September 30, 2010, we recorded the following net non-cash impairment charges:

	Three Months Ended September 30, 2011			Three Months Ended September 30, 2010			Nine Months Ended September 30, 2011			Nine Months Ended September 30, 2010
Operating Properties — Held for Sale and Sold Assets	$	(2,925	)	$	(83,488	)	$	(6,975	)	$	(83,488	)
Impairment — Discontinued Operations	$	(2,925	)	$	(83,488	)	$	(6,975	)	$	(83,488	)
Land Parcels — Held for Sale and Sold Assets	$	(51	)	$	(2,659	)	$	5,828		$	(2,659	)
Operating Properties — Held for Use		749			(60,103	)		2,862			(69,258	)
Land Parcels — Held for Use		91			(10,409	)		91			(10,409	)
Impairment — Continuing Operations	$	789		$	(73,171	)	$	8,781		$	(82,326	)
Total Net Impairment	$	(2,136	)	$	(156,659	)	$	1,806		$	(165,814	)

The guidance for the fair value measurement provisions for the impairment of long lived assets recorded at fair value establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets for identical assets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The following tables present information about our assets that were measured at fair value on a non-recurring basis during the nine months ended September 30, 2011 and September 30, 2010. The tables indicate the fair value hierarchy of the valuation techniques we utilized to determine fair value.

			Fair Value Measurements on a Non-Recurring Basis Using:
Description	Nine Months Ended September 30, 2011		Quoted Prices in Active  Markets for Identical Assets (Level 1)		Significant Other Observable  Inputs (Level 2)		Unobservable Inputs (Level 3)		Total Impairment
Long-lived Assets Held for Sale*	$	75,944		—		—	$	75,944	$	(7,358	)
Long-lived Assets Held and Used*	$	8,844		—		—	$	8,844		(1,161	)
									$	(8,519	)

			Fair Value Measurements on a Non-Recurring Basis Using:
Description	Nine Months Ended September 30, 2010		Quoted Prices in Active  Markets for Identical Assets (Level 1)		Significant Other Observable  Inputs (Level 2)		Unobservable Inputs (Level 3)		Total Impairment
Long-lived Assets Held for Sale	$	1,833		—		—	$	1,833	$	(1,505	)
Long-lived Assets Held and Used**	$	222,690		—		—	$	222,690		(155,154	)
									$	(156,659	)

* Excludes industrial properties and land parcels for which an impairment reversal of $10,325 was recorded during the nine months ended September 30, 2011 since the related assets are recorded at carrying value, which is lower than estimated fair value at September 30, 2011.

** Excludes an industrial property for which an impairment charge of $9,155 was recorded during the nine months ended September 30, 2010 since the industrial property was recorded at its carrying value at September 30, 2010.