3. Real Estate Assets

On June 9, 2017, Griffin closed on the purchase of 215 International, an approximately 277,000 square foot industrial/warehouse building in Concord, North Carolina, for a purchase price of $18,440. The purchase price was paid in cash at closing using the proceeds held in escrow from the 2017 Phoenix Crossing Land Sale (see below) of $9,711 with the balance paid from Griffin’s cash on hand. Griffin incurred approximately $71 of acquisition costs on the purchase of 215 International which are included in general and administrative expenses on Griffin’s consolidated statements of operations for the 2017 nine month period. 215 International was constructed in 2015 and was 74% leased at the time it was acquired. Subsequent to the closing, one of the tenants in 215 International leased an additional approximately 73,000 square feet, which resulted in 215 International being fully leased. 215 International is Griffin’s first property in the Charlotte area. Griffin determined that the fair value of the assets acquired approximated the purchase price. Of the $18,440 purchase price, $16,789 represented the fair value of the real estate assets and $1,651 represented the fair value of the acquired intangible assets, comprised of the value of the in-place leases at the time of purchase and tenant relationship intangible assets (see Note 2). The intangible assets are included in other assets on Griffin’s consolidated balance sheet.

Real estate assets consist of:


	Estimated
	Useful Lives	Aug. 31, 2017		Nov. 30, 2016
Land		$	20,403	$	17,895
Land improvements	10 to 30 years		28,539		27,592
Buildings and improvements	10 to 40 years		179,788		164,353
Tenant improvements	Shorter of useful life or terms of related lease		26,590		21,925
Machinery and equipment	3 to 20 years		11,022		11,022
Construction in progress			5,266		1,659
Development costs			14,779		14,615
			286,387		259,061
Accumulated depreciation			(92,864)		(86,801)
		$	193,523	$	172,260

Total depreciation expense and capitalized interest related to real estate assets were as follows:


	For the Three Months Ended				For the Nine Months Ended
	Aug. 31, 2017		Aug. 31, 2016		Aug. 31, 2017		Aug. 31, 2016
Depreciation expense	$	2,283	$	1,974	$	6,490	$	5,756

Capitalized interest	$	26	$	57	$	26	$	274

On August 24, 2017, Griffin closed on the previously contracted purchase of approximately 14 acres of undeveloped land in Upper Macungie Township, Lehigh County, Pennsylvania (the “Macungie Purchase”). The purchase price of $1,800 (excluding costs related to the purchase) was paid in cash at closing using the proceeds from the Southwick Land Sale that had been held in escrow (see below). The land acquired has all governmental approvals in place for Griffin’s planned development, on speculation, of an approximately 134,000 square foot industrial/warehouse building.

On August 4, 2017, Griffin completed the sale of approximately 76 acres (the “Southwick Land Sale”) of undeveloped land in Southwick, Massachusetts. Griffin received cash proceeds of $2,100 before transaction costs and recorded a pretax gain of $1,890 on the Southwick Land Sale. The net cash proceeds of $1,943 from the Southwick Land Sale were placed in escrow for the acquisition of a replacement property as part of a like-kind exchange under Section 1031 of the Internal Revenue Code of 1986, as amended (a “1031 Like-Kind Exchange”) (see above).

On April 28, 2017, Griffin closed on the previously contracted sale of approximately 67 acres (the “2017 Phoenix Crossing Land Sale”) of undeveloped land in Phoenix Crossing, the approximately 268 acre business park master planned by Griffin that straddles the town line between Windsor and Bloomfield, Connecticut. Griffin received cash proceeds of $10,250 before transaction costs and recorded a pretax gain of $7,975 on the 2017 Phoenix Crossing Land Sale. The net cash proceeds of $9,711 from the 2017 Phoenix Crossing Land Sale were placed in escrow and subsequently used for the acquisition of 215 International as part of a 1031 Like-Kind Exchange (see above).

In fiscal 2013, Griffin completed the sale of approximately 90 acres of undeveloped land in Phoenix Crossing for $8,968 in cash, before transaction costs (the “2013 Phoenix Crossing Land Sale”). Under the terms of the 2013 Phoenix Crossing Land Sale, Griffin was required to complete certain offsite improvements, primarily roadwork. As a result of Griffin's continued involvement with the land sold, the 2013 Phoenix Crossing Land Sale was accounted for under the percentage of completion method. Accordingly, the revenue and pretax gain on the sale were recognized on a pro rata basis in a ratio equal to the percentage of the total costs incurred to the total anticipated costs of sale, including costs of the required roadwork. Costs included in determining the percentage of completion included the cost of the land sold, allocated master planning costs and the cost of road construction. As of August 31, 2017, Griffin had substantially completed the required improvements related to the 2013 Phoenix Crossing Land Sale; accordingly, all of the remaining revenue and pretax gain on the sale have been recognized in Griffin’s consolidated statements of operations. Griffin’s consolidated statements of operations for the 2017 nine month period include revenue of $104 and a pretax gain of $66 from the 2013 Phoenix Crossing Land Sale. The consolidated statements of operations for the 2016 second quarter reflected a reduction of $278 of previously recognized revenue on the 2013 Phoenix Crossing Land Sale that resulted from an increase in the estimated costs to complete the required road improvements made at that time. Therefore, the 2016 third quarter and 2016 nine month period reflected revenue of $751 and $473, respectively, and pretax gains of $558 and $280, respectively. From the closing of the 2013 Phoenix Crossing Land Sale in fiscal 2013 through August 31, 2017, Griffin’s consolidated statements of operations have reflected total revenue of $8,968 and a total pretax gain of $6,674 from the 2013 Phoenix Crossing Land Sale.

On March 29, 2017, the full building tenant in an approximately 100,000 square foot industrial/warehouse building in New England Tradeport (“NE Tradeport”), Griffin’s industrial park located in Windsor and East Granby, Connecticut, filed for protection under Chapter 11 of the U.S. Bankruptcy Code. In the 2017 third quarter, Griffin entered into an Amendment to Lease (the “Amendment”) with this tenant. Under the terms of the Amendment, the tenant’s premises will be reduced to approximately 52,000 square feet prior to June 1, 2018, however, the per square foot rental rates and lease expiration date of March 31, 2024 under the existing lease remain the same. The tenant has also agreed to pay a termination fee of $200 in monthly installments over the balance of the lease term. The Amendment was approved by the U.S. Bankruptcy Court subsequent to the end of the 2017 third quarter (see Note 9). Rental revenue from this tenant was $279 in the 2017 third quarter.

Real estate assets held for sale consist of:


	Aug. 31, 2017		Nov. 30, 2016
Land	$	1,256	$	264
Land improvements		354		—
Development costs		1,074		2,728
	$	2,684	$	2,992

In the 2017 nine month period, $1,757 was reclassified from real estate assets to real estate assets held for sale related to sales agreements currently under contract (see Note 8). Real estate assets held for sale were reduced in the 2017 nine month period by $2,065 related to property sales that closed.