Real Estate

3 Months Ended

Mar. 31, 2012

Real Estate [Abstract]

Real Estate

NOTE 2. REAL ESTATE

Acquisitions

On January 24, 2012, we completed the acquisition of One Beach Street, consisting of approximately 97,000 rentable square feet in a 3-story fully renovated historic office building located along the Embarcadero in San Francisco's North Waterfront District. The purchase price was approximately $36.5 million, excluding closing costs of approximately $0.02 million, which was paid with cash on hand.

The fair values assigned to identifiable intangible assets acquired were based on estimates and assumptions determined by management. Using information available at the time the acquisition closed, we allocated the total consideration to tangible assets and liabilities and identified intangible assets and liabilities. The identified intangible assets and liabilities are being amortized over a weighted average life of 7.0 years. We may adjust the preliminary purchase price allocation after obtaining more information about asset valuations and liabilities assumed. The allocation of the purchase price for One Beach Street is as follows (in thousands):

Land	$	15,332
Building		16,764
Land improvements		30
Tenant improvements		1,223
Total real estate		33,349
Lease intangibles		4,141
Prepaid expenses and other assets		1
Total assets	$	37,491
Accounts payable and accrued expenses	$	94
Security deposits payable		75
Lease intangibles		1,382
Other liabilities and deferred credits		22
Total liabilities	$	1,573

We have included the results of operations for One Beach Street in our consolidated statements of operations from the date of acquisition. For the period of acquisition through March 31, 2012, One Beach Street contributed $0.8 million to total revenue, $0.5 million to operating expenses, $0.3 million to operating income and $0.3 million to net income.

Pro Forma Financial Information

The unaudited financial information in the table below summarizes the combined results of operations of One Beach Street with the historical results of operations of the Company, as though the entity had been acquired on January 1, 2011. The pro forma financial information for the three months ended March 31, 2011 also includes the pro forma results of operations of the Waikiki Beach Walk entities, Solana Beach Centre entities, First & Main, Lloyd District Portfolio and Solana Beach-Highway 101 which were acquired at various times during 2011. The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisitions had taken place on January 1, 2011. The pro forma financial information includes adjustments to depreciation expense for acquired property and equipment, adjustments to amortization charges for acquired intangible assets and liabilities, adjustments to straight-line rent revenue and the removal of the gain on acquisition of the controlling interests of the Solana Beach Centre entities and Waikiki Beach Walk entities for the three months ended March 31, 2011.

The following table summarizes the unaudited pro forma financial information (in thousands):

	Three Months Ended March 31, 2012				Three Months Ended March 31, 2011
	As Reported		Pro Forma		As Reported		Pro Forma
Total revenue	$	57,038	$	57,302	$	46,883	$	56,054
Total operating expenses		39,705		39,879		31,510		39,231
Operating income		17,333		17,423		15,373		16,823
Net income (loss)	$	2,871	$	2,976	$	13,596	$	(31,928	) (1)

(1) The net loss for the three months ended March 31, 2011 includes one-time expenses for the early extinguishment of debt and loan transfer and consent fees but excludes the gain on acquisition of the controlling interests in the Solana Beach Centre entities and the Waikiki Beach Walk entities.