Goodwill and Other Intangibles

12 Months Ended

Dec. 31, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

In connection with the Caplease Merger and Cole Merger, the Company recorded goodwill as a result of the merger consideration exceeding the net assets acquired. No goodwill was recorded on the CCPT Acquisition. The goodwill recorded on the Cole Merger was allocated between the Company’s two reporting units, the REI segment and Cole Capital segment. See Note 4 – Acquisitions of CapLease, Cole and CCPT for further detail of the various mergers.

The following table summarizes the Company’s goodwill activity during the years ended December 31, 2014 and 2013 by segment (in thousands):



	REI Segment			Cole Capital			Consolidated
Balance as of January 1, 2013	$	—		$	—		$	—
Caplease Merger	92,789			—			92,789
Balance as of December 31, 2013	92,789			—			92,789
Cole Merger ⁽¹⁾	1,654,085			558,835			2,212,920
Measurement period adjustments	(27,339		)	49,627			22,288
Goodwill allocated to dispositions ⁽²⁾	(210,139		)	—			(210,139		)
Impairment ⁽³⁾	—			(223,064		)	(223,064		)
Balance as of December 31, 2014	$	1,509,396		$	385,398		$	1,894,794

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(1) Goodwill recognized from the Cole Merger was assigned to the REI segment and Cole Capital based on the excess consideration paid over the fair value of the assets and liabilities acquired and assumed in each segment. Refer to Note 4 – Acquisitions of CapLease, Cole and CCPT for further discussion.


(2)	Goodwill allocated to the cost basis of properties sold or classified as held for sale is included in loss on held for sale assets and disposition of properties, net, in the consolidated statement of operations.

(3) The Cole Capital reporting segment impairment was recognized during the three months ended December 31, 2014.

In making estimates of fair values for purposes of allocating purchase price, the Company utilizes a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property and other market data. The Company also considers information obtained about each property as a result of its pre-acquisition due diligence, as well as subsequent marketing and leasing activities, in estimating the fair value of the tangible and intangible assets acquired and intangible liabilities assumed.

Intangible lease assets and liabilities of the Company consist of the following as of December 31, 2014 and 2013 (amounts in thousands, except weighted-average remaining life):



	Weighted-Average Remaining Life	December 31,
	Weighted-Average Remaining Life	2014		2013
Intangible lease assets:
In-place leases, net accumulated amortization of $236,096 and $60,753, respectively	12.7	$	1,816,508	$	689,109
Leasing commissions, net of accumulated amortization of $505 and $155, respectively	6.7	4,205		227
Above-market leases, net of accumulated amortization of $22,471 and $658, respectively	15.3	355,269		8,693
Total intangible lease assets, net		2,175,982		698,029



	Weighted-Average Remaining Life	December 31,
	Weighted-Average Remaining Life	2014		2013
Intangible lease liabilities:
Below-market leases, net of accumulated amortization of $19,123 and $715, respectively	13.8	$	317,838	$	77,169

The following table provides the projected amortization expense and adjustments to rental income related to the intangible lease assets and liabilities for the next five years as of December 31, 2014 (amounts in thousands):



	2015			2016			2017			2018			2019
In-place leases:
Total to be included in amortization expense	$	195,682		$	182,450		$	165,900		$	151,892		$	142,032
Leasing Commissions
Total to be included in amortization expense	$	445		$	472		$	459		$	351		$	327
Above-market lease assets:
Total to be deducted from rental income	$	27,129		$	26,978		$	26,598		$	26,016		$	24,033
Below-market lease liabilities:
Total to be included in rental income	$	(28,881	)	$	(22,752	)	$	(22,608	)	$	(22,276	)	$	(21,532	)

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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