REAL ESTATE

A summary of our real estate investments and related encumbrances is as follows:



	Cost		Accumulated Depreciation and Amortization			Encumbrances
	(In thousands)
December 31, 2011
Retail and mixed-use properties	$	4,312,189	$	(1,087,704	)	$	724,287
Retail properties under capital leases	113,605		(33,019		)	63,093
Residential	8,750		(6,865		)	23,236
	$	4,434,544	$	(1,127,588	)	$	810,616
December 31, 2010
Retail and mixed-use properties	$	3,779,203	$	(999,209	)	$	505,934
Retail properties under capital leases	108,381		(29,421		)	59,940
Residential	8,358		(6,574		)	23,567
	$	3,895,942	$	(1,035,204	)	$	589,441

Retail and mixed-use properties includes the residential portion of Santana Row, Bethesda Row and Congressional Plaza. The residential property investment is our investment in Rollingwood Apartments.

2011 Significant Acquisitions and Disposition

On January 19, 2011, we acquired the fee interest in Tower Shops located in Davie, Florida for a net purchase price of $66.1 million which included the assumption of a mortgage loan with a face amount of $41.0 million and a fair value of approximately $42.9 million. The property contains approximately 368,000 square feet of gross leasable area on 67 acres and is shadow-anchored by Home Depot and Costco. Approximately $1.2 million and $4.4 million of net assets acquired were allocated to other assets for “above market leases” and other liabilities for “below market leases”, respectively. We incurred a total of $0.4 million of acquisition costs of which $0.2 million were incurred in 2011 and are included in “general and administrative expenses” for the year ended December 31, 2011.

On July 12, 2011, we sold Feasterville Shopping Center located in Feasterville, Pennsylvania for a sales price of $20.0 million resulting in a gain of $14.8 million. The operations of this property are included in “discontinued operations” in the consolidated statements of operations for all periods presented and included in “assets held for sale/disposal” in our consolidated balance sheet as of December 31, 2010. The sale was completed as a Section 1031 tax deferred exchange transaction with the acquisition of Tower Shops.

On December 27, 2011, we acquired an 89.9% controlling interest in Montrose Crossing, a 357,000 square foot shopping center located in Rockville, Maryland. The purchase price was $141.5 million and our 89.9% ownership interest was $127.2 million which was funded with cash and our pro-rata share of $80.0 million of new mortgage debt. We are the managing member of the entity, control all significant operating decisions, and receive approximately 89.9% of the cash flow of the entity. Therefore, we have consolidated the property and its operations effective on the acquisition date. The purchase price has been preliminarily allocated to real estate assets, debt, and noncontrolling interests. The final purchase price allocation to all acquired assets, liabilities, and noncontrolling interests will be finalized after our valuation studies are complete. We incurred approximately $2.4 million of acquisition costs which are included in “general and administrative expenses” in 2011.

On December 30, 2011, we acquired a 48.2% controlling interest in Plaza El Segundo, a 381,000 square foot shopping center located in El Segundo, California. The purchase price was $192.7 million and our 48.2% ownership interest was funded with $8.5 million of cash and the assumption of our pro-rata share of the existing $175.0 million mortgage debt. We are the managing member of the entity, control all significant decisions, and receive the majority of the cash flow of the entity. Therefore, we have consolidated the property and its operations effective on the acquisition date. The purchase price has been preliminarily allocated to real estate assets, debt, and noncontrolling interests. The final purchase price allocation to all acquired assets, liabilities, and noncontrolling interests will be finalized after our valuation studies are complete. We incurred approximately $1.0 million of acquisition costs which are included in “general and administrative expenses” in 2011.

On December 30, 2011, we acquired an 8.1 acre land parcel adjacent to Plaza El Segundo for a purchase price of $15.9 million. We intend to use the land parcel for future development.

2010 Significant Acquisitions and Transactions

A summary of our significant acquisitions in 2010 is as follows:

Date

Property

City, State

Gross Leasable Area

Purchase Price

(In square feet)

(In millions)

August 16

Huntington Square

East Northport, NY

74,000

17.6

(1)

November 10

Former Mervyn’s Parcel
(Escondido Promenade)

Escondido, CA

75,000

11.2

(2)

November 22

Pentagon Row

Arlington, VA

N/A

8.5

(3)

December 27

Bethesda Row

Bethesda, MD

N/A

9.4

(4)

Total

149,000

46.7

_____________________

(1)

We acquired the leasehold interest in this property. Approximately $9.2 million of net assets acquired were allocated to other assets for “above market leases” and a “below market ground lease” for which we are the lessee. Approximately $1.7 million of net assets acquired were allocated to liabilities for “below market leases”. We incurred approximately $0.3 million of acquisition costs which are included in “general and administrative expenses”.


(2)	This property is adjacent to and operated as part of Escondido Promenade which is owned through a partnership in which we own the controlling interest.

(3)

We and a subsidiary of Post Properties, Inc. (“Post”) purchased the fee interest in the land under Pentagon Row. The land was purchased as a result of a favorable outcome to litigation. In September 2008, we and Post sued Vornado Realty Trust and related entities (“Vornado”) for breach of contract in the Circuit Court of Arlington County, Virginia. The breach of contract was a result of Vornado’s acquiring in transactions in 2005 and 2007 the fee interest in the land under our Pentagon Row project without first giving us and Post the opportunity to purchase the fee interest in that land as required by the right of first offer (“ROFO”) provisions included in the documentation relating to the Pentagon Row project. On April 30, 2010, the judge in this case issued a ruling that Vornado failed to comply with the ROFO and as a result, breached the contract, and ordered Vornado to sell to us and Post, collectively, the land under Pentagon Row. Vornado appealed the ruling, however, the appeal was denied in November 2010. As part of the acquisition of the land and termination of the respective ground lease, we were relieved of our deferred ground rent liability for approximately $8.8 million. The liability was offset against the purchase price with the excess of the liability over the purchase price of $0.3 million included in the statement of operations as an adjustment to rental expense.


(4)	We acquired the fee interest in approximately 2.1 acres of land under Bethesda Row. Prior to the transaction, the land parcel was owned pursuant to a ground lease and encumbered by a capital lease obligation which was terminated as part of the transaction.

The $0.4 million gain on sale of real estate relates to condemnation proceeds, net of costs, at one of our Northern Virginia properties in order to expand a local road.

In December 2010, we committed to a plan of sale for two buildings on Fifth Avenue in San Diego, California. As the buildings met the criteria to be classified as held for sale, we recognized a $0.4 million loss to write down one of the buildings to its expected sales price less cost to sell. Both buildings were sold in 2011. The operations of the buildings have been classified as discontinued operations in the consolidated statements of operations for all years presented and included in “assets held for sale/disposal” in our consolidated balance sheet as of December 31, 2010.