Note 5 – Property and Equipment

Operating Property, net

As of June 30, 2017 and December 31, 2016, property associated with our operating activities is summarized as follows:


	June 30,		December 31,
(Dollars in thousands)	2017		2016
Land	$	76,182	$	73,803
Building and improvements		129,106		122,863
Leasehold improvements		48,493		46,902
Fixtures and equipment		127,441		118,180
Construction-in-progress		13,710		11,517
Total cost		394,932		373,265
Less: accumulated depreciation		(175,398)		(161,379)
Operating property, net	$	219,534	$	211,886

Depreciation expense for operating property was $3.5 million and $7.3 million for the quarter and six months ended June 30, 2017 and $3.5 million and $7.1 million for the quarter and six months ended June 30, 2016, respectively.

Investment and Development Property

As of June 30, 2017 and December 31, 2016, our investment and development property is summarized below:


	June 30,		December 31,
(Dollars in thousands)	2017		2016
Land	$	25,450	$	24,616
Building		1,900		1,900
Construction-in-progress (including capitalized interest)		34,869		17,171
Investment and development property	$	62,219	$	43,687

Construction-in-Progress – Operating and Investing Properties

Construction-in-Progress balances are included in both our operating and development properties. The balances of our major projects along with the movements for the six months ended June 30, 2017 are shown below:


(Dollars in thousands)		Balance, December 31, 2016		Additions during the period(1)		Completed during the period		Foreign currency movements		Balance, June 30, 2017
Union Square development	$	11,412	$	8,912	$	--	$	--	$	20,324
Newmarket Property development		2,106		7,531		--		278		9,915
Courtenay Central development		3,510		746		--		209		4,465
Cinema developments and improvements		7,796		2,722		(1,635)		51		8,934
Other real estate projects		3,864		3,355		(2,455)		177		4,941
Total	$	28,688	$	23,266	$	(4,090)	$	715	$	48,579

(1) Includes capitalized interest of $266,000 and $421,000 for the quarter and six months ended June 30, 2017.

Real Estate Transactions

Sale of Landholding in Burwood, Australia

On May 12, 2014, we entered into a contract to sell our undeveloped 50.6 acre parcel in Burwood, Victoria, Australia, to Australand Holdings Limited (now known as Frasers Property Australia, “Frasers”) for a purchase price of $50.6 million (AU$65.0 million). We received $5.9 million (AU$6.5 million) on May 23, 2014. The remaining purchase price of $44.9 million (AU$58.5 million) is due on December 31, 2017.

The agreement provides for mandatory pre-payments in the event that any of the land is sold by the buyer, any such prepayment being in an amount equal to the greater of (a) 90% of the net sales price or (b) the balance of the purchase price multiplied by a fraction the numerator of which is the square footage of property being sold by the buyer and the denominator of which is the original square footage of the property being sold to the buyer. The agreement does not provide for the payment of interest on the balance owed.

On June 19, 2017, Frasers sold a parcel of land for which we received additional payment in the amount of US$16.5 million (AU$21.8 million), representing 90% of the net sales price. We expect the final settlement on the remaining receivable amount of $28.1 million (AU36.7 million), included as part of “Receivables” in our Consolidated Balance Sheet, to occur in December 2017. Cumulatively, this transaction now has achieved the requisites to consummate the sale. Since there is reasonable assurance of cost recovery, the property ownership has transferred to Frasers and we have assessed the collectability of the remaining receivable to be high, we recognized the sale of the land and the total transaction gain, in the amount of $9.4 million (AU$12.5 million) during the quarter ended June 30, 2017, determined as follows:


(Dollars in thousands)	In AU$
Selling price	$	65,000
Less: Property book value		(52,108)
Total transaction gain, gross		12,892
Less: Direct costs incurred(1)		(439)
Total transaction gain, net	$	12,453

(1) Represents commissions and legal expenses incurred in connection with this transaction.

New Corporate Headquarters in Los Angeles

On April 11, 2016, we purchased a 24,000 square foot office building with 72 parking spaces located at 5995 Sepulveda Boulevard in Culver City, California for $11.2 million. The terms and circumstances of this acquisition were not considered to meet the definition of a business combination in accordance with U.S. GAAP. We currently use approximately 50% of the leasable area for our headquarters offices and intend to lease, over time, the remainder to unaffiliated third parties.

Sale of Properties in Taupo, New Zealand

On April 1, 2015, we entered into two definitive purchase and sale agreements to sell our properties at Taupo, New Zealand for a combined sales price of $2.4 million (NZ$3.4 million). The first agreement related to a property with a sales price of $1.6 million (NZ$2.2 million) and a book value of $1.3 million (NZ$1.8 million), which closed on April 30, 2015 when we received the sales price in full. The other agreement related to a property with a sales price of $831,000 (NZ$1.2 million) and a book value of $426,000 (NZ$615,000) which was completed and for which we received cash settlement representing the full sales price on March 31, 2016. The first transaction qualified as a sale under both U.S. GAAP and tax purposes during the year-ended December 31, 2015. The second transaction was recorded as a sale during the quarter ended March 31, 2016.