Significant Acquisitions and Dispositions

12 Months Ended

Dec. 31, 2015

Business Combinations [Abstract]

Acquisitions and Dispositions

Acquisitions and Dispositions

Acquisitions and dispositions for the periods presented were completed in accordance with our strategy to reposition our investment concentration among the product types and markets in which we operate. With the exception of certain properties that have been sold or classified as held for sale, the results of operations for all acquired properties have been included in continuing operations within our consolidated financial statements since their respective dates of acquisition.

2015 Acquisitions

We acquired two industrial properties during the year ended December 31, 2015, one of which was treated as a business combination and one as an asset acquisition. The following table summarizes the fair value of amounts recognized for each major class of asset and liability (in thousands) for these acquisitions:

Real estate assets	$	26,276
Lease related intangible assets	2,001
Total acquired assets	28,277
Other liabilities	319
Total assumed liabilities	319
Fair value of acquired net assets	$	27,958

The leases in the acquired properties had an average remaining life at acquisition of approximately 9.2 years.

We have included $988,000 in rental revenues and $135,000 in earnings from continuing operations during 2015 for these properties since their respective dates of acquisition.

2014 Acquisitions

We acquired five operating properties during the year ended December 31, 2014. These acquisitions consisted of four industrial properties and one medical office property. The following table summarizes the fair value of amounts recognized for each major class of asset and liability (in thousands) for these acquisitions:

Real estate assets	$	116,773
Lease-related intangible assets	14,238
Total acquired assets	131,011
Other liabilities	355
Total assumed liabilities	355
Fair value of acquired net assets	$	130,656

The leases in the acquired properties had a weighted average remaining life at acquisition of approximately 9.0 years.

Fair Value Measurements

The fair value estimates used in allocating the aggregate purchase price of each acquisition among the individual components of real estate assets and liabilities were determined primarily through calculating the "as-if vacant" value of each building, using the income approach, and relied significantly upon internally determined assumptions. We have determined these estimates to have been primarily based upon Level 3 inputs, which are unobservable inputs based on our own assumptions. The range of most significant assumptions utilized in making the lease-up and future disposition estimates used in calculating the "as-if vacant" value of each building acquired during 2015 and 2014 are as follows:

	2015		2014
	Low	High	Low	High
Discount rate	7.07%	7.07%	7.38%	9.96%
Exit capitalization rate	5.57%	5.57%	5.98%	8.36%
Lease-up period (months)	12	12	12	12
Net rental rate per square foot - Industrial	$4.85	$4.85	$2.75	$9.36
Net rental rate per square foot - Medical Office	$—	$—	$19.56	$19.56

Acquisition-Related Activity

The acquisition-related activity in our consolidated Statements of Operations and Comprehensive Income consisted of transaction costs for completed acquisitions, which are expensed as incurred, as well as gains or losses related to acquisitions where we had a pre-existing non-controlling ownership interest. Acquisition-related activity for the years ended December 31, 2015, 2014 and 2013 includes transaction costs of $8.5 million, $1.1 million and $4.1 million, respectively. Substantially all of the activity in 2015 was driven by an increase to the estimated fair value of contingent consideration that relates to a previous period's acquisition. In 2013, we recognized gains of $962,000 related to acquisitions of properties from unconsolidated joint ventures.

Dispositions

We disposed of buildings (see Note 6 for the number of buildings sold in each year, as well as for their classification between continuing and discontinued operations) and undeveloped land, which generated net cash proceeds of $1.68 billion, $493.2 million and $740.0 million in 2015, 2014 and 2013, respectively.

On April 1, 2015, we completed the previously announced Suburban Office Portfolio Sale to a joint venture with affiliates of Starwood Capital Group, Vanderbilt Partners and Trinity Capital Advisors for approximately $1.07 billion in proceeds and recorded a gain on sale of $406.1 million. The Suburban Office Portfolio Sale included all of our wholly-owned, in-service suburban office properties located in Nashville, Raleigh, South Florida and St. Louis. The portfolio included approximately 6.7 million square feet across 61 buildings and 57 acres of undeveloped land. Additionally, an office asset in Raleigh, which was under construction at the time of the Suburban Office Portfolio Sale, was completed in late 2015 and sold to the same buyers in January 2016.

A portion of the purchase price for the Suburban Office Portfolio Sale was financed through a $200.0 million first mortgage on certain of the properties in the Suburban Office Portfolio that we provided to the seller. The first mortgage matures on December 31, 2016, is prepayable after January 1, 2016, and bears interest at LIBOR plus 1.5%. We have reviewed the creditworthiness of the entities with which we hold this first mortgage and have concluded it is probable that we will be able to collect all amounts due according to its contractual terms.

On April 8, 2015, we completed the sale of 51 non-strategic industrial properties for $270.0 million in proceeds and recorded a gain on sale of $107.4 million. These properties totaled 5.2 million square feet and were located in primarily Midwest markets.

Included in the building dispositions in 2014 was the sale of six office properties in Cincinnati, Ohio, which totaled 1.0 million square feet and were sold for $150.5 million, as well as the sale of two office properties in South Florida, which totaled 466,000 square feet and were sold for $128.0 million.

The income tax benefit from continuing operations in 2014 was triggered by sales of properties owned, or partially owned, by our taxable REIT subsidiary. Income tax expense included in discontinued operations in 2014 was also the result of the sale of a property, prior to the adoption of ASU 2014-08, which was partially owned by our taxable REIT subsidiary where we have no continuing involvement.

During the year ended December 31, 2014, eleven office properties, eleven industrial properties and one retail property were sold by six of our unconsolidated joint ventures, for which our capital distributions totaled $91.8 million and our share of gains, which are included in equity in earnings, totaled $84.6 million. These sales included a 436,000 square foot office tower in Atlanta, Georgia and a 382,000 square foot retail property in Minneapolis, Minnesota.

Included in the building dispositions in 2013 was the sale of 18 medical office properties in various markets, which totaled 1.1 million square feet and were sold for $285.9 million. These properties were in markets, or were associated with health systems, where we did not believe there to be significant future growth potential.

During the year endedDecember 31, 2013, 19 office properties and one industrial property were sold from certain of our unconsolidated joint ventures for which our capital distributions totaled $92.3 million. Our share of gains from joint venture property sales, which are included in equity in earnings, totaled $51.2 million.

All other dispositions were not individually material.