Real Estate Assets, Discontinued Operations and Assets Held for Sale

Real Estate Assets

Real estate assets, excluding assets held for sale, consisted of the following (in thousands):



	June 30, 2017	December 31, 2016
Buildings and tenant improvements	$3,975,603	$3,752,423
Land and improvements	1,524,433	1,392,382
Real estate assets	$5,500,036	$5,144,805

Discontinued Operations

All of the properties included in discontinued operations are medical office properties. Because of the size of the Medical Office Portfolio Disposition, and the fact that it represented our exit from the medical office product type, we determined that the disposition represented a strategic shift that would have a major effect on our operations and financial results. As such, the consolidated in-service properties in this portfolio met the criteria to be classified within discontinued operations. As the result of its classification within discontinued operations, the in-service assets and liabilities of this portfolio are required to be presented as held for sale for all prior periods presented in our Consolidated Balance Sheets. Operating results pertaining to the properties classified within discontinued operations were reclassified to discontinued operations for all prior periods presented in our Consolidated Statements of Operations and Comprehensive Income.

The following table illustrates the number of sold or held-for-sale properties included in, or excluded from, discontinued operations in this report:



	Held-for-Sale at June 30, 2017	Sold Year-to-Date in 2017	Sold in 2016	Total


Total properties included in discontinued operations	8	73	—	81
Properties excluded from discontinued operations	2	12	32	46
Total properties sold or classified as held-for-sale	10	85	32	127

Properties sold in 2017 but excluded from discontinued operations included four properties under development, which were disposed as part of the Medical Office Portfolio Disposition, as these properties did not meet the criteria to be included in discontinued operations.

For the properties that were classified in discontinued operations, we allocated interest expense to discontinued operations and have included such interest expense in computing income from discontinued operations. Interest expense allocable to discontinued operations was based upon an allocable share of our consolidated unsecured interest expense, as none of the properties included in discontinued operations were encumbered by secured debt. The allocation of unsecured interest expense to discontinued operations was based upon the gross book value of the unencumbered real estate assets included in discontinued operations as it related to the total gross book value of our unencumbered real estate assets.

The following table illustrates the operational results of the buildings reflected in discontinued operations (in thousands):



	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Revenues	$	35,165		$	42,736		$	81,404		$	84,181
Operating expenses	(11,170		)	(13,760		)	(26,166		)	(27,137		)
Depreciation and amortization	(6,315		)	(19,025		)	(25,849		)	(37,290		)
Operating income	17,680			9,951			29,389			19,754
Interest expense	(6,585		)	(7,673		)	(14,204		)	(15,270		)
Income before gain on sales	11,095			2,278			15,185			4,484
Gain on sale of depreciable properties	1,109,091			252			1,109,091			166
Income from discontinued operations before income taxes	1,120,186			2,530			1,124,276			4,650
Income tax expense	(11,613		)	—			(11,613		)	—
Income from discontinued operations	$	1,108,573		$	2,530		$	1,112,663		$	4,650

Capital expenditures on a cash basis for the six months ended June 30, 2017 and 2016 were $20.6 million and $54.8 million, respectively, related to properties within discontinued operations.

Allocation of Noncontrolling Interests - General Partner

The following table illustrates the General Partner's share of the income attributable to common shareholders from continuing operations and discontinued operations, reduced by the allocation of income between continuing and discontinued operations to the noncontrolling interests (in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Income from continuing operations attributable to common shareholders	$	118,194	$	106,563	$	184,362	$	147,771
Income from discontinued operations attributable to common shareholders	1,092,349		2,504		1,096,381		4,603
Net income attributable to common shareholders	$	1,210,543	$	109,067	$	1,280,743	$	152,374

Allocation of Noncontrolling Interests - Partnership

Substantially all of the income from discontinued operations for all periods presented in the Partnership's Consolidated Statements of Operations and Comprehensive Income is attributable to the common unitholders.

Assets Held for Sale

At June 30, 2017, ten in-service properties were classified as held for sale, eight of which were medical office properties that met the criteria to be classified within discontinued operations. Also at June 30, 2017, 52 acres of undeveloped land were classified as held for sale and classified within continuing operations, including undeveloped land to be sold as part of the Medical Office Portfolio Disposition, which did not meet the criteria to be classified within discontinued operations.

The following table illustrates aggregate balance sheet information for all held-for-sale properties (in thousands):



	Held-for-Sale Properties
	June 30, 2017									December 31, 2016
	Held-for-Sale Properties Included in Continuing Operations			Properties Included in Discontinued Operations			Total Held-For-Sale Properties			Held-for-Sale Properties Included in Continuing Operations			Properties Included in Discontinued Operations			Total Held-For-Sale Properties
Land and improvements	$	10,522		$	26,560		$	37,082		$	3,631		$	118,882		$	122,513
Buildings and tenant improvements	17,351			166,573			183,924			37,495			1,218,468			1,255,963
Undeveloped land	17,082			—			17,082			22,657			—			22,657
Accumulated depreciation	(6,198		)	(37,577		)	(43,775		)	(18,581		)	(240,685		)	(259,266		)
Deferred leasing and other costs, net	862			6,882			7,744			3,091			83,522			86,613
Other assets	738			10,859			11,597			3,334			92,444			95,778
Total assets held-for-sale	$	40,357		$	173,297		$	213,654		$	51,627		$	1,272,631		$	1,324,258

Accrued expenses	$	647		$	2,475		$	3,122		$	1,363		$	22,128		$	23,491
Other liabilities	802			5,165			5,967			298			32,502			32,800
Total liabilities held-for-sale	$	1,449		$	7,640		$	9,089		$	1,661		$	54,630		$	56,291