REAL ESTATE INVESTMENTS

As of September 30, 2014 and December 31, 2013, the gross carrying value of the Company’s Properties was as follows (in thousands):



	September 30, 2014		December 31, 2013
Land	$	675,109	$	680,513
Building and improvements	3,419,903		3,504,060
Tenant improvements	513,883		484,716
	$	4,608,895	$	4,669,289

Acquisitions

During the nine months ended September 30, 2014, the Company recorded a $0.5 million gain on remeasurement of its investment in partnerships with Parkway Properties, Inc. On December 19, 2013, the Company increased its equity ownership interest from 25% to 99% in each of the two partnerships that own One and Two Commerce Square, two 41-story trophy-class office towers in Philadelphia, Pennsylvania. As of December 31, 2013, the Company had recorded a $1.6 million net receivable balance from its former partner. This receivable balance represented the former partner's estimated portion of the net current assets pursuant to the terms of the agreement (the "Redemption Agreement") that provided for the forgoing transaction. In accordance with settlement procedures provided for in the Redemption Agreement, the Company and Parkway finalized the purchase accounting based on facts and circumstances that existed at the date of the acquisition but that were not fully known at such time. During the nine months ended September 30, 2014, $2.1 million of consideration was received from the former partner in full settlement of the aforementioned provision and a measurement period adjustment was made to adjust the fair value of the Company's previously held equity investment, resulting in a gain on remeasurement of the Company's investment in the partnerships of $0.5 million. For additional information related to this transaction, see the audited financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

On February 19, 2014, the Company acquired 54.1 acres of undeveloped land known as Encino Trace in Austin, Texas for $14.0 million. The land is fully entitled with a site plan and building permits in place allowing for the development of two four-story office buildings containing approximately 320,000 net rentable square feet. The purchase price included an in-place lease, which was placed into construction in progress. As such, the Company has treated this transaction as a business combination and allocated the purchase price to the tangible and intangible assets. The Company capitalized $8.4 million in construction in progress, recorded $4.6 million in land inventory and recorded a deposit for a portion of the future development fee held in escrow of $1.0 million. The net assets were purchased using available corporate funds.

As of September 30, 2014, each of the two office buildings at Encino Trace were in development, and the Company had funded, through such date, $28.7 million, inclusive of the $14.0 million acquisition cost. During the second quarter of 2014, the Company reclassified the $4.6 million remaining in land inventory to construction in progress in connection with commencement of development of the second building. Additional project costs will be funded over the remaining construction period.

Dispositions

On September 30, 2014, the Company sold an office building containing 172,943 rentable square feet at 1880 Campus Commons Drive in Reston, Virginia commonly known as Campus Pointe for a sales price of $42.5 million resulting in a gain on sale of $4.7 million after closing and other transaction related costs. The disposal of Campus Pointe does not represent a strategic shift that has a major effect on the Company's operations and financial results. Accordingly, the property remains classified within continuing operations for all periods presented.

On April 16, 2014, the Company sold a 5.3 acre parcel of land located in Dallas, Texas for a sales price of $1.6 million resulting in a nominal gain on sale after closing and other transaction related costs. The land parcel was undeveloped as of the date of sale.

On April 7, 2014, the Company received $0.9 million from an escrow account that was established in connection with the sale of eight office properties containing 800,546 square feet in Lawrenceville, New Jersey, known as Princeton Pike Corporate Center. The sale of Princeton Pike Corporate Center was completed on February 25, 2013 for an aggregate sales price of $121.0 million and resulted in a $5.3 million gain on sale after closing and other transaction related costs. The escrow account was funded with $2.0 million at closing and was established for use by the buyer to fund certain tenant improvement projects with any unused portion to be returned to the Company. The unused amount received from the escrow account was recognized as a gain on sale during the period ended September 30, 2014. The aforementioned gain was recognized within discontinued operations which is consistent with the accounting classification of the assets that were disposed of on February 25, 2013.

On April 3, 2014, the Company contributed two 3-story, Class A office buildings, containing an aggregate of approximately 192,396 net rentable square feet known as Four Points Centre in Austin, Texas to an existing real estate venture (the "Austin Venture") that the Company formed in 2013 with G&I VII Austin Office LLC, an investment vehicle advised by DRA Advisors LLC ("DRA"). The Company contributed the properties to the Austin Venture at an agreed upon value of $41.5 million. In conjunction with the contribution: (i) the Austin Venture obtained a $29.0 million mortgage loan; (ii) the DRA member contributed $5.9 million in net cash to the capital of the Austin Venture; and (iii) the Austin Venture distributed $34.4 million to the Company and credited the Company with a $5.9 million capital contribution to the Austin Venture. The Company incurred a $0.2 million loss on the contribution, driven primarily by closing costs. The disposal of Four Points Centre does not represent a strategic shift that has a major effect on the Company's operations and financial results. Accordingly, the property remains classified within continuing operations for all periods presented.

On March 27, 2014, the Company sold a 16.8 acre undeveloped parcel of land located in Austin, Texas for a sales price of $3.5 million resulting in a $1.2 million gain on sale of undepreciated real estate after closing and other transaction related costs. The land parcel was undeveloped as of the date of sale.

Held for Sale

On October 24, 2014, the Company sold its Valleybrooke Office Park, comprised of five properties consisting of 279,934 rentable square feet, located in Malvern, Pennsylvania for a sale price of $37.9 million. As of September 30, 2014, the Company categorized its Valleybooke portfolio as held for sale on its consolidated balance sheet. The carrying value of the property exceeds the fair value less the costs of sale. As a result, the Company recognized an impairment loss totaling approximately $1.8 million during the three months ended September 30, 2014. The disposal of the Valleybrooke Office Park does not represent a strategic shift that has a major effect on the Company's operations and financial results. Accordingly, the impairment loss and operating results of this property remain classified within continuing operations for all periods presented.