Real Estate Properties

12 Months Ended

Dec. 31, 2011

Real Estate Properties

Real Estate Properties

Note 3. Real Estate Properties

        During 2011, we acquired 23 properties with a combined 6,806,615 square feet for an aggregate purchase price of $1,144,852, including the assumption of $321,235 of mortgage debt and excluding closing costs, and we sold 20 properties with approximately 2,148,000 square feet for an aggregate sale price of $265,145, excluding closing costs. We also funded $104,653 of improvements to our owned properties during 2011. Since January 1, 2012, we have acquired an additional property with 1,006,574 square feet for a purchase price of $150,600, including the assumption of $147,872 of mortgage debt and excluding closing costs. We have also entered into agreements to acquire two properties with a combined 1,056,869 square feet for an aggregate purchase price of $148,000, including the assumption of approximately $29,200 of mortgage debt and excluding closing costs. Details of our completed and pending acquisitions and sales during 2011 and since then are as follows:

Property Acquisitions:

        In January 2011, we acquired three office properties located in Boca Raton, FL with a combined 639,830 square feet. The aggregate purchase price was $171,000, excluding closing costs. We allocated $15,900 to land, $129,790 to buildings and improvements and $25,310 to acquired real estate leases.

        Also in January 2011, we acquired an office property located in Columbia, SC with 115,028 square feet. The purchase price was $12,025, excluding closing costs. We allocated $1,180 to land, $8,886 to buildings and improvements, $2,072 to acquired real estate leases and $113 to assumed real estate lease obligations.

        Also in January 2011, we acquired an office property located in Chelmsford, MA with 98,048 square feet. The purchase price was $10,000, excluding closing costs. We allocated $1,410 to land, $7,322 to buildings and improvements, $1,711 to acquired real estate leases and $443 to assumed real estate lease obligations.

        In February 2011, we acquired an office property located in Montvale, NJ with 119,089 square feet. The purchase price was $20,600, excluding closing costs. We allocated $3,650 to land, $13,726 to buildings and improvements, $3,954 to acquired real estate leases and $730 to assumed real estate lease obligations.

        In March 2011, we acquired four properties located in Phoenix, AZ with a combined 1,063,364 square feet. The aggregate purchase price was $136,500, excluding closing costs. We allocated $30,985 to land, $55,733 to buildings and improvements, $38,635 to investment in direct financing lease, $15,706 to acquired real estate leases, $500 to assumed real estate lease obligations and $4,059 to notes payable. These allocations are preliminary and are subject to change pending an evaluation by an independent real estate appraisal firm that is expected to be finalized during the first quarter of 2012.

        In May 2011, we acquired an office property located in Chicago, IL with 1,070,388 square feet. The purchase price was $162,202, excluding closing costs. We allocated $34,300 to land, $110,245 to buildings and improvements, $24,399 to acquired real estate leases and $6,742 to assumed real estate lease obligations.

        In June 2011, we acquired four office properties located in Stafford, VA with a combined 149,023 square feet. The aggregate purchase price was $25,725, including the assumption of $14,960 of mortgage debt and excluding closing costs. We allocated $4,150 to land, $21,795 to buildings and improvements, $815 to acquired real estate leases, $101 to assumed real estate lease obligations and $934 to premium on mortgage debt.

        Also in June 2011, we acquired four office properties located in Folsom, CA with a combined 269,254 square feet. The aggregate purchase price was $46,300, including the assumption of $41,275 of mortgage debt and excluding closing costs. We allocated $4,370 to land, $41,748 to buildings and improvements, $3,729 to acquired real estate leases, $262 to assumed real estate lease obligations and $3,285 to premium on mortgage debt.

        In July 2011, we acquired an office property located in Birmingham, AL with 514,893 square feet. The purchase price was $68,500, excluding closing costs. We allocated $1,740 to land, $49,565 to buildings and improvements, $17,552 to acquired real estate leases and $357 to assumed real estate lease obligations.

        In August 2011, we acquired two office properties located in Chicago, IL with a combined 1,510,707 square feet. The aggregate purchase price was $390,000, including the assumption of $265,000 of mortgage debt and excluding closing costs. We allocated $34,980 to land, $310,574 to buildings and improvements, $62,016 to acquired real estate leases, $3,899 to assumed real estate lease obligations and $13,671 to premium on mortgage debt.

        Also in August 2011, we acquired an office property located in New Orleans, LA with 1,256,991 square feet. The purchase price was $102,000, excluding closing costs. We allocated $9,100 to land, $78,540 to buildings and improvements, $17,743 to acquired real estate leases and $3,383 to assumed real estate lease obligations.

        In January 2012, we acquired an office property located in Chicago, IL with 1,006,574 square feet. The aggregate purchase price was $150,600, including the assumption of $147,872 of mortgage debt and excluding closing costs.

        In October 2011, we entered an agreement to acquire an office property located in Hartford, CT with 884,669 square feet. The purchase price is $99,000, excluding closing costs. We expect to acquire this property during the first half of 2012; however, this acquisition is subject to customary closing conditions and we can provide no assurance that we will acquire this property in that time period or at all.

        In January 2012, we entered an agreement to acquire an office property located in Austin, TX with 172,200 square feet. The purchase price is $49,000, including the assumption of approximately $29,200 of mortgage debt and excluding closing costs. We expect to acquire this property during the first half of 2012; however, this acquisition is subject to customary closing conditions, including the assumption of existing mortgage debt, and we can provide no assurance that we will acquire this property in that time period or at all.

Property Sales:

        In November 2010, we entered into various agreements to sell 27 properties which are majority leased as medical office, clinic and biotech laboratory buildings to Senior Housing Properties Trust, or SNH, for an aggregate sale price of $470,000, excluding closing costs. In 2010, we sold 21 of these properties containing approximately 2,066,000 square feet for an aggregate sale price of $374,130, excluding closing costs, and recognized net gains totaling $133,272. In January 2011, we sold the remaining six properties containing approximately 737,000 square feet for an aggregate sale price of $95,870, excluding closing costs, and recognized gains totaling $35,000. In September 2011, we sold to SNH 13 additional properties located in eight states with approximately 1,310,000 square feet for an aggregate sale price of $167,000, excluding closing costs, and recognized net gains totaling $7,846. We previously granted SNH a right of first refusal to purchase certain of our properties if we sought to sell them. In connection with our September 2011 sale of 13 properties to SNH, we and SNH terminated the existing SNH right of first refusal as substantially all of the properties that were subject to that right of first refusal had been purchased by SNH (See Note 9). Because we and SNH have three trustees in common and we are both managed by RMR, the terms of these transactions were negotiated and approved by special committees of our and SNH's boards of trustees composed solely of Independent Trustees who were not also Independent Trustees of both companies.

        In February 2011, we sold an industrial property located in Adairsville, GA with 101,400 square feet for $2,275, excluding closing costs, and recognized a loss of $94.

        As of December 31, 2011, none of our properties were classified as held for sale. As of December 31, 2010, we had 12 office properties with a combined 1,556,000 square feet and 22 industrial and other properties with a combined 2,171,000 square feet classified as held for sale in our consolidated balance sheet. As discussed above, we sold two of these industrial properties and five of these office properties during 2011. The remaining 20 industrial properties with a combined 1,834,000 square feet and seven office properties with a combined 1,054,000 square feet were reclassified to properties held and used in operations during the fourth quarter of 2011 when we determined, based on marketing efforts and economic conditions, that the sale of these properties was no longer probable.

        We classify all properties actively marketed, under contract, in active negotiations and otherwise probable for sale within one year as held for sale in our consolidated balance sheets. Results of operations for properties sold or held for sale are included in discontinued operations in our consolidated statements of income, except for properties sold during 2010 to GOV. Properties that we sold to GOV are not considered discontinued operations under GAAP because of our retained equity interest in this former subsidiary. Summarized balance sheet and income statement information for properties sold or held for sale, other than properties sold to GOV, is as follows:

        Balance Sheets:

	December 31, 2010
Real estate properties	$	105,291
Acquired real estate leases		1,104
Rents receivable		4,446
Other assets, net		3,585
Properties held for sale		114,426
Assumed real estate lease obligations	$	7
Rent collected in advance		1,187
Security deposits		298
Liabilities related to properties held for sale	$	1,492

        Income Statements:

	Year Ended December 31,
	2011			2010			2009
Rental income	$	20,460		$	80,973		$	97,222
Operating expenses		(9,726	)		(31,802	)		(34,596	)
Depreciation and amortization		(4,463	)		(16,323	)		(17,647	)
General and administrative		(722	)		(2,834	)		(3,268	)
Acquisition related costs		(128	)		(7	)		(216	)
Operating income		5,421			30,007			41,495
Interest income		2			7			2
Interest expense		—			(3,791	)		(6,603	)
Income from discontinued operations	$	5,423		$	26,223		$	34,894

        Our real estate properties are generally leased on gross lease, modified gross lease or triple net lease bases pursuant to non-cancelable, fixed term operating leases expiring between 2012 to 2051. The triple net leases generally require the lessee to pay all property operating costs. Our gross leases and modified gross leases require us to pay all or some property operating expenses and to provide all or some property management services.

        We committed $104,794 for expenditures related to 6,806,000 square feet of leases executed during 2011. Committed but unspent tenant related obligations based on executed leases as of December 31, 2011, were $71,305.

        The future minimum lease payments scheduled to be received by us during the current terms of our leases as of December 31, 2011 are as follows:

2012	$	746,467
2013		685,860
2014		625,785
2015		566,948
2016		476,837
Thereafter		2,157,646
	$	5,259,543

        One of our real estate properties purchased during 2009 is subject to a ground lease. The land on this property is leased pursuant to a non-cancelable, fixed term operating ground lease that expires in 2098.

        The future minimum lease payments scheduled to be paid by us during the current terms of this ground lease under which we are the lessee, as of December 31, 2011, are as follows:

2012	$	1,456
2013		1,461
2014		1,477
2015		1,477
2016		1,477
Thereafter		134,456
	$	141,804

        The amount of ground lease expense included in operating expenses during the years ended December 31, 2011, 2010 and 2009, totaled $1,850, $1,844 and $718, respectively.