Real Estate Properties

12 Months Ended

Dec. 31, 2012

Real Estate Properties

Real Estate Properties

Note 3. Real Estate Properties

Completed Acquisitions:

        During the year ended December 31, 2012, we acquired 22 properties with a combined 6,660,563 square feet for an aggregate purchase price of $992,215, including the assumption of $359,212 of mortgage debt and excluding closing costs. We allocated the purchase prices of these acquisitions based on the estimated fair value of the acquired assets and assumed liabilities as follows:

Date	Location	Square Feet		Purchase Price(1)		Land		Buildings and Improvements		Acquired Real Estate Leases		Acquired Real Estate Lease Obligations		Assumed Mortgage Debt		Premium on Assumed Debt		Other Assumed Liabilities
CWH (excluding SIR) Acquisitions through December 31, 2012:
January 2012	Chicago, IL(2)		1,009,940	$	150,600	$	32,457	$	122,433	$	20,932	$	5,710	$	147,872	$	12,458	$	7,421
March 2012	Hartford, CT		868,395		101,500		15,930		60,312		25,542		284		—		—		—
May 2012	Austin, TX		170,052		49,000		7,900		38,533		4,733		30		29,012		2,136		—
September 2012	Columbia, SC		334,075		60,000		1,660		53,059		11,375		3,932		40,328		2,162		—
October 2012	Indianapolis, IN(3)		1,058,112		193,102		9,671		158,084		37,086		481		116,000		7,386		4,138
			3,440,574		554,202		67,618		432,421		99,668		10,437		333,212		24,142		11,559
SIR Acquisitions through December 31, 2012:
June 2012	Provo, UT(4)		405,699		85,500		6,700		78,800		—		—		—		—		—
June 2012	Englewood, CO		140,162		18,900		3,230		11,801		3,869		—		—		—		421
July 2012	Windsor, CT		268,328		27,175		4,250		16,695		6,230		—		—		—		—
July 2012	Topeka, KS		143,934		19,400		1,300		15,918		2,182		—		—		—		1,698
August 2012	Huntsville, AL(4)(5)		1,370,974		72,782		5,628		67,154		—		—		—		—		—
September 2012	Carlsbad, CA(5)		95,000		24,700		3,381		17,918		4,885		—		18,500		1,484		—
September 2012	Chelmsford, MA(5)		110,882		12,200		2,009		6,727		3,911		—		7,500		447		—
November 2012	Sunnyvale, CA(3)		96,415		28,050		11,552		12,461		4,037		—		—		—		—
November 2012	Oahu, HI(3)		49,452		6,300		5,888		315		97		—		—		—		—
November 2012	Sterling, VA(3)		337,228		85,600		9,874		62,238		14,615		1,127		—		—		—
December 2012	Ann Arbor, MI(3)		82,003		16,906		2,877		9,081		4,948		—		—		—		663
December 2012	Columbia, MD(3)		119,912		40,500		3,700		24,592		12,208		—		—		—		—
			3,219,989		438,013		60,389		323,700		56,982		1,127		26,000		1,931		2,782
			6,660,563	$	992,215	$	128,007	$	756,121	$	156,650	$	11,564	$	359,212	$	26,073	$	14,341

⁽¹⁾

Purchase price includes the assumption of mortgage debt, if any, and excludes closing costs.

⁽²⁾

During the fourth quarter of 2012, we finalized the purchase price allocation for this acquisition and adjusted the preliminary purchase price allocation by recording an increase to buildings and improvements and other assumed liabilities of $7,054.

⁽³⁾

The allocation of purchase price is based on preliminary estimates and may change upon completion of (i) third party appraisals and (ii) our analysis of acquired in place leases and building valuations.

⁽⁴⁾

These properties were acquired and simultaneously leased back to the seller in a sale/leaseback transaction. SIR accounted for these transactions as an acquisition of assets.

⁽⁵⁾

During the fourth quarter of 2012, SIR finalized the purchase price allocations for these acquisitions and adjusted the preliminary purchase price allocations as follows: (i) reallocated $1,598 from buildings and improvements to land related to its Huntsville, AL acquisition, (ii) reallocated $69 from land and $1,882 from buildings and improvements to acquired real estate leases related to its Carlsbad, CA acquisition, and (iii) reallocated $31 from land, $1,805 from buildings and improvements and $217 from assumed real estate lease obligations to acquired real estate leases related to its Chelmsford, MA acquisition.

        We also funded $134,631 of improvements to our properties during the year ended December 31, 2012.

        During the three months ended March 31, 2012, we completed the purchase price allocation on four properties located in Phoenix, AZ with a combined 1,063,364 square feet. We acquired these properties in March 2011 for an aggregate purchase price of $136,500, excluding closing costs. After receiving relevant market information and evaluations from an independent real estate appraisal firm in March 2012, we estimated the fair value of the acquired land and buildings and improvements to be $22,614 and $64,104, respectively. As a result, we retrospectively adjusted the preliminary purchase price allocation by reallocating $8,371 from land to buildings and improvements. All other allocation amounts were unchanged.

        In January 2013, SIR acquired two properties with a combined 553,799 square feet for an aggregate purchase price of $105,000, excluding closing costs.

Our and SIR's Pending Acquisitions:

        As of February 21, 2013, SIR has agreed to acquire three properties with a combined 225,211 square feet for an aggregate purchase price of $53,320, excluding closing costs. We understand that these pending acquisitions are subject to SIR's satisfactory completion of diligence and other customary closing conditions. Accordingly, we can provide no assurance that SIR will acquire all or any of these properties.

Property Sales:

        In April 2012, we sold an office property located in Salina, NY with 12,934 square feet for $575, excluding closing costs. In connection with this sale, we provided mortgage financing to the buyer, an unrelated third party, totaling $419 at 6.0% per annum and recognized a gain on sale of $158. In June 2012, we sold an office property located in Santa Fe, NM with 76,978 square feet for $1,250, excluding closing costs. We provided mortgage financing to the buyer, an unrelated third party, totaling $1,000 at 5.0% per annum and recognized a gain on sale of $192. In September 2012, we sold an office property located in Foxborough, MA with 208,850 square feet for $9,900, excluding closing costs, and recognized a gain on sale of $1,689.

        In January 2013, we sold 18 suburban office and industrial properties with a combined 1,060,026 square feet for $10,250, excluding closing costs. In addition, as of February 21, 2013, we have two properties with a combined 675,250 square feet under agreement for sale totaling $5,055, excluding closing costs. We expect to sell these properties during 2013; however, no assurance can be given that these properties will be sold in that time period or at all.

        As of December 31, 2012, we had 37 office properties and 57 industrial properties with a combined 6,673,851 square feet held for sale. As of December 31, 2011, none of our properties were classified as held for sale. We classify all properties that meet the criteria outlined in the Property, Plant and Equipment Topic of the Codification as held for sale in our consolidated balance sheets. Results of operations for properties sold or held for sale, except for properties sold to GOV, are included in discontinued operations in our consolidated statements of operations once the criteria for discontinued operations in the Presentation of Financial Statements Topic of the Codification is met. Properties that we sold to GOV during 2010 as discussed in Note 10 are not considered discontinued operations under GAAP because of our retained equity interest in this former subsidiary. Summarized balance sheet information for all properties classified as held for sale and income statement information for properties held for sale or sold, other than properties sold to GOV during 2010, is as follows:

        Balance Sheets:

	December 31, 2012
Real estate properties	$	164,041
Acquired real estate leases		453
Rents receivable		2,791
Other assets, net		4,547
Properties held for sale	$	171,832
Assumed real estate lease obligations	$	21
Rent collected in advance		854
Security deposits		1,464
Liabilities related to properties held for sale	$	2,339

        Income Statements:

	Year Ended December 31,
	2012			2011			2010
Rental income	$	25,903		$	58,176		$	142,689
Operating expenses		(24,697	)		(38,393	)		(61,950	)
Depreciation and amortization		(12,563	)		(16,454	)		(35,848	)
General and administrative		(3,035	)		(3,798	)		(5,899	)
Acquisition related costs		—			(128	)		(7	)
Operating (loss) income		(14,392	)		(597	)		38,985
Interest and other income		55			58			835
Interest expense		—			—			(3,791	)
(Loss) income from discontinued operations	$	(14,337	)	$	(539	)	$	36,029

        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 2013 to 2051. Our 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 $143,277 for expenditures related to 7,433,000 square feet of leases executed during 2012. Committed but unspent tenant related obligations based on existing leases as of December 31, 2012, were $91,052.

        The future minimum lease payments scheduled to be received by us during the current terms of our leases as of December 31, 2012 are as follows:

2013	$	803,877
2014		769,138
2015		725,432
2016		633,339
2017		542,828
Thereafter		2,529,672
	$	6,004,286

        One of our real estate properties 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, 2012, are as follows:

2013	$	1,461
2014		1,477
2015		1,477
2016		1,477
2017		1,477
Thereafter		132,979
	$	140,348

        The amount of ground lease expense included in operating expenses during the years ended December 31, 2012, 2011 and 2010, totaled $1,828, $1,850 and $1,844, respectively.