Investment in Direct Financing Lease

9 Months Ended

Sep. 30, 2011

Investment in Direct Financing Lease

Investment in Direct Financing Lease

Note 4.  Investment in Direct Financing Lease

Our investment in a direct financing lease relates to the triple net lease with a term that exceeds 75% of the useful life of one office tower located within a mixed use property in Phoenix, AZ that we acquired in March 2011.  We recognize direct financing lease income using the effective interest method to produce a level yield on funds not yet recovered.  Estimated unguaranteed residual value represents our estimate of the fair value of the leased asset at the expiration of the lease, which does not exceed its original cost.  Significant assumptions used in estimating residual value include estimated net cash flows over the remaining lease term and expected future real estate value.  The following table summarizes the carrying amount of our net investment in the direct financing lease as of September 30, 2011.  The carrying amount of our net investment is included in other assets in our condensed consolidated balance sheet.

	September 30, 2011
Total minimum lease payments receivable	$	41,207
Estimated unguaranteed residual value of leased asset	4,951
Unearned income	(11,166		)
Net investment in direct financing lease	$	34,992

Additionally, we have determined that no allowance for losses related to our direct financing lease was necessary at September 30, 2011.

Our direct financing lease has an expiration date in 2045.  Future minimum rentals receivable on this direct financing lease as of September 30, 2011 are $2,024 in 2011, $8,098 in 2012, $8,098 in 2013, $8,098 in 2014, $8,098 in 2015 and $6,791 thereafter.