Business Combination

Effective February 12, 2016, we acquired a partner’s 49% interest in an unconsolidated joint venture associated with two centers in Colorado, which resulted in the consolidation of these centers (see Note 18 for additional information). Management has determined that this transaction qualified as a business combination to be accounted for under the acquisition method. Accordingly, the assets and liabilities of this transaction were recorded in our Consolidated Balance Sheet at their estimated fair values as of the effective date. Fair value of assets acquired, liabilities assumed and equity interests were estimated using market-based measurements, including cash flow and other valuation techniques. The fair value measurements are based on both significant inputs for similar assets and liabilities in comparable markets and significant inputs that are not observable in the markets in accordance with our fair value measurements accounting policy. Key assumptions include third-party appraisals; a minority interest discount rate of 20%; cash flow discount rates ranging from 6.5% to 8%; a terminal capitalization rate for similar properties ranging from 6% to 7.5%; and factors that we believe market participants would consider in estimating fair value. The result of this transaction is included in our Consolidated Statements of Operations beginning February 12, 2016.

The following table summarizes the business combination, including the assets acquired and liabilities assumed as indicated (in thousands):



	February 12, 2016
Fair value of our equity interest before business combination	$	22,514		⁽¹⁾
Gain recognized on equity interest remeasured to fair value	$	37,383		⁽²⁾

Amounts recognized for assets and liabilities assumed:
Assets:
Property	$	58,665
Unamortized lease costs	8,936
Accrued rent and accounts receivable	102
Cash and cash equivalents	3,555
Other, net	4,992
Liabilities:
Debt, net	(48,727		)
Accounts payable and accrued expenses	(1,339		)
Other, net	(3,670		)
Total net assets	$	22,514

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(1)	Includes $2.5 million of cash received from the partner.


(2)	Amount is included in Gain on Sale and Acquisition of Real Estate Joint Venture and Partnership Interests in our Consolidated Statement of Operations.

During 2016, we acquired three shopping centers located in Arizona and Florida, and we consolidated a partner's 50% interest in an unconsolidated tenancy-in-common arrangement related to a property in Colorado. The following table summarizes the transactions related to these acquisitions, including the assets acquired and liabilities assumed as indicated (in thousands):



	December 31, 2016
Fair value of our equity interest before acquisition	$	13,579
Fair value of consideration transferred	$	443,745
Acquisition costs (included in operating expenses)	$	936
Gain on acquisition	$	9,015		₍₁₎

Amounts recognized for assets and liabilities assumed:
Assets:
Property	$	433,055
Unamortized lease costs	80,951
Accrued rent and accounts receivable	122
Cash and cash equivalents	556
Other, net	6,812
Liabilities:
Accounts payable and accrued expenses	(6,383		)
Other, net	(62,254		)
Total net assets	$	452,859

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(1)	Amount is included in Gain on Sale and Acquisition of Real Estate Joint Venture and Partnership Interests in our Consolidated Statement of Operations.

The following table summarizes the impact to revenues and net income attributable to common shareholders from our business combination and acquisitions (in thousands):



	Year Ended December 31, 2016
Increase in revenues	$	23,337
Increase in net income attributable to common shareholders	230

The following table details the weighted average amortization and net accretion periods of intangible assets and liabilities arising from our business combination and acquisitions (in years):



	December 31, 2016

Assets:
In place leases	18.4
Above-market leases	29.7

Liabilities:
Below-market leases	20.3
Above-market assumed mortgages	4.8

The following unaudited supplemental pro forma data is presented for the periods ended December 31, 2016 and 2015, as if these transactions occurring in 2016 were completed on January 1, 2015. The gains and acquisition costs related to these transactions were adjusted to the assumed acquisition date. The unaudited supplemental pro forma data is not necessarily indicative of what the actual results of our operations would have been assuming the transactions had been completed as set forth above, nor does it purport to represent our results of operations for future periods (in thousands, except per share amounts):



	Pro Forma 2016 ⁽¹⁾		Pro Forma 2015 ⁽¹⁾
Revenues	$	567,985	$	547,381
Net income	236,461		234,307
Net income attributable to common shareholders - basic	198,563		213,920
Net income attributable to common shareholders - diluted	200,559		215,823
Earnings per share – basic	1.58		1.74
Earnings per share – diluted	1.56		1.72

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(1)	There are no non-recurring pro forma adjustments included within or excluded from the amounts in the preceding table.