Sale of Land and Building

9 Months Ended

Sep. 30, 2012

Sale of Land and Building

Note 14: Sale of Land and Building

On July 18, 2012, we entered into a Purchase and Sale Agreement and Joint Escrow Instructions (“Sale Agreement”) with Gilead Sciences, Inc. (“Gilead”), under which certain real property and improvements and other related assets will be sold to Gilead for a total price of $180 million, subject to various closing conditions. The transaction is expected to close on or about November 1, 2012. The property includes approximately four acres of land, the 294,000 square foot office building located at 303 Velocity Way, Foster City, California, and certain other assets related to the property.

The diligence period has expired; consequently, Gilead no longer has the option to terminate the Sale Agreement in its sole discretion.

When the transaction closes, the property will be subject to a leaseback of up to one year for which rent is not required to be paid. This constitutes a form of continuing involvement that prevents gain recognition. Until we vacate the building, the proceeds from the sale will be accounted for as a current liability on our balance sheet in accordance with the deposit method of accounting for real estate transactions.

Assets held for sale of $62.1 million as of September 30, 2012, are classified as current assets. Assets held for sale include $56.9 million of funds pledged with respect to the synthetic lease of the 303 Velocity Way facility, $2.9 million of related land, $2.1 million of leasehold and land improvements, and $0.2 million of previously capitalized lease financing and other costs. We expect to incur approximately $1 million of direct costs associated with this transaction.