Investment in Real Estate

3 Months Ended

Mar. 31, 2013

Investment in Real Estate [Abstract]

Investment in Real Estate

3. Investment in Real Estate

Acquisitions

During the three months ended March 31, 2013, we acquired two land parcels. The purchase price of the land parcels was approximately $9,334, excluding costs incurred in conjunction with the acquisition of the land parcels.

Sales and Discontinued Operations

During the three months ended March 31, 2013, we sold four industrial properties comprising approximately 0.2 million square feet of GLA and two land parcels. Gross proceeds from the sales of the industrial properties and land parcels were approximately $11,187. The net loss on the sale of the industrial properties was approximately $2,812. The four sold industrial properties meet the criteria to be included in discontinued operations. Therefore the results of operations and net loss on sale of real estate for the four industrial properties sold are included in discontinued operations. The results of operations and gain on sale of real estate for the two land parcels that do not meet the criteria to be included in discontinued operations are included in continuing operations.

At March 31, 2013, we had four industrial properties comprising approximately 0.8 million square feet of GLA and one land parcel held for sale. The results of operations of these industrial properties held for sale at March 31, 2013 are included in discontinued operations. There can be no assurance that such industrial properties or land parcel held for sale will be sold.

Income from discontinued operations for the three months ended March 31, 2012 reflects the results of operations of the four industrial properties that were sold during the three months ended March 31, 2013, the results of operations of 28 industrial properties that were sold during the year ended December 31, 2012, the results of operations of the four industrial properties identified as held for sale at March 31, 2013 and the gain on sale of real estate relating to three industrial properties that were sold during the three months ended March 31, 2012.

The following table discloses certain information regarding the industrial properties included in discontinued operations for the three months ended March 31, 2013 and 2012:

	Three Months Ended March 31, 2013			Three Months Ended March 31, 2012
Total Revenues	$	1,009		$	4,015
Property Expenses	(244		)	(1,674		)
Impairment of Real Estate	—			(1,410		)
Depreciation and Amortization	(318		)	(1,060		)
(Loss) Gain on Sale of Real Estate	(3,074		)	6,199
(Loss) Income from Discontinued Operations	$	(2,627	)	$	6,070

At March 31, 2013 and December 31, 2012, we had notes receivable outstanding of approximately $41,065 and $41,201, net of a discount of $239 and $255, respectively, which are included as a component of Prepaid Expenses and Other Assets, Net. At March 31, 2013 and December 31, 2012, the fair value of the notes receivable was $43,267 and $44,783, respectively. The fair value of our notes receivable was determined by discounting the future cash flows using current rates at which similar notes with similar remaining maturities would be made to other borrowers. The current market rates we utilized were internally estimated; therefore, we have concluded that our determination of fair value of our notes receivable was primarily based upon Level 3 inputs, as discussed below.

Impairment Charges

During the three months ended March 31, 2012, we recorded the following net non-cash impairment charges:

	Three Months Ended March 31, 2013		Three Months Ended March 31, 2012
Sold Operating Properties—Discontinued Operations	$	—	$	1,410
Held for Use Operating Properties—Continuing Operations	—		(164		)
Total Net Impairment	$	—	$	1,246

The net impairment charges for assets that qualify to be classified as held for sale are calculated as the difference of the carrying value of the properties and land parcels over the fair value less costs to sell. On the date an asset no longer qualifies to be classified as held for sale, the carrying value must be reestablished at the lower of the estimated fair market value of the asset or the carrying value of the asset prior to held for sale classification, adjusted for any depreciation and amortization that would have been recorded if the asset had not been classified as held for sale. The net impairment charges recorded during the three months ended March 31, 2012 are due to updated fair market values for certain industrial properties whose estimated fair market values had changed since December 31, 2011 and were either sold during 2012 or were classified as held for sale at December 31, 2011, but no longer qualify to be classified as held for sale at March 31, 2012. Catch-up depreciation and amortization was recorded during the three months ended March 31, 2012 for certain assets that no longer were classified as held for sale.

The accounting guidance for the fair value measurement provisions for the impairment of long lived assets recorded at fair value establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets for identical assets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The fair market values were determined using widely accepted valuation techniques including discounted cash flow analyses using expected cash flows, internal valuations of real estate and third party offers.

For operational real estate assets, the most significant assumptions used in the discounted cash flow analyses included the discount rate, projected occupancy levels, market rental rates, capital expenditures and the terminal capitalization rate. For the valuation of land parcels, we reviewed recent comparable sales transactions, to the extent available, or if not available, we considered older comparable transactions, adjusted upward or downward to reflect management’s assumptions about current market conditions. In all cases, members of our management team that were responsible for the individual markets where the land parcels were located determined the internal valuations. Valuations based on third party offers include bona fide contract prices and letter of intent amounts that we believe are indicative of fair value.

The following table presents information about our real estate assets that were measured at fair value on a non-recurring basis during the three months ended March 31, 2012. The table indicates the fair value hierarchy of the valuation techniques we utilized to determine fair value.

			Fair Value Measurements on a Non-Recurring Basis Using:
Description	Three Months Ended March 31, 2012		Quoted Prices in Active Markets for Identical Assets (Level  1)	Significant Other Observable Inputs (Level 2)	Unobservable Inputs (Level 3)		Total Impairment
Long-lived Assets Held for Sale or Sold*	$	28,457	—	—	$	28,457	$	(1,511	)
Long-lived Assets Held and Used*	$	8,303	—	—	$	8,303	(39		)
							$	(1,550	)
_____________________

* Excludes industrial properties for which an impairment reversal of $304 was recorded during the three months ended March 31, 2012, since the related assets are recorded at carrying value, which is lower than estimated fair value at March 31, 2012.

The following table presents quantitative information about the Level 3 fair value measurements at March 31, 2012.

Quantitative Information about Level 3 Fair Value Measurements:
Description	Fair Value at March 31, 2012		Valuation Technique	Unobservable Inputs	Range
One Industrial Property comprising approximately 0.01 million square feet of GLA	$	585	Discounted Cash Flow	Discount Rate	11.75%
				Market Rent Growth Rate	2%
				Expense Growth Rate	2%
				Rental Rates Per Square Foot (A)	$4.25
				Terminal Capitalization Rate	10%
Fourteen Industrial Properties comprising approximately 2.1 million square feet of GLA	$	36,175	3rd Party Pricing	(B)	N/A

(A) Estimates for market rental rates upon stabilization of the property.

(B) The fair value for the properties is based upon the value of either a third party purchase contract or third party letters of intent, both of which are subject to our corroboration for reasonableness. Certain of the properties are included in portfolios whereby the letter of intent pricing relates to the respective portfolio. The estimated purchase price for the portfolio was allocated to the individual properties within the portfolio based upon their relative fair value.