The financial results attributable to apartment communities retained by the Spinnee for all periods presented have been classified as discontinued operations within the consolidated financial statements.

Major assets and liabilities related to discontinued operations at December 31, 2019 are shown below (in thousands):

	2019
ASSETS:
Net real estate	$	936,168
Cash and cash equivalents		6,443
Restricted cash		4,717
Investment in unconsolidated real estate partnerships		12,741
Other assets		62,627
Total assets of discontinued operations	$	1,022,696

LIABILITIES:
Non-recourse property debt, net	$	492,785
Deferred tax liability		144,033
Accrued liabilities and other		26,571
Total liabilities of discontinued operations	$	663,389

Summarized results of discontinued operations for the years ended December 31, 2020, 2019, and 2018 are shown below (in thousands):

	2020			2019			2018
REVENUES:
Rental and other property revenues	$	144,757		$	143,692		$	132,163
OPERATING EXPENSES:
Property operating expenses		51,710			49,502			45,372
Depreciation and amortization		72,729			62,887			48,392
Other expenses (income), net		1,897			257			(1,208	)
Total operating expenses		126,336			112,646			92,556

Interest income		2,076			2,125			1,592
Interest expense		(17,972	)		(17,918	)		(20,829	)
Income from unconsolidated real estate partnerships		764			802			940
Income before income tax benefit (expense)		3,289			16,055			21,310
Income tax benefit (expense)		7,939			3,440			(319	)
Income from discontinued operations, net of tax		11,228			19,495			20,991
Net loss (income) attributable to noncontrolling interests in consolidated real estate partnerships		404			189			(5	)
Net income from discontinued operations attributable to AIR	$	11,632		$	19,684		$	20,986

Through December 15, 2020, we incurred transaction costs of $57.0 million related to the Separation, all of which are reflected in other expenses, net on our consolidated statement of operations for the year ended December 31, 2020. Transaction costs primarily consist of third-party advisory, consulting, legal and professional services, as well as other items that are incremental in nature and that were specifically related to the Separation.

After the Separation, we and the Spinnee are operating as two, focused and independent companies. We entered into various separation and transition services agreements with the Spinnee that provide for a framework of our relationship with the Spinnee after the Separation, including: (i) a separation agreement setting forth the mechanics of the Separation, the key provisions relating to the separation of our assets and liabilities from those of the Spinnee, and certain organizational matters and conditions; (ii) an employee matters agreement to allocate liabilities and responsibilities relating to employment matters, teammate compensation, and benefits plans and programs, and other related matters; (iii) Property Management Agreements pursuant to which we will provide property management and related services at a majority of the properties owned or leased by the Spinnee in exchange for a fee based on an agreed percentage of revenue collected; (iv) Master Services Agreement pursuant to which we will provide the Spinnee with customary administrative and support services on an ongoing basis in exchange for payment for the fully-burdened costs (including internal allocated costs); and (v) a Master Leasing Agreement pursuant to which the Spinnee may enter into leases with us pursuant to which the Spinnee, at its option, may redevelop, develop, or lease-up apartment communities. The Property Management Agreement, the Master Service Agreement, and the Master Lease Agreement may be terminated in accordance with the respective agreements.

The Master Leasing Agreement governs any future leasing arrangements between us and the Spinnee. The initial term of the Master Leasing Agreement is 18 months, with automatic annual extensions (subject to each party’s right to terminate upon notice prior to the end of any such extension term). The initial annual rent for any leased property is based a calculation derived from the then-current fair market value of the subject property and market NOI cap rates, subject to certain adjustments, and is further subject to periodic escalation as set forth in the applicable lease, and the other terms thereof, including the initial term and

extensions on an arm’s-length basis, as defined in the Master Lease Agreement. The Spinnee has the right to terminate any such lease prior to the end of its term once the leased property is stabilized. In connection with an early termination, we have an option to pay the Spinnee an amount equal to the difference between the then-current fair market value of such property and the initial fair market value of such property at the time of the lease inception, at a small discount. If we do not exercise an option, the Spinnee will have the right to sell the property to a third party with us guaranteed to receive an amount equal to the fair market value of the property at the time of the lease inception, or the Spinnee may elect to purchase the property at a purchase price equal to the fair market value thereof at the time of lease inception (and may subsequently sell the property to a third party, subject to our right of first refusal during the first year following the Spinnee’s acquisition). On January 1, 2021, the Master Lease Agreement commenced and we had four redevelopment properties leased to the Spinnee.