
4.	Real Estate, Real Estate Held for Sale and Lease Intangibles

The following table summarizes the carrying amounts for the Company’s investment in real estate (at cost) as of December 31, 2016 and 2015 (amounts in thousands):



	2016			2015
Land	$	5,899,862		$	5,864,046
Depreciable property:
Buildings and improvements	16,913,430			16,346,829
Furniture, fixtures and equipment	1,346,300			1,207,098
In-Place lease intangibles	470,849			483,160
Projects under development:
Land	115,876			284,995
Construction-in-progress	521,292			837,381
Land held for development:
Land	84,440			120,007
Construction-in-progress	34,376			38,836
Investment in real estate	25,386,425			25,182,352
Accumulated depreciation	(5,360,389		)	(4,905,406		)
Investment in real estate, net	$	20,026,036		$	20,276,946

The following table summarizes the carrying amounts for the Company's above and below market ground and retail lease intangibles as of December 31, 2016 and 2015 (amounts in thousands):



Description	Balance Sheet Location	2016			2015
Assets
Ground lease intangibles – below market	Other Assets	$	178,251		$	178,251
Retail lease intangibles – above market	Other Assets	1,260			1,260
Lease intangible assets		179,511			179,511
Accumulated amortization		(17,972		)	(13,451		)
Lease intangible assets, net		$	161,539		$	166,060

Liabilities
Ground lease intangibles – above market	Other Liabilities	$	2,400		$	2,400
Retail lease intangibles – below market	Other Liabilities	5,270			5,270
Lease intangible liabilities		7,670			7,670
Accumulated amortization		(4,509		)	(3,414		)
Lease intangible liabilities, net		$	3,161		$	4,256

During the years ended December 31, 2016, 2015 and 2014, the Company amortized approximately $4.3 million in each year of above and below market ground lease intangibles which is included (net increase) in property and maintenance expense in the accompanying consolidated statements of operations and comprehensive income. During the years ended December 31, 2016, 2015 and 2014, the Company amortized approximately $0.9 million, $0.9 million and $1.1 million, respectively, of above and below market retail lease intangibles which is included (net increase) in rental income in the accompanying consolidated statements of operations and comprehensive income.

The following table provides a summary of the aggregate amortization expense for above and below market ground lease intangibles and retail lease intangibles for each of the next five years (amounts in thousands):



	2017			2018			2019			2020			2021

Ground lease intangibles	$	4,321		$	4,321		$	4,321		$	4,321		$	4,321
Retail lease intangibles	(540		)	(71		)	(71		)	(71		)	(67		)
Total	$	3,781		$	4,250		$	4,250		$	4,250		$	4,254

Acquisitions and Dispositions

During the year ended December 31, 2016, the Company acquired the entire equity interest in the following from unaffiliated parties (purchase price in thousands):



	Properties	Apartment Units	Purchase Price
Rental Properties – Consolidated (1)	4	573	$	249,334
Total	4	573	$	249,334


(1)	Purchase price includes an allocation of approximately $98.0 million to land and $151.3 million to depreciable property.

During the year ended December 31, 2015, the Company acquired the entire equity interest in the following from unaffiliated parties (purchase price in thousands):



	Properties	Apartment Units	Purchase Price
Rental Properties – Consolidated (1)	4	625	$	296,037
Land Parcels (2)	—	—	27,800
Total	4	625	$	323,837


(1)	Purchase price includes an allocation of approximately $44.7 million to land and $251.3 million to depreciable property.


(2)	The Company acquired three contiguous land parcels in San Francisco during 2015 which will be combined for future development.

During the year ended December 31, 2016, the Company disposed of the following to unaffiliated parties (sales price in thousands):



	Properties	Apartment Units	Sales Price
Consolidated:
Rental Properties (1)	98	29,440	$	6,811,503
Land Parcels	—	—	57,455
Unconsolidated:
Rental Properties (2)	1	336	74,500
Total	99	29,776	$	6,943,458


(1)	Includes the Starwood Portfolio sale (see further discussion below) representing 72 operating properties consisting of 23,262 apartment units for $5.365 billion.

(2) The Company owned a 20% interest in this unconsolidated rental property. Sale price listed is the gross sale price. The Company's share of the net sales proceeds approximated $12.4 million.

The Company recognized a net gain on sales of real estate properties of approximately $4.0 billion (inclusive of $3.2 billion on the Starwood Portfolio sale), a net gain on sales of land parcels of approximately $15.7 million and a net gain on sales of unconsolidated entities of approximately $8.9 million on the above sales.

During the year ended December 31, 2015, the Company disposed of the following to unaffiliated parties (sales price in thousands):



	Properties	Apartment Units	Sales Price
Consolidated:
Rental Properties (1)	8	1,857	$	513,312
Total	8	1,857	$	513,312


(1)	Includes a 193,230 square foot medical office building adjacent to our Longfellow Place property in Boston with a sales price of approximately $123.3 million which is not included in the Company's property and apartment unit counts.

The Company recognized a net gain on sales of real estate properties of approximately $335.1 million on the above sales.

Starwood Disposition

Following the approval by the Company's Board of Trustees, the Company executed an agreement with controlled affiliates of Starwood Capital Group ("Starwood") on October 23, 2015 to sell a portfolio of 72 operating properties consisting of 23,262 apartment units located in five markets across the United States for $5.365 billion (the "Starwood Transaction" or "Starwood Portfolio"). As of December 31, 2015, Starwood had deposited $250.0 million in cash into escrow as earnest money, which was non-refundable unless the Company defaulted on the sales agreement. On January 26 and 27, 2016, the Company closed on the sale of the entire portfolio described above. As a result, the Starwood Transaction met the held for sale criteria at December 31, 2015. In accordance with this classification, the Company ceased depreciation on all assets in the Starwood Portfolio as of November 1, 2015 and the following assets were classified as held for sale in the accompanying consolidated balance sheets at December 31, 2015 (amounts in thousands):



	December 31, 2015
Land	$	602,737
Depreciable property:
Buildings and improvements	2,386,489
Furniture, fixtures and equipment	335,565
In-Place lease intangibles	35,554
Real estate held for sale before accumulated depreciation	3,360,345
Accumulated depreciation	(1,179,210		)
Real estate held for sale	$	2,181,135

The following table provides the operating segments/locations of the properties and apartment units sold in the Starwood Transaction, which represents substantially all of the assets in the Company's South Florida and Denver markets and certain assets in the Washington D.C., Seattle and Los Angeles markets. The sale of these properties represents the continuation of the Company's long-term strategy of investing in six core coastal markets. See Note 11 for further discussion.



Markets/Metro Areas	Properties	Apartment Units
South Florida	33	10,742
Denver	18	6,635
Washington D.C.	10	3,020
Seattle	8	1,721
Los Angeles	3	1,144
Total	72	23,262

The Company used proceeds from the Starwood Transaction and other 2016 sales discussed above to pay special dividends of $8.00 per share/unit (approximately $3.0 billion) on March 10, 2016 and $3.00 per share/unit (approximately $1.1 billion) on October 14, 2016. The Company used the majority of the remaining proceeds to reduce aggregate indebtedness in order to make the transaction leverage neutral. See Note 8 for further discussion.

Other

In December 2011, the Company and Toll Brothers (NYSE: TOL) jointly acquired a vacant land parcel at 400 Park Avenue South in New York City. The Company's and Toll Brothers' allocated portions of the purchase price were approximately $76.1 million and $57.9 million, respectively. The acquisition was financed through contributions by the Company and Toll Brothers of approximately $102.5 million and $75.7 million, respectively, which included the land purchase noted above, restricted deposits and taxes and fees. Until the core and shell of the building were complete, the building and land were owned jointly and were required to be consolidated on the Company's balance sheet as the Company was the managing member and Toll Brothers did not have substantive kick-out or participating rights. In July 2015, the Company recorded the master condominium declaration for this development project and as a result, the Toll Brothers’ portion of the property was deconsolidated from the Company's balance sheet. The Company now solely owns the rental portion of the building (floors 2-22) and the ground floor retail and Toll Brothers solely owns the for sale portion of the building (floors 23-40). The joint venture no longer owns any real property. In conjunction with this transaction, the Company reduced investment in real estate by $116.7 million, noncontrolling interests in partially owned properties by $117.3 million and accrued retainage by $1.1 million and increased other liabilities by $1.7 million (to account for Toll Brothers' restricted cash still held by the Company). The deconsolidation of the Toll Brothers' portion of the project had no impact on the consolidated results of operations and comprehensive income.