Goodwill and Other Intangibles

12 Months Ended

Dec. 31, 2013

Goodwill And Intangible Assets Liabilities Disclosure [Abstract]

Goodwill And Intangible Assets Disclosure

Goodwill and Other Intangibles

In connection with our acquisitions of properties, we have recorded net lease intangibles that are being amortized over periods ranging from one to 40 years. In addition, we have several ground leases that are being amortized over periods up to 134 years. In-place lease and above-market rent are included in In-place lease intangible assets, net and Above-market rent intangible assets, net, respectively, in the consolidated balance sheets. Tenant relationship, below-market ground lease (as lessee), trade name, management contracts and software license intangibles are included in Other intangible assets, net in the consolidated balance sheets. Below-market rent, above-market ground lease (as lessor), and below-market purchase option intangibles are included in Accounts payable, accrued expenses and other liabilities in the consolidated balance sheets.

In connection with our investment activity during 2013, we have recorded net lease intangibles comprised as follows (life in years, dollars in thousands):



	Weighted-Average Life	Amount
Amortizable Intangible Assets
In-place lease	12.3	$	85,759
Above-market rent	16.5	10,917
Below-market ground lease	118.1	3,998
		$	100,674

Amortizable Intangible Liabilities
Below-market rent	21.1	$	(32,716	)

In connection with the CPA^®:15 Merger, we recorded goodwill of $268.7 million as a result of the Merger Consideration exceeding the fair value of the assets acquired and liabilities assumed (Note 3). The goodwill was attributed to our Real Estate Ownership reporting unit as it relates to the real estate assets we acquired. The following table presents a reconciliation of our goodwill (in thousands):



	Real Estate Ownership			Investment Management		Total
Balance at January 1, 2011	$	—		$	63,607	$	63,607
Activity	—			—		—
Balance at December 31, 2011	—			63,607		63,607
Acquisition of CPA^®:15	268,683			—		268,683
Allocation of goodwill to the cost basis of properties sold or held for sale^(a)	(3,158		)	—		(3,158		)
Balance at December 31, 2012	265,525			63,607		329,132
Allocation of goodwill to the cost basis of properties sold or held for sale ^(a)	(13,118		)	—		(13,118		)
Adjustments related to deferred foreign income taxes ^(b)	32,715			—		32,715
Adjustment to purchase price ^(c)	1,479			—		1,479
Balance at December 31, 2013 ^(d)	$	286,601		$	63,607	$	350,208

___________


(a)	Amount is included within Gain (loss) on sale of real estate for assets sold or Impairment charges for assets classified as held for sale, both of which are included in discontinued operations (Note 17).


(b)	In the fourth quarter of 2013, we recorded an out-of-period adjustment related to accounting for deferred foreign income taxes (Note 2).


(c)	In the fourth quarter of 2013, we recorded an immaterial out-of-period adjustment to correct an error in the purchase price allocation for the CPA^®:15 Merger.


(d)	We recorded goodwill in the Real Estate Ownership segment in connection with the CPA^®:16 Merger in January 2014 (Note 20).

Current accounting guidance requires that we test for the recoverability of goodwill at the reporting unit level. The test for recoverability must be conducted at least annually, or more frequently if events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable. We performed our annual test for impairment during the fourth quarter of 2013 for goodwill recorded in both segments, and no impairment was indicated.

Intangible assets and liabilities and goodwill are summarized as follows (in thousands):



	December 31,
	2013									2012
	Gross Carrying Amount			Accumulated Amortization			Net Carrying Amount			Gross Carrying Amount			Accumulated Amortization			Net Carrying Amount
Amortizable Intangible Assets
Management contracts	$	32,765		$	(32,395	)	$	370		$	32,765		$	(31,283	)	$	1,482
Internal-use software development costs	3,255			—			3,255			—			—			—
	36,020			(32,395		)	3,625			32,765			(31,283		)	1,482
Lease Intangibles:
In-place lease	551,737			(84,610		)	467,127			474,630			(27,352		)	447,278
Tenant relationship	6,247			(1,656		)	4,591			8,149			(3,406		)	4,743
Above-market rent	292,132			(50,157		)	241,975			293,627			(13,742		)	279,885
Below-market ground lease	4,386			(22		)	4,364			—			—			—
	854,502			(136,445		)	718,057			776,406			(44,500		)	731,906
Unamortizable Goodwill and Indefinite-Lived Intangible Assets
Goodwill	350,208			—			350,208			329,132			—			329,132
Trade name	3,975			—			3,975			3,975			—			3,975
	354,183			—			354,183			333,107			—			333,107
Total intangible assets	$	1,244,705		$	(168,840	)	$	1,075,865		$	1,142,278		$	(75,783	)	$	1,066,495

Amortizable Intangible Liabilities
Below-market rent	$	(116,939	)	$	11,832		$	(105,107	)	$	(86,171	)	$	3,227		$	(82,944	)
Above-market ground lease	(6,896		)	512			(6,384		)	(6,896		)	103			(6,793		)
	(123,835		)	12,344			(111,491		)	(93,067		)	3,330			(89,737		)
Unamortizable Intangible Liabilities
Below-market purchase option	(16,711		)	—			(16,711		)	(16,711		)	—			(16,711		)
Total intangible assets	$	(140,546	)	$	12,344		$	(128,202	)	$	(109,778	)	$	3,330		$	(106,448	)

Net amortization of intangibles, including the effect of foreign currency translation, was $86.1 million, $24.9 million and $4.7 million for the years ended December 31, 2013, 2012 and 2011, respectively. Amortization of below-market rent and above-market rent is recorded as an adjustment to Lease revenues, while amortization of management contracts, in-place lease and tenant relationship intangibles is included in Depreciation and amortization, and amortization of above-market ground lease and below-market ground lease is included in Property expenses.

Based on the intangible assets and liabilities recorded at December 31, 2013, scheduled annual net amortization of intangibles for each of the next five years and thereafter is as follows (in thousands):



Years Ending December 31,	Total
2014	$	84,921
2015	76,725
2016	74,872
2017	71,474
2018	65,170
Thereafter	237,029
Total	$	610,191

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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