Goodwill and Other Intangibles

9 Months Ended

Sep. 30, 2014

Goodwill And Intangible Assets Liabilities Disclosure [Abstract]

In connection with our acquisitions of properties, we have recorded net lease intangibles that are being amortized over periods ranging from one year to 40 years. In addition, we have several ground lease intangibles that are being amortized over periods of 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 financial statements. Tenant relationship, below-market ground lease (as lessee), trade name, management contracts, and software license intangibles are included in Other assets, net in the consolidated financial statements. Below-market rent, above-market ground lease (as lessee), and below-market purchase option intangibles are included in Below-market rent and other intangible liabilities, net in the consolidated financial statements.

In connection with our investment activity during the nine months ended September 30, 2014, including primarily the properties we acquired through the CPA^®:16 Merger, we 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	$	596,298
Above-market rent	12.3	395,824
Below-market ground lease	62.7	14,397
		$	1,006,519

Amortizable Intangible Liabilities
Below-market rent	17.9	$	(56,665	)
Above-market ground lease	31.5	(6,712		)
		$	(63,377	)

In connection with the CPA^®:16 Merger, we recorded preliminary goodwill of $349.0 million as a result of the Merger Consideration exceeding the fair value of the assets acquired and liabilities assumed (Note 3). During the second quarter of 2014, we identified certain measurement period adjustments that impacted the provisional accounting, which decreased the total fair value of our equity interest in CPA^®:16 – Global and noncontrolling interests acquired by $0.1 million. The goodwill was attributed to our Real Estate Ownership reporting unit as it relates to the real estate assets we acquired in the CPA^®:16 Merger. The following table presents a reconciliation of our goodwill (in thousands):



	Real Estate Ownership			Investment Management		Total
Balance at January 1, 2014	$	286,601		$	63,607	$	350,208
Acquisition of CPA^®:16 – Global	348,876			—		348,876
Other adjustments accounted for as business combinations ^(a)	14,137			—		14,137
Allocation of goodwill to the cost basis of properties sold or classified as held-for-sale	(2,743		)	—		(2,743		)
Foreign currency translation adjustments and other	(7,687		)	—		(7,687		)
Balance at September 30, 2014	$	639,184		$	63,607	$	702,791

___________


(a)	Amount includes a deferred tax liability offset of $11.7 million recorded in connection with an acquisition of an investment in Norway (Note 5).

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



	September 30, 2014									December 31, 2013
	Gross Carrying Amount			Accumulated Amortization			Net Carrying Amount			Gross Carrying Amount			Accumulated Amortization			Net Carrying Amount
Amortizable Intangible Assets
Management contracts	$	32,765		$	(32,765	)	$	—		$	32,765		$	(32,395	)	$	370
Internal-use software development costs	13,987			(12		)	13,975			3,255			—			3,255
	46,752			(32,777		)	13,975			36,020			(32,395		)	3,625
Lease Intangibles:
In-place lease	1,101,405			(166,397		)	935,008			551,737			(84,610		)	467,127
Above-market rent	646,587			(101,125		)	545,462			292,132			(50,157		)	241,975
Below-market ground lease	18,346			(336		)	18,010			4,386			(22		)	4,364
Tenant relationship	6,230			(1,778		)	4,452			6,247			(1,656		)	4,591
	1,772,568			(269,636		)	1,502,932			854,502			(136,445		)	718,057
Unamortizable Goodwill and Indefinite-Lived Intangible Assets
Goodwill	702,791			—			702,791			350,208			—			350,208
Trade name	3,975			—			3,975			3,975			—			3,975
	706,766			—			706,766			354,183			—			354,183
Total intangible assets	$	2,526,086		$	(302,413	)	$	2,223,673		$	1,244,705		$	(168,840	)	$	1,075,865

Amortizable Intangible Liabilities
Below-market rent	$	(169,785	)	$	20,860		$	(148,925	)	$	(116,939	)	$	11,832		$	(105,107	)
Above-market ground lease	(13,419		)	985			(12,434		)	(6,896		)	512			(6,384		)
	(183,204		)	21,845			(161,359		)	(123,835		)	12,344			(111,491		)
Unamortizable Intangible Liabilities
Below-market purchase option	(16,711		)	—			(16,711		)	(16,711		)	—			(16,711		)
Total intangible liabilities	$	(199,915	)	$	21,845		$	(178,070	)	$	(140,546	)	$	12,344		$	(128,202	)

Net amortization of intangibles, including the effect of foreign currency translation, was $42.5 million and $21.7 million for the three months ended September 30, 2014 and 2013, respectively, and $131.9 million and $64.0 million for the nine months ended September 30, 2014 and 2013, respectively. Amortization of below-market rent and above-market rent intangibles is recorded as an adjustment to Lease revenues; 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 intangibles is included in Property expenses.

Based on the intangible assets and liabilities recorded at September 30, 2014, scheduled annual net amortization of intangibles for the remainder of 2014, each of the next four calendar years following December 31, 2014, and thereafter is as follows (in thousands):



Years Ending December 31,	Net Decrease in Lease Revenues		Increase to Amortization/ Property Expenses		Net
2014 (remainder)	$	14,146	$	27,749	$	41,895
2015	55,529		110,442		165,971
2016	53,738		106,295		160,033
2017	50,318		102,432		152,750
2018	46,703		99,396		146,099
Thereafter	176,103		512,697		688,800
Total	$	396,537	$	959,011	$	1,355,548

- 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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