Property Dispositions and Discontinued Operations

From time to time, we may decide to sell a property. We have an active capital recycling program, with a goal of extending the average lease term through reinvestment, improving portfolio credit quality through dispositions and acquisitions of assets, increasing the asset criticality factor in our portfolio, and/or executing strategic dispositions of assets. We may make a decision to dispose of a property when it is vacant as a result of tenants vacating space, tenants electing not to renew their leases, tenant insolvency, or lease rejection in the bankruptcy process. In such cases, we assess whether we can obtain the highest value from the property by selling it, as opposed to re-leasing it. We may also sell a property when we receive an unsolicited offer or negotiate a price for an investment that is consistent with our strategy for that investment. When it is appropriate to do so, we classify the property as an asset held for sale on our consolidated balance sheet and, for those properties sold or classified as held-for-sale prior to January 1, 2014, the current and prior period results of operations of the property have been reclassified as discontinued operations under current accounting guidance (Note 2). All property dispositions are recorded within our Real Estate Ownership segment.

Property Dispositions Included in Continuing Operations

The results of operations for properties that have been classified as held-for-sale or have been sold after December 31, 2013 and properties that were classified as direct financing leases, and with which we have no continuing involvement, excluding the properties that were classified as held-for-sale in the CPA^®:16 Merger, are included within continuing operations in the consolidated financial statements. Total revenues from these properties were $0.8 million for the three months ended September 30, 2013, and $6.3 million and $2.6 million for the nine months ended September 30, 2014 and 2013, respectively. There were no such revenues during the three months ended September 30, 2014. Net income from the operations of these properties were $0.2 million and $0.3 million for the three months ended September 30, 2014 and 2013, respectively, and $1.7 million and $1.1 million for the nine months ended September 30, 2014 and 2013, respectively.

2014 — During the nine months ended September 30, 2014, we sold five properties for a total of $40.6 million, net of selling costs, and we recognized a net loss on these sales of $3.8 million. These sales included a manufacturing facility for which the contractual minimum sale price of $5.8 million was not met. The third-party purchaser paid $1.4 million, with the difference of $4.4 million being paid by the vacating tenant. The amount paid by the tenant was recorded as lease termination income, partially offsetting the $8.4 million loss on the sale of the property.

In addition, during September 2014, we conveyed a parcel of land to a local government for $0.4 million and recognized a gain of $0.3 million. During February 2014, a domestic vacant property was foreclosed upon and sold for $4.6 million. The proceeds from the sale were used to partially repay a non-recourse mortgage loan encumbering this property and another property with an outstanding balance of $6.0 million at the time of the sale. In connection with the sale, we recognized a gain on the sale of $0.1 million.

During the nine months ended September 30, 2014, in connection with those sales of properties accounted for as businesses we allocated goodwill totaling $2.7 million to the cost basis of the properties, for our Real Estate Ownership segment, based on the relative fair values at the time of the sales (Note 8).

2013 — During the nine months ended September 30, 2013, we sold our investment in a direct financing lease. The results of operations for this investment is included within continuing operations in the consolidated financial statements for the nine months ended September 30, 2013.

Property Dispositions Included in Discontinued Operations

The results of operations for properties that have been classified as held-for-sale or have been sold prior to January 1, 2014 and the properties that were acquired as held-for-sale in the CPA^®:16 Merger, are reflected in the consolidated financial statements as discontinued operations, net of tax and are summarized as follows (in thousands):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Revenues	$	377		$	6,946		$	8,586		$	25,094
Expenses	(142		)	(5,391		)	(1,928		)	(17,382		)
(Loss) gain on extinguishment of debt	—			—			(1,267		)	98
Gain on sale of real estate	—			239			27,672			622
Impairment charges	—			(1,416		)	—			(6,366		)
Income from discontinued operations	$	235		$	378		$	33,063		$	2,066

2014 — At December 31, 2013, we had nine properties classified as held-for-sale, all of which were sold during the nine months ended September 30, 2014. The properties were sold for a total of $116.4 million, net of selling costs, and we recognized a net gain on these sales of $28.0 million, excluding impairment charges totaling $3.1 million previously recognized during 2013. We used a portion of the proceeds to repay a related mortgage loan obligation of $11.4 million and recognized a loss on extinguishment of debt of $0.1 million.

In connection with those sales of properties accounted for as businesses for the nine months ended September 30, 2014, we allocated goodwill totaling $7.0 million to the cost basis of the properties, for our Real Estate Ownership segment, based on the relative fair value at the time of the sale.

In connection with the CPA^®:16 Merger in January 2014, we acquired ten properties, including five properties held by one jointly-owned investment, that were classified as Assets held for sale with a total fair value of $133.0 million. We sold all of these properties during the nine months ended September 30, 2014 for a total of $123.4 million, net of selling costs, including seller financing of $15.0 million, and recognized a net loss on these sales of $0.3 million. We used a portion of the proceeds to repay the related mortgage loan obligations totaling $18.9 million and recognized a loss on extinguishment of debt of $1.2 million.

2013 — During the nine months ended September 30, 2013, we sold seven domestic properties, including three properties that were previously classified as Assets held for sale in the consolidated financial statements, for a total of $22.7 million, net of selling costs, and recognized a net gain on these sales of $0.6 million, excluding impairment charges totaling $3.9 million and $0.2 million previously recognized during 2013 and 2012, respectively. We used a portion of the proceeds to repay the related mortgage loan obligation of $5.7 million and recognized a gain on extinguishment of debt of $0.1 million. In connection with those sales of properties accounted for as businesses for the nine months ended September 30, 2013, we allocated goodwill totaling $1.2 million to the cost basis of the properties, for our Real Estate Ownership segment, based on the relative fair value at the time of sale (Note 8).

During the nine months ended September 30, 2013, a jointly-owned investment in which we and an affiliate own 44% and 56%, respectively, and which we consolidate, entered into a contract to sell a domestic property, which we acquired in the CPA^®:15 Merger, for $16.4 million. In addition, during the nine months ended September 30, 2013, we entered into a contract to sell our only hotel at that time for $3.8 million. In connection with the potential sale of the hotel, we recognized impairment charges totaling $1.1 million during the second quarter of 2013 in order to write down the carrying value of the asset to its estimated fair value, which approximated the estimated selling price less selling costs. We completed the sales of the jointly-owned investment in June 2014 and the hotel in October 2013.

We sold or classified as held-for-sale 20 additional properties during the fourth quarter of 2013. The results of operations for these properties are included in Income from discontinued operations, net of tax in the consolidated financial statements for the nine months ended September 30, 2013.