Basis of Presentation and Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2015

As of March 31, 2015, and December 31, 2014, the cost basis and accumulated depreciation and amortization related to our consolidated real estate properties and related lease intangibles were as follows (in thousands):



				Lease Intangibles
				Assets						Liabilities
							Acquired Above-Market Leases			Acquired Below-Market Leases
	Buildings and Improvements			Other Lease Intangibles
as of March 31, 2015	Buildings and Improvements			Other Lease Intangibles
Cost	$	1,895,389		$	181,267		$	4,074		$	(56,404	)
Less: accumulated depreciation and amortization	(534,466		)	(103,787		)	(3,911		)	42,023
Net	$	1,360,923		$	77,480		$	163		$	(14,381	)



				Lease Intangibles
				Assets						Liabilities
							Acquired Above-Market Leases			Acquired Below-Market Leases
	Buildings and Improvements			Other Lease Intangibles
as of December 31, 2014	Buildings and Improvements			Other Lease Intangibles
Cost	$	2,039,765		$	215,913		$	11,785		$	(59,605	)
Less: accumulated depreciation and amortization	(557,429		)	(123,242		)	(9,766		)	42,621
Net	$	1,482,336		$	92,671		$	2,019		$	(16,984	)

We amortize the value of in-place leases, in-place tenant improvements, and in-place leasing commissions to expense over the initial term of the respective leases. The tenant relationship values are amortized to expense over the tenants’ respective initial lease terms and any anticipated renewal periods, but in no event does the amortization period for intangible assets or liabilities exceed the remaining depreciable life of the building. Should a tenant terminate its lease, the unamortized portion of the acquired lease intangibles related to that tenant would be charged to expense. The estimated remaining average useful lives for acquired lease intangibles range from an ending date of April 2015 to an ending date of December 2030. Anticipated amortization associated with the acquired lease intangibles for each of the following five years is as follows (in thousands):



April - December 2015	$	2,375
2016	$	1,185
2017	$	579
2018	$	(145	)
2019	$	475

Impairment of Real Estate Related Assets

For our consolidated real estate assets, we monitor events and changes in circumstances indicating that the carrying amounts of the real estate assets may not be recoverable. When such events or changes in circumstances are present, we assess potential impairment by comparing estimated future undiscounted cash flows expected to be generated over the life of the asset including its eventual disposition, to the carrying amount of the asset. In the event that the carrying amount exceeds the estimated future undiscounted cash flows and also exceeds the fair value of the asset, we recognize an impairment loss to adjust the carrying amount of the asset to its estimated fair value. Our process to estimate the fair value of an asset involves using third party broker valuation estimates, bona fide purchase offers or the expected sales price of an executed sales agreement, which would be considered Level 1 or Level 2 assumptions within the fair value hierarchy. To the extent that this type of third party information is unavailable, we estimate projected cash flows and a risk-adjusted rate of return that we believe would be used by a third party market participant in estimating the fair value of an asset. This is considered a Level 3 assumption within the fair value hierarchy. These projected cash flows are prepared internally by the Company’s asset management professionals and are updated quarterly to reflect in place and projected leasing activity, market revenue and expense growth rates, market capitalization rates, discount rates, and changes in economic and other relevant conditions. The Company’s Chief Financial Officer, Chief Investment Officer, and Chief Accounting Officer review these projected cash flows to assure that the valuation is prepared using reasonable inputs and assumptions which are consistent with market data or with assumptions that would be used by a third party market participant and assume the highest and best use of the real estate investment. For the three months ended March 31, 2015 and 2014, we recorded non-cash impairment charges including amounts recognized in discontinued operations totaling approximately $0.1 million and $8.2 million, respectively, related to the impairment of consolidated real estate assets. The impairment loss recorded in 2015 within continuing operations related to final estimated closing costs incurred in connection with the disposition of One and Two Chestnut Place. The impairment loss recorded in 2014 related to an asset assessed for impairment due to a change in management’s estimate of the intended hold period.

For our unconsolidated real estate assets, at each reporting date we compare the estimated fair value of our investment to the carrying amount. An impairment charge is recorded to the extent the fair value of our investment is less than the carrying amount and the decline in value is determined to be other than a temporary decline. We had no impairment charges related to our investments in unconsolidated entities for the three months ended March 31, 2015 or 2014.

In evaluating our investments for impairment, management makes several estimates and assumptions, including, but not limited to, the projected date of disposition (the intended hold period) and sales price for each property, the estimated future cash flows of each property during our estimated ownership period, and for unconsolidated investments, the estimated future distributions from the investment. A change in these estimates and assumptions could result in understating or overstating the carrying amount of our investments which could be material to our financial statements.

We undergo continuous evaluations of property level performance, credit market conditions, and financing options. If our assumptions regarding the cash flows expected to result from the use and eventual disposition of our properties decrease or our expected hold periods decrease, we may incur future impairment charges on our real estate related assets. In addition, we may incur impairment charges on assets classified as held for sale in the future if the carrying amount of the asset upon classification as held for sale exceeds the estimated fair value, less costs to sell.

Accounts Receivable, net

The following is a summary of our accounts receivable as of March 31, 2015, and December 31, 2014 (in thousands):



	March 31, 2015			December 31, 2014
Straight-line rental revenue receivable	$	68,462		$	73,266
Tenant receivables	9,379			10,165
Non-tenant receivables	984			1,150
Allowance for doubtful accounts	(3,359		)	(1,201		)
Total	$	75,466		$	83,380

Deferred Financing Fees, net

The following is a summary of our deferred financing fees as of March 31, 2015, and December 31, 2014 (in thousands):



	March 31, 2015			December 31, 2014
Cost	$	23,497		$	24,704
Less: accumulated amortization	(12,807		)	(13,921		)
Net	$	10,690		$	10,783

Other Intangible Assets, net

Other intangible assets consists of a ground lease on one of our properties. As of March 31, 2015, and December 31, 2014, the cost basis and accumulated amortization related to our consolidated other intangibles assets were as follows (in thousands):



	March 31, 2015			December 31, 2014
Cost	$	2,978		$	2,978
Less: accumulated amortization	(864		)	(834		)
Net	$	2,114		$	2,144

We amortize the value of other intangible assets to expense over the estimated remaining useful life which has an ending date of December 2032. Anticipated amortization associated with other intangible assets for each of the following five years is as follows (in thousands):



April - December 2015	$	89
2016	$	119
2017	$	119
2018	$	119
2019	$	119

Real Estate Held for Sale

We classify properties as held for sale when certain criteria are met, in accordance with GAAP. At that time, we present the assets and obligations associated with the real estate held for sale separately in our consolidated balance sheet, and we cease recording depreciation and amortization expense related to that property. Real estate held for sale is reported at the lower of its carrying amount or its estimated fair value less estimated costs to sell. At March 31, 2015, we had four properties classified as real estate held for sale. At December 31, 2014, we had three properties classified as real estate held for sale.

Revenue Recognition

We recognize rental income generated from all leases of consolidated real estate assets on a straight-line basis over the terms of the respective leases, including the effect of rent holidays, if any. The total net increase to rental revenues due to straight-line rent adjustments for three months ended March 31, 2015 and 2014, was approximately $2.8 million and $1.6 million, respectively, and includes amounts recognized in discontinued operations. Our rental revenue also includes amortization of acquired above- and below-market leases. The total net increase to rental revenues due to the amortization of acquired above- and below-market leases for the three months ended March 31, 2015, and also for three months ended March 31, 2014, was approximately $1.2 million, and includes amounts recognized in discontinued operations. Revenues relating to lease termination fees are recognized on a straight-line basis amortized from the time that a tenant’s right to occupy the leased space is modified through the end of the revised lease term. For the three months ended March 31, 2015 and 2014, we recognized lease termination fees of approximately $0.5 million and $0.2 million, respectively, including amounts recognized in discontinued operations.

Income Taxes

We have elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, and have qualified as a REIT since the year ended December 31, 2004. The Company is generally not subject to federal income taxes to the extent we distribute our REIT taxable income to our stockholders currently each year and we meet certain other organizational and operational requirements. In addition to the Company, our business is conducted through our operating partnership, Tier OP, and various subsidiaries, including limited liability companies, partnerships, and corporations elected to be treated as taxable REIT subsidiaries. The Company and its subsidiaries are subject to state and local income taxes on operations located in states, cities, and other jurisdictions that impose an income tax. In addition, our taxable REIT subsidiaries are subject to federal, state, and local income taxes at regular corporate tax rates.

As of March 31, 2015, we have deferred tax liabilities of approximately $2.6 million and deferred tax assets, net of related valuation allowances, of approximately $2.4 million related to various state taxing jurisdictions. At December 31, 2014, we had deferred tax liabilities of approximately $2.9 million and deferred tax assets, net of related valuation allowances, of approximately $2.5 million related to various state taxing jurisdictions.

- Definition

Disclosure of accounting policy for income taxes, which may include its accounting policies for recognizing and measuring deferred tax assets and liabilities and related valuation allowances, recognizing investment tax credits, operating loss carryforwards, tax credit carryforwards, and other carryforwards, methodologies for determining its effective income tax rate and the characterization of interest and penalties in the financial statements.

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Disclosure of accounting policy for revenue recognition. If the entity has different policies for different types of revenue transactions, the policy for each material type of transaction is generally disclosed. If a sales transaction has multiple element arrangements (for example, delivery of multiple products, services or the rights to use assets) the disclosure may indicate the accounting policy for each unit of accounting as well as how units of accounting are determined and valued. The disclosure may encompass important judgment as to appropriateness of principles related to recognition of revenue. The disclosure also may indicate the entity's treatment of any unearned or deferred revenue that arises from the transaction.

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Disclosure of accounting policy for trade and other accounts receivables. This disclosure may include the basis at which such receivables are carried in the entity's statements of financial position (for example, net realizable value), how the entity determines the level of its allowance for doubtful accounts, when impairments, charge-offs or recoveries are recognized, and the entity's income recognition policies for such receivables, including its treatment of related fees and costs, its treatment of premiums, discounts or unearned income, when accrual of interest is discontinued, how the entity records payments received on nonaccrual receivables and its policy for resuming accrual of interest on such receivables. If the enterprise holds a large number of similar loans, disclosure may include the accounting policy for the anticipation of prepayments and significant assumptions underlying prepayment estimates for amortization of premiums, discounts, and nonrefundable fees and costs.

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