Acquisition of Real Estate

9 Months Ended

Sep. 30, 2012

Acquisition of Real Estate

3. Acquisition of Real Estate

The fair value of the real estate acquired is recorded to the acquired tangible assets, consisting of land, site improvements, building and tenant improvements, and identified intangible assets and liabilities, consisting of the value of above and below-market leases and the value of in-place leases and tenant relationships, if any, based in each case on their respective fair values. Loan premiums, in the case of above-market rate loans, or loan discounts, in the case of below-market loans, will be recorded based on the fair value of any loans assumed in connection with acquiring the real estate. Above-market ground leases will be recorded based on the respective fair value of the ground leases.

The fair value of the real estate assets acquired during the nine months ended September 30, 2012 (in thousands):

Property	Land		Site Improvements		Building Improvements		Tenant Improvements		Acquired In- Place Lease Value		Above- Market Lease Value		Net Assets Acquired
2400 Dralle Road	$	11,706	$	4,732	$	38,175	$	912	$	6,645	$	2,080	$	64,250
Midwest Commerce Center I(1)		6,861		8,610		39,750		614		5,995		1,120		62,950
	$	18,567	$	13,342	$	77,925	$	1,526	$	12,640	$	3,200	$	127,200

⁽¹⁾  Fair value determinations are preliminary. Final valuations of assets acquired are not yet complete.

Acquisition related expenses of $1,099,000 and $1,044,000, $2,508,000 and $12,537,000 associated with the acquisitions of real estate were expensed as incurred during the three and nine months ended September 30, 2012 and 2011, respectively.

Building Improvements are depreciated over 39 years; Site Improvements are depreciated over 15 and 25 years; Tenant Improvements, Acquired In-Place Lease Value, Above-Market Lease Value and Below-Market Lease Value are amortized over the remaining lease terms at the time of acquisition. The 2400 Dralle Road and Midwest Commerce Center I properties are included in the Domestic/Industrial segment and their operations contributed to a $1,710,000 and $2,973,000 increase in segment income for the three and nine months ended September 30, 2012, respectively.

Unaudited pro forma results, assuming the above noted acquisitions had occurred as of January 1, 2011 for purposes of the 2012 acquisitions and assuming our 2011 acquisitions had occurred as of January 1, 2010 for purposes of presenting the 2012 and 2011 pro forma disclosures, respectively, are presented below. Non-recurring acquisition costs of $2,508,000 and of $12,537,000 were excluded from 2012 and 2011 pro forma results and included in the nine months ended September 30, 2011 and 2010 pro forma results, respectively, as an operating expense. These unaudited pro forma results have been prepared for comparative purposes only and include certain adjustments, such as increased depreciation and amortization expenses as a result of tangible and intangible assets acquired in the acquisitions. These unaudited pro forma results do not purport to be indicative of what operating results would have been had the acquisitions actually occurred on January 1, 2011 or 2010, respectively, and may not be indicative of future operating results (dollars in thousands, except share data):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Revenue	$	47,845		$	44,056		$	138,892		$	128,220
Operating Loss		(11,423	)		(5,350	)		(16,718	)		(24,121	)
Net Loss		(12,060	)		(4,337	)		(14,187	)		(18,738	)
Basic and Diluted Loss Per Share	$	(0.05	)	$	(0.02	)	$	(0.06	)	$	(0.10	)
Weighted Average Shares Outstanding for Basic and Diluted Loss		249,173,577			199,398,630			247,718,798			183,098,748