Net Investments in Properties and Real Estate Under Construction

Real Estate

Real estate, which consists of land and buildings leased to others, at cost, and which are subject to operating leases, is summarized as follows (in thousands):



	June 30, 2015			December 31, 2014
Land	$	552,071		$	513,172
Buildings	2,006,916			1,883,543
Less: Accumulated depreciation	(198,050		)	(175,478		)
	$	2,360,937		$	2,221,237

The carrying value of our Real estate decreased $67.9 million from December 31, 2014 to June 30, 2015, due to the strengthening of the U.S. dollar relative to foreign currencies during the same period.

Acquisitions of Real Estate During 2015

During the six months ended June 30, 2015, we entered into the following investments, which were deemed to be real estate asset acquisitions because we acquired the sellers’ properties and simultaneously entered into new leases in connection with these acquisitions, at a total cost of $154.8 million, including net lease intangibles of $40.5 million (Note 8) and acquisition-related costs and fees of $7.0 million, which were capitalized:


•	$22.2 million for an office facility in San Antonio, Texas on January 16, 2015;


•	$63.8 million for two warehouse facilities in Mszczonów and Tomaszów Mazowiecki, Poland on February 26, 2015 (dollar amount is based on the exchange rate of the euro on the date of acquisition); and


•	$68.8 million primarily for four retail facilities in Fargo, North Dakota and Ashwaubenon, Brookfield, and Wauwatosa, Wisconsin on June 26, 2015.

During the six months ended June 30, 2015, we placed into service three build-to-suit projects totaling $117.1 million and capitalized $3.1 million of building improvements with existing tenants.

Operating Real Estate

Operating real estate, which consists of our domestic self-storage operations, at cost, is summarized as follows (in thousands):



	June 30, 2015			December 31, 2014
Land	$	66,066		$	66,066
Buildings	207,245			206,793
Less: Accumulated depreciation	(26,238		)	(22,217		)
	$	247,073		$	250,642

Partial Sale

On December 1, 2011, we entered into a contract with I Shops LLC, a real estate developer, to finance the renovation of a hotel and construction of a shopping center in Orlando, Florida. As a result of the terms of that agreement, we consolidated the hotel and the shopping center. Additionally, as a condition to providing the construction loan, we entered into a contract with the developer that granted us the option to acquire a 15% equity interest in the parent company that owns I Shops LLC. However, we did not exercise the option and it expired on January 31, 2015.

On April 24, 2014, upon the substantial repayment of the construction loan by the developer, we deconsolidated our investment in the hotel as it no longer met the criteria for consolidation, which was accounted for as a partial sale due to our purchase option. The related gain on sale of real estate was $14.6 million, of which $12.4 million, or 85%, we recognized during the three months ended June 30, 2014 and $2.2 million, or 15%, we deferred until the purchase option expired, in accordance with ASC 360-20-40-3, Criteria for Recognizing Profit on Sales of Real Estate Under Full Accrual Method. We recognized the $2.2 million gain on sale of real estate during the three months ended March 31, 2015, after the option expired without being exercised on January 31, 2015. In accordance with ASU 2014-08, the results of operations for assets related to the partial sale are included in continuing operations in the consolidated financial statements.

Real Estate Under Construction

The following table provides the activity of our Real estate under construction (in thousands):



	Six Months Ended			Year Ended
	June 30, 2015			December 31, 2014
Beginning balance	$	110,983		$	127,935
Capitalized funds	14,090			74,420
Placed into service	(117,120		)	(96,807		)
Capitalized interest	2,125			6,661
Foreign currency translation adjustments, building improvements, and other	(1,490		)	(1,226		)
Ending balance	$	8,588		$	110,983

Capitalized Funds

During the six months ended June 30, 2015, total capitalized funds were primarily comprised of $5.9 million in construction draws related to three existing build-to-suit projects and $8.2 million for the funding of one new build-to-suit project, which is an expansion of a property acquired in a prior year.

During the year ended December 31, 2014, costs attributable to seven build-to-suit projects, including acquisition-related costs and fees related to two new build-to-suit projects, were capitalized.

Placed into Service

During the six months ended June 30, 2015, we placed into service three build-to-suit projects totaling $117.1 million, of which one was completed and two were partially completed as of June 30, 2015.

During the year ended December 31, 2014, we placed four build-to-suit projects into service, of which three were completed and one was partially completed as of December 31, 2014, in the amount of $96.8 million. Of the total, $81.9 million was reclassified to Real estate, at cost, and $14.9 million was reclassified to Operating real estate, at cost.

Capitalized Interest

Capitalized interest includes amortization of the mortgage discount and deferred financing costs and interest incurred during construction, totaling $2.1 million and $6.7 million for the six months ended June 30, 2015 and the year ended December 31, 2014, respectively.

Ending Balance

At June 30, 2015, we had one open build-to-suit project. At December 31, 2014, we had two open build-to-suit projects. The aggregate unfunded commitment on the remaining open projects totaled approximately $6.7 million and $12.5 million at June 30, 2015 and December 31, 2014, respectively.