Note 4. Real Estate Properties

As of March 31, 2016, we owned 72 properties (92 buildings), with an undepreciated carrying value of $1,770,983, excluding one property (one building) classified as discontinued operations with an undepreciated carrying value of $12,260. We generally lease space at our properties on a gross lease or modified gross lease basis pursuant to fixed term operating leases expiring between 2016 and 2032. Our leases generally require us to pay all or some property operating expenses and to provide all or most property management services. During the three months ended March 31, 2016, we entered into 20 leases for 522,962 rentable square feet, including a 25,579 square foot expansion to be constructed at an existing property, for a weighted (by rentable square feet) average lease term of 11.6 years and we made commitments for approximately $20,469 of leasing related costs. We have estimated unspent leasing related obligations of $22,752 as of March 31, 2016. In addition, prior to the commencement of the lease, we have committed to redevelop and expand the existing property referenced above at an estimated cost of approximately $12,800.

Acquisition Activities

During the three months ended March 31, 2016, we acquired one office property (one building) located in Sacramento, CA with 337,811 rentable square feet. This property was 86% leased, of which 71% was leased to the State of California and occupied by three separate agencies on the date of acquisition. The purchase price was $79,244, excluding acquisition costs. Our allocation of the purchase price of this acquisition based on the estimated fair values of the acquired assets and assumed liabilities is presented in the table below. The allocation of the purchase price is based on preliminary estimates and may change upon completion of third party appraisals.

Number

Buildings

Acquired

Other

Acquisition

Properties/

Square

Purchase

and

Acquired

Lease

Assumed

Date

Location

Type

Buildings

Feet

Price

Land

Improvements

Leases

Obligations

Liabilities

January 2016

Sacramento, CA

Office

1 / 1

337,811

79,244

4,658

61,330

13,525

(269)

—

In April 2016, we exercised our option to purchase for $1,623 an adjacent land parcel at one of our existing properties in Atlanta, GA. We expect this transaction to close during the third quarter of 2016.

We regularly evaluate whether events or changes in circumstances have occurred that could indicate an impairment in the value of long lived assets. If there is an indication that the carrying value of an asset is not recoverable, we estimate the projected undiscounted cash flows to determine if an impairment loss should be recognized. We determine the amount of any impairment loss by comparing the historical carrying value to estimated fair value. We estimate fair value through an evaluation of recent financial performance and projected discounted cash flows using standard industry valuation techniques. In addition to consideration of impairment upon the events or changes in circumstances described above, we regularly evaluate the remaining lives of our long lived assets. If we change our estimate of the remaining lives, we allocate the carrying value of the affected assets over their revised remaining lives.

Disposition Activities – Continuing Operations

In 2015, we began marketing for sale an office property ( one building) in Savannah, GA with 35,228 rentable square feet and a net book value of $3,071 at March 31, 2016. In March 2016, we entered into an agreement to sell this property. The contract sales price is $4,500, which amount is before transaction costs we may incur. This sale is subject to conditions and is currently expected to occur in the third quarter of 2016. We can provide no assurance that the sale of this property will occur, that the sale will not be delayed or that its terms will not change. We have classified this property as held for sale as of March 31, 2016. The results of operations for this property are included in continuing operations in our condensed consolidated financial statements. Summarized balance sheet information for the property is as follows:


	March 31,		December 31,
	2016		2015
Real estate properties, net	$	3,071	$	3,071
Rents receivable		-		1
Other assets		27		26
Assets of property held for sale	$	3,098	$	3,098

Other liabilities	$	32	$	43
Liabilities of property held for sale	$	32	$	43

Disposition Activities – Discontinued Operations

In March 2016, we entered into an agreement to sell an office property ( one building) in Falls Church, VA with 164,746 rentable square feet and a net book value of $12,282 at March 31, 2016. The contract sales price is $14,750, which amount is before transaction costs we may incur. This sale is subject to conditions, including the purchaser obtaining certain zoning entitlements, and is currently expected to occur in the first quarter of 2017. We can provide no assurance that the sale of this property will occur, that the sale will not be delayed or that its terms will not change. We have classified this property, which was held for sale prior to our adoption of ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, as a discontinued operation in our condensed consolidated financial statements. Summarized balance sheet and income statement information for the property is as follows:

Balance Sheets:


	March 31,		December 31,
	2016		2015
Real estate properties, net	$	12,260	$	12,260
Rents receivable		17		-
Other assets		225		208
Assets of discontinued operations	$	12,502	$	12,468

Other liabilities	$	75	$	54
Liabilities of discontinued operations	$	75	$	54

Statements of Operations


	Three Months ended March 31,
	2016		2015
Rental income	$	28	$	31
Real estate taxes		(23)		(70)
Utility expenses		(50)		(67)
Other operating expenses		(76)		(71)
General and administrative		(28)		(29)
Loss from discontinued operations	$	(149)	$	(206)