Net Gain (Loss) on Disposition of Full or Partial Interest in Rental Properties

The net gain (loss) on disposition of full or partial interest in rental properties is comprised of the following:



	Three Months Ended September 30,					Nine Months Ended September 30,
	2014			2013		2014			2013
	(in thousands)
Stapleton - 3055 Roslyn (Office Building)	$	(146	)	$	—	$	(146	)	$	—
QIC Joint Venture	—			381,627		(467		)	381,627
New York Retail Joint Venture	—			4,932		—			4,932
	$	(146	)	$	386,559	$	(613	)	$	386,559

As discussed in Note A – Accounting Policies, the Company adopted new discontinued operations accounting guidance effective April 1, 2014. As a result, the sale of Stapleton - 3055 Roslyn, a fully consolidated office building in Denver, Colorado, during the three months ended September 30, 2014 did not qualify for discontinued operations. The loss on the sale of this property is included in net gain (loss) on disposition of full or partial interest in rental properties for the three and nine months ended September 30, 2014. Prior to the three months ended September 30, 2014, full disposals of consolidated real estate assets qualified for and were recorded as discontinued operations and accordingly, were excluded from this financial statement line item.

QIC Joint Venture

In September 2013, the Company entered into joint venture agreements with outside partners, affiliated entities of QIC, one of the largest institutional investment managers in Australia. The outside partners invested in and received 49% of the Company’s equity interests in seven regional retail malls.

For its 49% equity interests, the outside partner invested cash and assumed debt of $448,900,000, representing 49% of the nonrecourse mortgage debt on the seven properties. As of September 30, 2013, the Company received approximately $412,300,000 of proceeds, net of transaction costs, of which approximately $188,200,000 represented cash, with the remainder being in the form of a loan. Based on the amount of cash received, the outside partners’ minimum initial investment requirement was met and the transaction qualified for full gain recognition. As such, the Company recognized a net gain on disposition of partial interest in rental properties of $381,627,000 during the three and nine months ended September 30, 2013. The seven properties are adequately capitalized and do not contain the characteristics of a VIE. Based on this and the substantive participating rights held by the outside partners with regards to the properties, the Company concluded it appropriate to deconsolidate the entities and account for them under the equity method of accounting. During the three months ended September 30, 2013 and prior to admitting the outside party into the joint ventures, the Company acquired noncontrolling interests in two of the regional retail malls for approximately $92,400,000, which has been reflected in the Consolidated Statement of Equity.

New York Retail Joint Venture

In March 2011, the Company entered into joint venture agreements with an outside partner, an affiliated entity of Madison International Realty LLC. The outside partner invested in and received a 49% equity interest in 15 mature retail properties located in the Greater New York City metropolitan area.

For its 49% equity interests, the outside partner invested cash and assumed debt of $244,952,000, representing 49% of the nonrecourse mortgage debt on the 15 properties. As of January 31, 2012, the Company received proceeds of $178,286,000, primarily in the form of a loan. Based on the net amount of cash received, the outside partner’s minimum initial investment requirement of 20% was not met. Since the transaction did not qualify for full gain recognition, the installment method of gain recognition was applied and a net gain on disposition of partial interest in rental properties of $9,561,000 was recorded during the year ended January 31, 2012. As of January 31, 2013, the remaining gain of $114,465,000 continued to be deferred and was included in accounts payable, accrued expenses and other liabilities.

During the three months ended September 30, 2013, the Company used distribution proceeds from the joint ventures to pay down a portion of the loan, which increases the net cash received for purposes of measuring whether full gain recognition is appropriate. However, the outside partner’s investment requirement was still not met and the installment method of gain recognition was continued to be applied, resulting in an additional net gain on disposition of partial interest in rental properties of $4,932,000 during the three and nine months ended September 30, 2013. The remaining $109,533,000 of gain, which continued to be deferred at September 30, 2013, was recognized during the three months ended December 31, 2013.