Net Gain on Change in Control of Interests

9 Months Ended

Sep. 30, 2015

Net Gain on Change in Control of Interests [Abstract]

Net Gain on Change in Control of Interests

Net Gain on Change in Control of Interests

The following table summarizes the net gain on change in control of interests:

		Three Months Ended September 30,				Nine Months Ended September 30,
		2015		2014		2015		2014
		(in thousands)
University Park at MIT	Cambridge, Massachusetts	$	—	$	—	$	463,643	$	—
Apartment Communities:
Cherry Tree	Strongsville, Ohio	—		—		7,391		—
Chestnut Lake	Strongsville, Ohio	—		—		8,525		—
Stratford Crossing	Wadsworth, Ohio	—		—		8,125		—
Other		—		—		—		2,759
Total		$	—	$	—	$	487,684	$	2,759

Apartment Communities

In April 2015, the Company acquired its partner’s 50% equity ownership interest in three operating apartment communities (Cherry Tree,Chestnut Lake and Stratford Crossing) in exchange for the Company’s 50% equity ownership in five operating apartment communities (Arbor Glen, Eaton Ridge, Newport Landing, Parkwood Village and Sutton Landing) in a non-cash transaction. Subsequent to the transaction, the Company owns 100% of the three retained operating apartment communities. See Note P – Net Gain on Disposition of Interest in Unconsolidated Entities for detailed information on the net gain on disposition of interest in unconsolidated entities related to the five operating apartment communities exchanged.

University Park at MIT

In June 2015, the Company completed the share purchase and redemption agreement with its partner to acquire the partner’s 49% equity ownership interest in seven life science office properties and two parking facilities at University Park at MIT, a mixed-use life science office campus in Cambridge, Massachusetts (“MIT Assets”). The Company used $386,156,000 of the net proceeds from the May 2015 equity offering to finance this acquisition. See Note G – Capital Stock for information on the equity offering.

Prior to the acquisition, the Company owned 51% and had accounted for the MIT Assets using the equity method of accounting. Subsequent to the transaction, the Company owns 100% of the MIT Assets and has concluded it appropriate to consolidate the assets. As a result, the Company remeasured its equity interests, as required by the accounting guidance, at fair value (based upon the income approach using current rents and market cap rates and discount rates) and recorded a net gain on change in control of interests as noted above.

The fair value of the acquisition was allocated as follows. All amounts are presented in thousands.

Real Estate, net	$	1,121,786
Restricted cash	17,235
Notes and accounts receivable, net	1,801
Other assets (1)	103,804
	1,244,626
Mortgage debt and notes payable, nonrecourse	(363,147		)
Accounts payable, accrued expenses and other liabilities (2)	(94,214		)
Net Assets Acquired	$	787,265

Net gain on change in control of interests	$	463,643
Carrying value of previously held equity interests	(62,534		)
Fair value of previously held equity interests (3)	401,109
Cash paid	386,156
Total	$	787,265

(1) Primarily consists of $78,000 of in-place leases and $20,000 of below-market ground leases with weighted-average lives at the time of acquisition of 3.6 years and 60 years, respectively.

(2) Primarily consists of $49,000 of below-market tenant leases and $24,000 of above-market ground leases with weighted-average lives at the time of acquisition of 3.6 years and 58 years, respectively.

(3) The significant assumptions used to value the previously held equity interests in the MIT Assets were determined to be Level 3 inputs. The weighted-average discount rate applied to cash flows and the weighted-average terminal capitalization rate were 7.0% and 6.0%, respectively.

Pro Forma Information

The following unaudited supplemental pro forma operating data is presented for the nine months ended September 30, 2015 and 2014, as if the step acquisition related to the MIT Assets was effective January 1, 2014. The gain on change in control of interests related to this acquisition was adjusted to the assumed acquisition date. The unaudited supplemental pro forma operating data is not necessarily indicative of what the Company’s actual results of operations would have been assuming the transactions had been effective as set forth above, nor do they purport to represent the Company’s results of operations for future periods. The qualitative and quantitative effect to the pro forma operating data related to the remaining acquisitions described in the table above was not material.

				Pro Forma Adjustments
	Nine Months Ended September 30, 2015			Remove: Net Gain on Change in Control  of Interests (1)			Other Pro Forma Adjustments (2)			Pro Forma Nine Months  Ended September 30, 2015
	(in thousands, except share and per share data)
Revenues	$	785,898		$	—		$	43,742		$	829,640
Loss from continuing operations	$	(57,038	)	$	(283,828	)	$	(15,211	)	$	(356,077	)
Net loss attributable to common shareholders	$	(52,672	)	$	(283,828	)	$	(15,211	)	$	(351,711	)
Weighted average shares outstanding - Basic	230,778,223									230,778,223
Net loss attributable to common shareholders - Basic	$	(0.23	)							$	(1.52	)
Weighted average shares outstanding - Diluted	230,778,223									230,778,223
Net loss attributable to common shareholders - Diluted	$	(0.23	)							$	(1.52	)

				Pro Forma Adjustments
	Nine Months Ended September 30, 2014			Add: Net Gain on Change in Control  of Interests (1)		Other Pro Forma Adjustments (2)			Pro Forma Nine Months  Ended September 30, 2014
	(in thousands, except share and per share data)
Revenues	$	713,917		$	—	$	67,482		$	781,399
Earnings (loss) from continuing operations	$	(100,526	)	$	283,828	$	(26,153	)	$	157,149
Net earnings (loss) attributable to common shareholders	$	(76,786	)	$	283,828	$	(26,153	)	$	180,889
Weighted average shares outstanding - Basic	198,328,900								198,328,900
Net earnings (loss) attributable to common shareholders - Basic	$	(0.39	)						$	0.89
Weighted average shares outstanding - Diluted	198,328,900								231,151,937
Net earnings (loss) attributable to common shareholders - Diluted	$	(0.39	)						$	0.82

(1) Gain on change in control of interests of $463,643, net of tax of $179,815.

(2) Represents additional depreciation and amortization expense related to the increased basis of real estate and intangible assets, plus pro forma earnings of the 100% ownership interests, less actual equity in earnings related to the Company’s 51% prior ownership for the periods presented.