Note 5 – Property and Equipment

Operating Property, net

As of September 30, 2015 and December 31, 2014, property associated with our operating activities is summarized as follows:


	September 30,		December 31,
(Dollars in thousands)	2015		2014
Land	$	57,365	$	62,024
Building and improvements		104,050		120,913
Leasehold interests		45,675		46,813
Fixtures and equipment		98,249		107,286
Construction-in-progress (including capitalized interest)		12,188		4,681
Total cost		317,527		341,717
Less: accumulated depreciation		(147,268)		(154,828)
Operating property, net	$	170,259	$	186,889

Depreciation expense for operating property was $3.3 million and $10.1 million for the quarter and nine months ended September 30, 2015 and $3.7 million and $10.7 million for the quarter and nine months ended September 30, 2014.

Operating Property – Taupo, New Zealand

On April 1, 2015, we entered into two definitive purchase and sale agreements to sell our properties at Taupo, New Zealand for a combined sales price of $2.3 million (NZ$3.4 million). The first agreement relates to a property with a sales price of $1.49 million (NZ$2.2 million) and a book value of $1.3 million (NZ$1.8 million), which closed on April 30, 2015 when we received the sales price in full. The other agreement relates to a property with a sales price of $767,000 (NZ$1.2 million) and a book value of $393,000 (NZ$615,000) with a closing date of March 31, 2016. This property is classified as held for sale as of September 30, 2015. While both transactions were treated as current sales for tax purposes, only the first transaction qualifies as a sale under U.S. GAAP.

Operating Property – Moonee Ponds, Australia

On October 15, 2013, we entered into a definitive purchase and sale agreement to sell this property for a sales price of $17.5 million (A$ 23.0 million) payable in full upon closing of the transaction on April 16, 2015. In accordance with the requirements under U.S. GAAP, we recognized a profit of $8.0 million (A$ 10.3 million) in the second quarter of 2015 upon the receipt of sale proceeds on April 16, 2015.

Operating Property – Burwood, Australia

On May 12, 2014, we entered into a contract to sell our undeveloped 50.6 acre parcel in Burwood, Victoria, Australia, to an affiliate of Australand Holdings Limited (now known as Frasers Property Australia) for a purchase price of $47.0 million (A$65.0 million).

We received $5.9 million (A$6.5 million) on May 23, 2014. The remaining purchase price of $41.1 million (A$58.5 million) is due on December 31, 2017. The agreement provides for mandatory pre-payments in the event that any of the land is sold by the buyer, any such prepayment being in an amount equal to the greater of (a) 90% of the net sales price or (b) the balance of the purchase price multiplied by a fraction the numerator of which is the square footage of property being sold by the buyer and the denominator of which is the original square footage of the property being sold to the buyer. The agreement does not provide for the payment of interest on the balance owed.

Our book value in the property is $36.6 million (A$52.1 million) and while the transaction was treated as a current sale for tax purposes in 2014, it does not qualify as a sale under U.S. GAAP until the receipt of the payment of the balance of the purchase price due on December 31, 2017 (or earlier depending upon whether any prepayment obligation is triggered). The asset is classified as long-term land held for sale on the Consolidated Balance Sheet as of September 30, 2015.

Investment and Development Property

As of September 30, 2015 and December 31, 2014, our investment and development property is summarized below:


	September 30,		December 31,
(Dollars in thousands)	2015		2014
Land	$	20,329	$	23,833
Construction-in-progress (including capitalized interest)		1,464		2,291
Investment and development property	$	21,793	$	26,124