Note 5 – Property and Equipment

Operating Property, net

As of June 30, 2016 and December 31, 2015, property associated with our operating activities is summarized as follows:


	June 30,		December 31,
(Dollars in thousands)	2016		2015
Land	$	75,517	$	70,063
Building and improvements		131,033		126,622
Leasehold improvements		46,999		46,874
Fixtures and equipment		113,326		112,423
Construction-in-progress		13,381		7,825
Total cost		380,256		363,807
Less: accumulated depreciation		(160,261)		(153,509)
Operating property, net	$	219,995	$	210,298

Depreciation expense for operating property was $3.5 million and $7.1 million for the quarter and six months ended June 30, 2016, respectively, and $3.3 million and $6.8 million for the quarter and six months ended June 30, 2015, respectively.

New Corporate Headquarters in Los Angeles

On April 11, 2016, we purchased a 24,000 square foot Class B office building with 72 parking spaces located at 5995 Sepulveda Boulevard in Culver City, California (a Los Angeles suburb) for $11.2 million. We intend to use approximately 50% of the leasable area for our headquarters offices and to lease the remainder to unaffiliated third parties. We anticipate, when the move is completed at the end of 2016 and the excess space is leased, that we will be able to reduce our headquarters occupancy cost by approximately $350,000 per annum. We are in the process of obtaining a mortgage on this building.

Burwood, Australia

On May 12, 2014, we entered into a contract to sell our undeveloped 50.6 acre parcel in Burwood, Victoria, Australia, to Australand Holdings Limited (now known as Frasers Property Australia) for a purchase price of $49.4 million (AU$65.0 million). We received $5.9 million (AU$6.5 million) on May 23, 2014. The remaining purchase price of $43.5 million (AU$58.5 million) is due on December 31, 2017.

Our book value in the property is $38.7 million (AU$52.1 million) and $38.0 (AU$52.1 million) as of June 30, 2016 and December 31, 2015, respectively. While the transaction was treated as a sale for tax purposes in 2014, it does not qualify as a sale under US 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 sheets as of June 30, 2016 and December 31, 2015.

Doheny Condo, Los Angeles

On February 25, 2015, we sold our Los Angeles Condo for $3.0 million resulting in a $2.8 million gain on sale.

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 related to a property with a sales price of $1.6 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 related to a property with a sales price of $831,000 (NZ$1.2 million) and a book value of $426,000 (NZ$615,000) which was completed and for which we received cash settlement representing the full sales price on March 31, 2016. The first transaction qualified as a sale under both U.S. GAAP and tax purposes during the year-ended December 31, 2015. The second transaction was recorded as a sale during the three months ended March 31, 2016.

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 (AU$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 gain on sale of $8.0 million (AU$10.3 million) in the prior-year quarter upon the receipt of sale proceeds on April 16, 2015.

Cannon Park, Queensland, Australia

On December 23, 2015, we completed a 100% acquisition of two adjoining entertainment-themed centers (“ETCs”) in Townsville, Australia for a total of $24.3 million (AU$33.6 million) in cash. The properties are located approximately 6 miles from downtown Townsville, the second largest city in Queensland, Australia. The total gross leasable area of the two adjoining properties, the Cannon Park City Centre and the Cannon Park Discount Centre, is 133,000 square feet. The Cannon Park City Centre is anchored by Reading Cinemas, which is operated by Reading International’s 75% owned subsidiary, Australia Country Cinemas, and has three mini-major tenants and ten specialty family oriented restaurant tenants. The Cannon Park Discount Centre is anchored by Kingpin Bowling and supported by four other retailers. This acquisition is consistent with our business plan to own, where practical, the land underlying our entertainment assets.

The acquired assets consist primarily of the land and buildings, which is approximately 98% leased to existing tenants. Tenancies range from having 9 months to 8 years left to run on their leases at the time of purchase.

The total purchase price was allocated to the identifiable assets acquired based on our preliminary estimates of their fair values on the acquisition date. There were no liabilities assumed. As of June 30, 2016, the Company is still finalizing its allocation and this may result in potential adjustments within the 1-year measurement period from acquisition date. The determination of the fair values of the acquired assets (and the related determination of their estimated lives) requires significant judgment. There was no goodwill recorded, as the purchase price did not exceed the fair value estimates of the net acquired assets.

Our preliminary purchase price allocation is as follows:


(Dollars in thousands)	US Dollars		AU dollars
Prepaid assets	$	28	$	38
Operating property:
Land		7,609		10,500
Building		16,712		23,060
Total purchase price	$	24,349	$	33,598

Investment and Development Property

As of June 30, 2016 and December 31, 2015, our investment and development property is summarized below:


	June 30,		December 31,
(Dollars in thousands)	2016		2015
Land	$	24,341	$	21,434
Building		1,899		-
Construction-in-progress		8,620		1,568
Investment and development property	$	34,860	$	23,002