Discontinued Operations

6 Months Ended

Jun. 30, 2011

Discontinued Operations (Tables) [Abstract]

Discontinued Operations

10.        Discontinued Operations

We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment is recorded if estimated future operating cash flows (undiscounted and without interest charges) plus estimated disposition proceeds (undiscounted) are less than the current book value of the property. Key factors that we use in this analysis include: projected rental rates, capital expenditures and property sales capitalization rates. Additionally, a property classified as held for sale is carried at the lower of carrying cost or estimated fair value, less estimated cost to sell.

For the second quarter of 2011, Realty Income recorded a provision for impairment of $10,000 on one property, which was classified as held for sale at June 30, 2011. For the second quarter of 2010, Realty Income recorded a provision for impairment of $53,000 on one property, which was sold in the second quarter of 2010.

For the first six months of 2011, provisions for impairment of $210,000 were recorded by Realty Income on three properties, one of which was sold in March and two of which are classified as held for sale at June 30, 2011. For the first six months of 2010, provisions for impairment of $87,000 were recorded by Realty Income on two properties, both of which were sold in the second quarter of 2010. For the first six months of 2011 and 2010, no provisions for impairment were recorded by Crest.

Operations from ten investment properties classified as held for sale at June 30, 2011, plus properties sold in 2011 and 2010 are reported as discontinued operations. Their respective results of operations have been reclassified as "income from discontinued operations, real estate held for investment" on our consolidated statements of income. We do not depreciate properties that are classified as held for sale.

No debt was assumed by buyers of our investment properties, or repaid as a result of our investment property sales, and we do not allocate interest expense to discontinued operations related to real estate held for investment. We allocate interest expense related to borrowings specifically attributable to Crest. The interest expense amounts allocated to Crest are included in "income from discontinued operations, real estate acquired for resale by Crest" on our consolidated statements of income.

The following is a summary of Crest's "income from discontinued operations, real estate acquired for resale by Crest" on our consolidated statements of income (dollars in thousands):

	Three months ended						Six months ended
Crest's income from discontinued operations, real estate acquired for resale	June 30,  2011			June 30,  2010			June 30,  2011			June 30,  2010
Interest revenue	$	346		$	351		$	694			701
Interest expense		(198	)		(135	)		(399	)		(263	)
General and administrative expense		(12	)		(87	)		(25	)		(184	)
Property expenses		(4	)		(2	)		(7	)		(6	)
Income tax benefit		88			111			179			201
Income from discontinued operations, real estate acquired for resale by Crest	$	220		$	238		$	442		$	449

The following is a summary of Realty Income's "income from discontinued operations, from real estate held for investment" on our consolidated statements of income (dollars in thousands):

	Three months ended						Six months ended
Realty Income's income from discontinued operations, real estate held for investment	June 30, 2011			June 30, 2010			June 30, 2011			June 30, 2010
Gain on sales of investment properties	$	1,096		$	1,663		$	1,224		$	2,366
Rental revenue		112			684			338			1,564
Other revenue		7			7			28			17
Depreciation and amortization		(58	)		(258	)		(161	)		(556	)
Property expenses		(86	)		(194	)		(195	)		(625	)
Provisions for impairment		(10	)		(53	)		(210	)		(87	)
Income from discontinued operations, real estate held for investment	$	1,061		$	1,849		$	1,024		$	2,679

The following is a summary of our total income from discontinued operations (dollars in thousands, except per share data):

	Three months ended				Six months ended
Total discontinued operations	June 30, 2011		June 30, 2010		June 30, 2011		June 30, 2010
Real estate acquired for resale by Crest	$	220	$	238	$	442	$	449
Real estate held for investment		1,061		1,849		1,024		2,679
Income from discontinued operations	$	1,281	$	2,087	$	1,466	$	3,128
Per common share, basic and diluted	$	0.01	$	0.02	$	0.01	$	0.03

The per share amounts for "income from discontinued operations" above and the "income from continuing operations" and "net income" reported on the consolidated statements of income have each been calculated independently.