Discontinued Operations and Impairments

3 Months Ended

Mar. 31, 2014

Discontinued Operations and Impairments

Discontinued Operations and Impairments

13. Discontinued Operations and Impairments

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. A provision is made for impairment 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 estimate in this analysis include projected rental rates, estimated holding periods, capital expenditures and property sales capitalization rates. If a property is classified as held for sale, it is carried at the lower of carrying cost or estimated fair value, less estimated cost to sell, and depreciation of the property ceases.

For the first three months of 2014, we recorded total provisions for impairment of $1.7 million on one sold property and three properties classified as held for sale in the following industries: one in the consumer electronics industry, one in the home furnishings industry, and two in the restaurant-casual industry.  These properties were not previously classified as held for sale in financial statements issued prior to the date of adoption of ASU 2014-08; accordingly, the provisions for impairment are included in income from continuing operations on our consolidated statement of income for the three months ended March 31, 2014.

In comparison, for the first three months of 2013, we recorded total provisions for impairment of $456,000 on five sold properties in the following industries: one in the automotive parts industry, two in the child care industry, one in the pet supplies and services industry, and one in the restaurant-casual industry. These provisions for impairment are included in income from discontinued operations on our consolidated statement of income for the three months ended March 31, 2013.

Operations from 11 investment properties were classified as held for sale at March 31, 2014.   We do not depreciate properties that are classified as held for sale.  The results of operations for ten of these properties that have not previously been classified as held for sale are included in income from continuing operations, and the results of operations of the remaining one property that was classified as held for sale as of December 31, 2013 have been reclassified to discontinued operations on our consolidated statement of income for the three months ended March 31, 2014.

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.

The following is a summary of income from discontinued operations on our consolidated statements of income (dollars in thousands):

			Three Months Ended
			March 31,
Income from discontinued operations	2014				2013
Gain on sales of investment properties	$	2,607			$	38,559
Rental revenue	63				2,787
Tenant reimbursements	2				33
Other revenue	8				11
Depreciation and amortization	-				(495		)
Property expenses (including reimbursable)	(101			)	(540		)
Provisions for impairment	-				(456		)
Crest’s income (loss) from discontinued operations	498				(40		)
Income from discontinued operations	$	3,077			$	39,859
Per common share, basic and diluted	$	0.01			$	0.23