REAL ESTATE ACTIVITIES

Investments in real estate as of September 30, 2014 and December 31, 2013 were comprised of the following:



(in thousands of dollars)	As of September 30, 2014			As of December 31, 2013
Buildings, improvements and construction in progress	$	2,808,363		$	3,049,758
Land, including land held for development	447,102			478,110
Total investments in real estate	3,255,465			3,527,868
Accumulated depreciation	(1,028,846		)	(1,012,746		)
Net investments in real estate	$	2,226,619		$	2,515,122

Capitalization of Costs

The following table summarizes our capitalized salaries, commissions and benefits, real estate taxes and interest for the three and nine months ended September 30, 2014 and 2013:



	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands of dollars)	2014		2013		2014		2013
Development/Redevelopment Activities:
Salaries and benefits	$	201	$	272	$	1,026	$	585
Real estate taxes	4		4		4		4
Interest	201		331		494		620
Leasing Activities:
Salaries, commissions and benefits	1,394		1,180		4,223		3,902

Dispositions

In September 2014, we sold North Hanover Mall in Hanover, Pennsylvania and Nittany Mall in State College, Pennsylvania in a single transaction for a combined sales price of $32.3 million, representing capitalization rates of 11.0% and 16.2% for North Hanover Mall and Nittany Mall, respectively.

On July 29, 2014, we entered into a 50/50 joint venture with The Macerich Company ("Macerich") to redevelop The Gallery at Market East in Philadelphia, Pennsylvania. In connection therewith, we contributed and sold real estate assets to the venture and Macerich acquired its interest in the venture and real estate from us for $106.8 million in cash, representing a capitalization rate of 5.1%. It is expected that both parties will make additional investments in the project. Net proceeds after closing costs from the sale of the interests was $104.0 million. We used $25.8 million of such proceeds to repay a mortgage loan secured by 801 Market Street, Philadelphia, Pennsylvania, a property that is part of The Gallery at Market East, $50.0 million to repay the outstanding balance on our 2013 Revolving Facility, and the remaining proceeds for general corporate purposes. We recorded a loss of $0.6 million from the sale of these interests. We retained a 50% interest in The Gallery at Market East. We account for the retained 50% investment in The Gallery using the equity method of accounting.

In June 2014, we sold South Mall in Allentown, Pennsylvania for $23.6 million, representing a capitalization rate of 10.1%. We recorded a gain of $0.2 million from the sale of this property.

Impairment of Assets

Nittany Mall

In 2014, we recorded an aggregate loss on impairment of assets at Nittany Mall in State College, Pennsylvania of $15.5 million. During the three months ended June 30, 2014, we recorded a loss on impairment of assets of $13.9 million when we entered into negotiations with the buyer of the property. During the third quarter of 2014, we recorded an additional $1.6 million loss on impairment of assets following further negotiations with the buyer of the property. As a result of these negotiations, we determined that the holding period for the property was less than had been previously estimated, which we concluded was a triggering event, leading us to conduct an analysis of possible asset impairment at this property. Based upon the purchase and sale agreement with the prospective buyer of the property, we determined that the estimated undiscounted cash flows, net of estimated capital expenditures, for Nittany Mall were less than the carrying value of the property, and recorded both the initial loss on impairment of assets and the subsequent additional loss on impairment of assets.

North Hanover Mall

In 2014, we recorded an aggregate loss on impairment of assets at North Hanover Mall in Hanover, Pennsylvania of $2.9 million. During the three months ended June 30, 2014, we recorded a loss on impairment of assets of $2.2 million when we entered into negotiations with the buyer of the property. During the third quarter of 2014, we recorded an additional $0.7 million loss on impairment of assets following further negotiations with the buyer of the property. As a result of these negotiations, we determined that the holding period for the property was less than had been previously estimated, which we concluded was a triggering event, leading us to conduct an analysis of possible asset impairment at this property. Based upon the purchase and sale agreement with the prospective buyer of the property, we determined that the estimated undiscounted cash flows, net of estimated capital expenditures, for North Hanover were less than the carrying value of the property, and recorded both the initial loss on impairment of assets and the subsequent additional loss on impairment of assets. We previously recognized losses on impairment of assets on North Hanover of $6.3 million in 2013 and $24.1 million in 2011.

South Mall

In March 2014, we recorded a loss on impairment of assets at South Mall in Allentown, Pennsylvania of $1.3 million. We sold the property in June 2014. During the three months ended March 31, 2014, we entered into negotiations with a potential buyer of the property, and as a result of these negotiations, we determined that the holding period for the property was less than had been previously estimated, which we concluded was a triggering event, leading us to conduct an analysis of possible asset impairment at this property. Using updated assumptions, we determined that the estimated undiscounted cash flows, net of estimated capital expenditures, for South Mall were less than the carrying value of the property, and recorded the loss on impairment of assets.

Discontinued Operations

We have presented as discontinued operations the operating results of Phillipsburg Mall, Orlando Fashion Square, Chambersburg Mall, Paxton Towne Centre, Christiana Center and Commons at Magnolia, which are properties that were sold in 2013. The following table summarizes revenue and expense information for the three and nine months ended September 30, 2013 for these discontinued operations (there were no properties classified in discontinued operations in the three or nine months ended September 30, 2014):



	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands of dollars)		2013				2013
Real estate revenue		$	2,491			$	9,379
Expenses:
Operating expenses		(1,109		)		(3,989		)
Depreciation and amortization		(345		)		(1,074		)
Interest expense		(494		)		(1,753		)
Total expenses		(1,948		)		(6,816		)
Operating results from discontinued operations		543				2,563
Impairment of assets of discontinued operations		(23,662		)		(23,662		)
Gains on sales of discontinued operations		45,097				78,351
Income from discontinued operations		$	21,978			$	57,252