Real Estate Facilities

3 Months Ended

Mar. 31, 2014

Real Estate Facilities [Abstract]

Real Estate Facilities

3. Real estate facilities

The activity in real estate facilities for the three months ended March 31, 2014 is as follows (in thousands):

			Buildings and		Accumulated
	Land		Improvements		Depreciation		Total
Balances at December 31, 2013	$	827,092	$	2,346,958	$	(1,035,387)	$	2,138,663
Capital improvements, net		—		10,534		—		10,534
Disposals		—		(1,868)		1,868		—
Depreciation and amortization		—		—		(28,441)		(28,441)
Balances at March 31, 2014	$	827,092	$	2,355,624	$	(1,061,960)	$	2,120,756

The purchase price of acquired properties is recorded to land, buildings and improvements and intangible assets and liabilities associated with in-place leases (including tenant improvements, unamortized lease commissions, value of above-market and below-market leases, acquired in-place lease values, and tenant relationships, if any) based on their respective estimated fair values. Acquisition-related costs are expensed as incurred.

In determining the fair value of the tangible assets of the acquired properties, management considers the value of the properties as if vacant as of the acquisition date. Management must make significant assumptions in determining the value of assets acquired and liabilities assumed. Using different assumptions in the recording of the purchase cost of the acquired properties would affect the timing of recognition of the related revenue and expenses. Amounts recorded to land are derived from comparable sales of land within the same region. Amounts recorded to buildings and improvements, tenant improvements and unamortized lease commissions are based on current market replacement costs and other market information. The amount recorded to acquired in-place leases is determined based on management’s assessment of current market conditions and the estimated lease-up periods for the respective spaces.

On December 20, 2013, the Company acquired Bayshore Commons, an eight-building, 340,000 square foot, office park in San Mateo, California, for $60.5 million. On November 8, 2013, the Company acquired nine multi-tenant flex buildings in the Valwood submarket of Dallas, Texas, aggregating 245,000 square feet for $12.4 million. On October 15, 2013, the Company acquired four multi-tenant flex parks along with a four-acre parcel of land aggregating 559,000 square feet of single-story flex buildings located in Dallas, Texas, for a purchase price of $27.9 million.On July 26, 2013, the Company acquired a 389,000 square foot multi-tenant flex park consisting of 18 single-story buildings located in Dallas, Texas, for a purchase price of $14.8 million.

At the beginningof 2013, the Company reclassified a 125,000 square foot building located in Northern Virginia to land and building held for development as the Company intends to redevelop the property. In conjunction with the reclassification, the Company ceased depreciation of the asset. In July, 2013, the Company entered into a joint venture agreement with a real estate development company to pursue a multifamily development on the property. During the entitlement phase, all costs related to the pre-development will be split evenly between the Company and its joint venture partner. The Company will contribute the property to the joint venture upon completion of the entitlement phase. The asset and capitalized development costs were  $16.8 million and $16.2 million at March 31, 2014 and December 31, 2013, respectively. For the three months ended March 31, 2014, the Company capitalized costs of $628,000 related to this development, of which $224,000  related to capitalized interest costs.