Note 2 - Operating Property Activities

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Business Combination Disclosure [Text Block]

2.

Operating Property Activities

Acquisitions of Operating Real Estate -

During the nine months ended September 30, 2016, the Company acquired the following properties, in separate transactions (in thousands):

			Purchase Price
Property Name	Location	Month Acquired	Cash *		Debt Assumed		Other **		Total		GLA* **
Jericho Atrium	Jericho, NY	Apr-16	$	29,750	$	-	$	-	$	29,750		147
Oakwood Plaza	Hollywood, FL (1)	Apr-16		53,412		100,000		61,588		215,000		899
Webster Square North	Nashua, NH	Jul-16		8,200		-		-		8,200		21
Gateway Plaza	Mill Creek, WA (1)	Jul-16		493		17,500		-		17,993		97
Kentlands Market Square	Gaithersburg, MD	Aug-16		61,826		33,174		-		95,000		221
GEPT Portfolio (4 properties)	Various (1)	Sep-16		79,974		76,989		10,882		167,845		681
			$	233,655	$	227,663	$	72,470	$	533,788		2,066

* The Company utilized $66.0 million associated with Internal Revenue Code §1031 sales proceeds.

** Includes the Company’s previously held equity interest investment.

*** Gross leasable area ("GLA")

(1) The Company acquired from its partners their ownership interest in these properties that were held in joint ventures in which the Company had noncontrolling interests. The Company evaluated these transactions pursuant to the FASB’s Consolidation guidance and as a result, recognized gains on change in control of interests resulting from the fair value adjustments associated with the Company’s previously held equity interests, which are included in the purchase price above in Other. The Company’s previous ownership interests and gains on change in control of interests recognized as a result of these transactions are as follows (in millions):

Property Name	Previous Ownership Interest			Gain on change in control of interests, net
Oakwood Plaza		55.0	%	$	46.5
Gateway Plaza		15.0	%		-
GEPT Portfolio (4 properties)		15.0	%		6.6
				$	53.1

The purchase price for these acquisitions has been preliminarily allocated to real estate and related intangible assets acquired and liabilities assumed, as applicable, in accordance with our accounting policies for business combinations. The purchase price allocations and related accounting will be finalized upon completion of the Company’s valuation studies. Accordingly, the fair values allocated to these assets and liabilities are subject to revision. The Company records allocation adjustments, where applicable, when purchase price allocations are finalized. The preliminary allocations, allocation adjustments and revised allocations for properties acquired during the nine months ended September 30, 2016, are as follows (in thousands):

	Preliminary  Allocation			Allocation  Adjustments (1)			Revised Allocation a s of September 30, 2016
Land	$	144,368		$	(10,056	)	$	134,312
Buildings		257,967			40,123			298,090
Above market leases		10,005			(2,254	)		7,751
Below market leases		(26,399	)		(2,705	)		(29,104	)
In-place leases		37,145			(1,490	)		35,655
Building improvements		102,853			(21,200	)		81,653
Tenant improvements		10,758			(1,724	)		9,034
Mortgage fair value adjustment		(3,143	)		(694	)		(3,837	)
Other assets		234			-			234
Net assets acquired	$	533,788		$	-		$	533,788

(1) In accordance with ASU 2015-16, which eliminated the requirement to restate prior period financial statements for measurement period adjustments relating to purchase price allocations, the Company adjusted the preliminary allocation amounts recorded for properties acquired during 2016. The impact of these allocation adjustments on the Company’s tangible and intangible assets and liabilities are reflected in the table above.

The pro forma financial information set forth below is based upon the Company’s historical Condensed Consolidated Statements of Operations for the nine months ended September 30, 2016 and 2015, adjusted to give effect to properties acquired during the nine months ended September 30, 2016 and 2015, as if they were acquired at the beginning of 2015 and 2014, respectively. The pro forma financial information is presented for informational purposes only and may not be indicative of what actual results of income would have been, nor does it purport to represent the results of income for future periods. (Amounts presented in millions, except per share figures). 

	Nine Months Ended September 30,
	201 6		201 5
Revenues from rental property	$	878.2	$	886.5
Net income	$	313.0	$	538.2
Net income available to the Company’s common shareholders	$	273.5	$	488.0
Net income available to the Company’s common shareholders per common share:
Basic	$	0.65	$	1.19
Diluted	$	0.65	$	1.18

Revenues from rental properties and net income in the Company’s Condensed Consolidated Statements of Operations includes $12.1 million and $1.8 million of revenues and net income, respectively, from properties acquired during the nine months ended September 30, 2016.

Dispositions

and Assets Held for Sale

–

During the nine months ended September 30, 2016, the Company disposed of 26 consolidated operating properties and one out-parcel, in separate transactions, for an aggregate sales price of $334.9 million. These transactions resulted in (i) an aggregate gain of $75.9 million, after income tax expense, and (ii) aggregate impairment charges of $7.8 million, before noncontrolling interest expense of $0.2 million.

At September 30, 2016, the Company had three properties classified as held-for-sale at a carrying amount of $13.4 million, net of accumulated depreciation of $11.8 million, which are included in Other assets on the Company’s Condensed Consolidated Balance Sheets. The Company’s determination of the fair value of the properties was based upon executed contracts of sale with third parties. The book value of one of these properties exceeded its estimated fair value, less costs to sell, and as such an impairment charge of $4.7 million was recognized.

Impairments

–

During the nine months ended September 30, 2016, the Company recognized aggregate impairment charges of $68.1 million. These impairment charges consist of (i) $50.7 million related to certain properties maintained in the Company’s TRS for which the hold period was re-evaluated in connection with the Merger (see Footnote 15), (ii) $7.8 million related to the sale of certain operating properties, as discussed above, (iii) $4.9 million related to adjustments to property carrying values for which the Company has marketed for sale as part of its active capital recycling program and as such has adjusted the anticipated hold periods for such properties and (iv) $4.7 million related to one property classified as held-for-sale for which the book value exceeded its estimated fair value, as discussed above. The Company’s estimated fair values for these properties were based on third party offers through signed contracts, third party appraisals or discounted cash flow models. (See Footnote 10 for fair value disclosure).