4. Real Estate and Lease Intangibles

The following table summarizes the carrying amounts for the Company’s investment in real estate (at cost) as of December 31, 2017 and 2016 (amounts in thousands):

	2017			2016
Land	$	5,996,024		$	5,899,862
Depreciable property:
Buildings and improvements		17,743,042			16,913,430
Furniture, fixtures and equipment		1,548,961			1,346,300
In-Place lease intangibles		476,359			470,849
Projects under development:
Land		43,226			115,876
Construction-in-progress		120,321			521,292
Land held for development:
Land		62,538			84,440
Construction-in-progress		36,425			34,376
Investment in real estate		26,026,896			25,386,425
Accumulated depreciation		(6,040,378	)		(5,360,389	)
Investment in real estate, net	$	19,986,518		$	20,026,036

The following table summarizes the carrying amounts for the Company’s above and below market ground and retail lease intangibles as of December 31, 2017 and 2016 (amounts in thousands):

Description	Balance Sheet Location	2017			2016
Assets
Ground lease intangibles – below market	Other Assets	$	191,918		$	178,251
Retail lease intangibles – above market	Other Assets		1,260			1,260
Lease intangible assets			193,178			179,511
Accumulated amortization			(22,434	)		(17,972	)
Lease intangible assets, net		$	170,744		$	161,539

Liabilities
Ground lease intangibles – above market	Other Liabilities	$	2,400		$	2,400
Retail lease intangibles – below market	Other Liabilities		5,270			5,270
Lease intangible liabilities			7,670			7,670
Accumulated amortization			(5,143	)		(4,509	)
Lease intangible liabilities, net		$	2,527		$	3,161

The following table provides a summary of the effect of the amortization for above and below market ground and retail lease intangibles on the Company’s accompanying consolidated statements of operations and comprehensive income for the years ended December 31, 2017, 2016 and 2015 (amounts in thousands):

Description	Income Statement Location	2017			2016			2015
Ground lease intangible amortization	Property and Maintenance	$	(4,369	)	$	(4,321	)	$	(4,321	)
Retail lease intangible amortization	Rental Income		541			895			939
Total amortization of above/below market lease intangibles		$	(3,828	)	$	(3,426	)	$	(3,382	)

The following table provides a summary of the aggregate amortization for above and below market ground and retail lease intangibles for each of the next five years (amounts in thousands):

	2018			2019			2020			2021			2022
Ground lease intangibles	$	(4,463	)	$	(4,463	)	$	(4,463	)	$	(4,463	)	$	(4,463	)
Retail lease intangibles	71				71			71			71			27
Total	$	(4,392	)	$	(4,392	)	$	(4,392	)	$	(4,392	)	$	(4,436	)

Acquisitions and Dispositions

During the year ended December 31, 2017, the Company acquired the entire equity interest in the following from unaffiliated parties (purchase price in thousands):

	Properties		Apartment Units		Purchase Price
Rental Properties – Consolidated (1)		4		947	$	468,050
Total		4		947	$	468,050

(1)

Purchase price includes an allocation of approximately $68.3 million to land, $386.2 million to depreciable property (inclusive of capitalized closing costs) and $13.7 million to ground lease intangible (included in other assets). For one of the property acquisitions, the Company owns the building and improvements and leases the land underlying the improvements under a long-term ground lease that expires in 2113. This property is consolidated and reflected as a real estate asset while the ground lease is accounted for as an operating lease.

During the year ended December 31, 2016, the Company acquired the entire equity interest in the following from unaffiliated parties (purchase price in thousands):

	Properties		Apartment Units		Purchase Price
Rental Properties – Consolidated (1)		4		573	$	249,334
Total		4		573	$	249,334

(1)

Purchase price includes an allocation of approximately $98.0 million to land and $151.3 million to depreciable property.

During the year ended December 31, 2017, the Company disposed of the following to unaffiliated parties (sales price in thousands):

	Properties		Apartment Units		Sales Price
Rental Properties – Consolidated		5		1,194	$	354,950
Land Parcels (one)		—		—		33,450
Total		5		1,194	$	388,400

The Company recognized a net gain on sales of real estate properties of approximately $157.1 million and a net gain on sales of land parcels of approximately $19.2 million on the above sales.

During the year ended December 31, 2016, the Company disposed of the following to unaffiliated parties (sales price in thousands):

	Properties		Apartment Units		Sales Price
Consolidated:
Rental Properties (1)		98		29,440	$	6,811,503
Land Parcels		—		—		57,455
Unconsolidated:
Rental Properties (2)		1		336		74,500
Total		99		29,776	$	6,943,458

(1)

Includes the Starwood Portfolio sale (see further discussion below) representing 72 operating properties consisting of 23,262 apartment units for $5.365 billion.

(2)

The Company owned a 20% interest in this unconsolidated rental property. Sale price listed is the gross sale price. The Company’s share of the net sales proceeds approximated $12.4 million.

The Company recognized a net gain on sales of real estate properties of approximately $4.0 billion (inclusive of $3.2 billion on the Starwood Portfolio sale), a net gain on sales of land parcels of approximately $15.7 million and a net gain on sales of unconsolidated entities (included in income (loss) from investments in unconsolidated entities in the consolidated statements of operations and comprehensive income) of approximately $8.9 million on the above sales.

Starwood Disposition

The Company executed an agreement with controlled affiliates of Starwood Capital Group (“Starwood”) on October 23, 2015 to sell a portfolio of 72 operating properties consisting of 23,262 apartment units located in five markets across the United States for $5.365 billion (the “Starwood Transaction” or “Starwood Portfolio”). The Starwood Portfolio included substantially all of the assets in the Company’s South Florida and Denver markets and certain suburban assets in the Washington D.C., Seattle and Los Angeles markets. On January 26 and 27, 2016, the Company closed on the sale of the entire portfolio described above.

The following table provides the operating segments/locations of the properties and apartment units sold in the Starwood Transaction. The sale of these properties represents the continuation of the Company’s long-term strategy of investing in the urban and high-density suburban areas of its coastal gateway markets. See Note 11 for further discussion.

Markets/Metro Areas	Properties		Apartment Units
South Florida		33		10,742
Denver		18		6,635
Washington D.C.		10		3,020
Seattle		8		1,721
Los Angeles		3		1,144
Total		72		23,262

The Company used proceeds from the Starwood Transaction and other 2016 sales discussed above to pay special dividends of $8.00 per share/unit (approximately $3.0 billion) on March 10, 2016 and $3.00 per share/unit (approximately $1.1 billion) on October 14, 2016. The Company used the majority of the remaining proceeds to reduce aggregate indebtedness in order to make the transaction leverage neutral. See Note 8 for further discussion.

Impairment

During the year ended December 31, 2017, the Company recorded an approximate $1.7 million non-cash asset impairment charge on a land parcel currently being marketed for sale, which is included in land held for development on the consolidated balance sheets and included in the non-same store/other segment discussed in Note 17. The charge was the result of an analysis of the parcel’s estimated fair value (determined using internally developed models based on market assumptions and potential sales data from the marketing process) compared to its current capitalized carrying value. The parcel now has a carrying value of $0.2 million.

Other

In December 2011, the Company and Toll Brothers (NYSE: TOL) jointly acquired a vacant land parcel at 400 Park Avenue South in New York City. The Company’s and Toll Brothers’ allocated portions of the purchase price were approximately $76.1 million and $57.9 million, respectively. The acquisition was financed through contributions by the Company and Toll Brothers of approximately $102.5 million and $75.7 million, respectively, which included the land purchase noted above, restricted deposits and taxes and fees. Until the core and shell of the building were complete, the building and land were owned jointly and were required to be consolidated on the Company’s balance sheets as the Company was the managing member and Toll Brothers did not have substantive kick-out or participating rights. In July 2015, the Company recorded the master condominium declaration for this development project and as a result, the Toll Brothers’ portion of the property was deconsolidated from the Company’s balance sheets. The Company now solely owns the rental portion of the building (floors 2-22) and the ground floor retail and Toll Brothers solely owns the for sale portion of the building (floors 23-40). The joint venture no longer owns any real property. In conjunction with this transaction, the Company reduced investment in real estate by $116.7 million, noncontrolling interests in partially owned properties by $117.3 million and accrued retainage by $1.1 million and increased other liabilities by $1.7 million (to account for Toll Brothers’ restricted cash still held by the Company). The deconsolidation of the Toll Brothers’ portion of the project had no impact on the consolidated results of operations and comprehensive income.