GOVERNMENT PROPERTIES INCOME TRUST, 10-K filed on 2/20/2015
Annual Report
Document and Entity Information (USD $)
In Billions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Feb. 17, 2015
Jun. 30, 2014
Document and Entity Information
 
 
 
Entity Registrant Name
Government Properties Income Trust 
 
 
Entity Central Index Key
0001456772 
 
 
Document Type
10-K 
 
 
Document Period End Date
Dec. 31, 2014 
 
 
Amendment Flag
false 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Entity Public Float
 
 
$ 1.4 
Entity Common Stock, Shares Outstanding
 
70,356,976 
 
Document Fiscal Year Focus
2014 
 
 
Document Fiscal Period Focus
FY 
 
 
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Real estate properties:
 
 
Land
$ 254,008 
$ 243,686 
Buildings and improvements
1,428,472 
1,324,876 
Total real estate properties, at cost, gross
1,682,480 
1,568,562 
Accumulated depreciation
(219,791)
(187,635)
Total real estate properties, at cost, net
1,462,689 
1,380,927 
Equity investment in Select Income REIT
680,137 
 
Assets of discontinued operations
13,165 
25,997 
Assets of property held for sale
32,797 
 
Acquired real estate leases, net
150,080 
142,266 
Cash and cash equivalents
13,791 
7,663 
Restricted cash
2,280 
1,689 
Rents receivable, net
36,239 
33,350 
Deferred leasing costs, net
11,450 
11,618 
Deferred financing costs, net
12,782 
3,911 
Other assets, net
12,205 
25,031 
Total assets
2,427,615 
1,632,452 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
Unsecured revolving credit facility
 
157,000 
Unsecured term loan
550,000 
350,000 
Unsecured senior notes, net of discount
347,423 
 
Mortgage notes payable, including premiums
187,694 
90,727 
Liabilities of discontinued operations
150 
276 
Liabilities of property held for sale
343 
 
Accounts payable and accrued expenses
26,471 
23,216 
Due to related persons
2,161 
2,474 
Assumed real estate lease obligations, net
15,924 
19,084 
Total liabilities
1,130,166 
642,777 
Shareholders' equity:
 
 
Common shares of beneficial interest, $.01 par value: 100,000,000 and 70,000,000 shares authorized, respectively, 70,349,227 and 54,722,018 shares issued and outstanding, respectively
703 
547 
Additional paid in capital
1,457,631 
1,105,679 
Cumulative net income
248,447 
191,913 
Cumulative other comprehensive income
37 
49 
Cumulative common distributions
(409,369)
(308,513)
Total shareholders' equity
1,297,449 
989,675 
Total liabilities and shareholders' equity
$ 2,427,615 
$ 1,632,452 
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
Dec. 31, 2014
Dec. 31, 2013
CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
Common shares of beneficial interest, par value (in dollars per share)
$ 0.01 
$ 0.01 
Common shares of beneficial interest, shares authorized
100,000,000 
70,000,000 
Common shares of beneficial interest, shares issued
70,349,227 
70,349,227 
Common shares of beneficial interest, shares outstanding
54,722,018 
54,722,018 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
 
 
 
Rental income
$ 251,031 
$ 226,910 
$ 203,700 
Expenses:
 
 
 
Real estate taxes
28,389 
25,710 
22,485 
Utility expenses
19,369 
17,116 
15,767 
Other operating expenses
45,982 
41,134 
37,074 
Depreciation and amortization
66,593 
55,699 
49,070 
Loss on asset impairment
2,016 
 
 
Acquisition related costs
1,344 
2,439 
1,614 
General and administrative
15,809 
12,710 
11,924 
Total expenses
179,502 
154,808 
137,934 
Operating income
71,529 
72,102 
65,766 
Interest and other income
69 
37 
29 
Interest expense (including net amortization of debt premiums and deferred financing fees of $1,310, $1,340 and $1,332, respectively)
(28,048)
(16,831)
(16,892)
Loss on early extinguishment of debt
(1,307)
 
 
Income from continuing operations before income tax expense and equity in earnings of investees
42,243 
55,308 
48,903 
Income tax expense
(117)
(133)
(159)
Loss on issuance of shares by an equity investee
(53)
 
 
Equity in earnings of investees
10,963 
334 
316 
Income from continuing operations
53,036 
55,509 
49,060 
Income (loss) from discontinued operations
3,498 
(889)
900 
Net income
56,534 
54,620 
49,960 
Other comprehensive income (loss):
 
 
 
Unrealized gain (loss) from investees
(12)
(50)
22 
Other comprehensive income (loss)
(12)
(50)
22 
Comprehensive income
$ 56,522 
$ 54,570 
$ 49,982 
Weighted average common shares outstanding (basic) (in shares)
61,313 
54,606 
48,558 
Weighted average common shares outstanding (diluted) (in shares)
61,399 
54,685 
48,644 
Per common share amounts (basic and diluted):
 
 
 
Income from continuing operations, basic (in dollars per share)
$ 0.87 
$ 1.02 
$ 1.01 
Income from continuing operations, diluted (in dollars per share)
$ 0.86 
$ 1.02 
$ 1.01 
Income from discontinued operations, basic and diluted (in dollars per share)
$ 0.06 
$ (0.02)
$ 0.02 
Net income, basic and diluted (in dollars per share)
$ 0.92 
$ 1.00 
$ 1.03 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Parenthetical) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
 
 
 
Amortization of debt premiums and deferred financing fees
$ 1,310 
$ 1,340 
$ 1,332 
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (USD $)
In Thousands, except Share data, unless otherwise specified
Common Shares
Additional Paid In Capital
Cumulative Net Income
Cumulative Other Comprehensive Income (Loss)
Cumulative Common Distributions
Total
Balance at Dec. 31, 2011
$ 471 
$ 935,438 
$ 87,333 
$ 77 
$ (131,651)
$ 891,668 
Increase (Decrease) in Shareholders' Equity
 
 
 
 
 
 
Issuance of shares, net
75 
166,643 
 
 
 
166,718 
Issuance of shares, net (in shares)
7,500,000 
 
 
 
 
 
Share grants
1,901 
 
 
 
1,902 
Share grants (in shares)
92,238 
 
 
 
 
 
Unrealized gain (loss) from investees
 
 
 
22 
 
22 
Net income
 
 
49,960 
 
 
49,960 
Distributions to common shareholders
 
 
 
 
(82,819)
(82,819)
Balance at Dec. 31, 2012
547 
1,103,982 
137,293 
99 
(214,470)
1,027,451 
Balance (in shares) at Dec. 31, 2012
54,643,888 
 
 
 
 
 
Increase (Decrease) in Shareholders' Equity
 
 
 
 
 
 
Share grants
 
1,697 
 
 
 
1,697 
Share grants (in shares)
78,130 
 
 
 
 
 
Unrealized gain (loss) from investees
 
 
 
(50)
 
(50)
Net income
 
 
54,620 
 
 
54,620 
Distributions to common shareholders
 
 
 
 
(94,043)
(94,043)
Balance at Dec. 31, 2013
547 
1,105,679 
191,913 
49 
(308,513)
989,675 
Balance (in shares) at Dec. 31, 2013
54,722,018 
 
 
 
 
 
Increase (Decrease) in Shareholders' Equity
 
 
 
 
 
 
Issuance of shares, net
155 
350,558 
 
 
 
350,713 
Issuance of shares, net (in shares)
15,563,559 
 
 
 
 
 
Share grants
1,394 
 
 
 
1,395 
Share grants (in shares)
63,650 
 
 
 
 
 
Unrealized gain (loss) from investees
 
 
 
(12)
 
(12)
Net income
 
 
56,534 
 
 
56,534 
Distributions to common shareholders
 
 
 
 
(100,856)
(100,856)
Balance at Dec. 31, 2014
$ 703 
$ 1,457,631 
$ 248,447 
$ 37 
$ (409,369)
$ 1,297,449 
Balance (in shares) at Dec. 31, 2014
70,349,227 
 
 
 
 
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net income
$ 56,534 
$ 54,620 
$ 49,960 
Adjustments to reconcile net income to cash provided by operating activities:
 
 
 
Depreciation
37,671 
34,694 
32,348 
Net amortization of debt premiums and discount and deferred financing fees
1,310 
1,340 
1,332 
Loss on early extinguishment of debt
1,307 
 
 
Straight line rental income
(4,495)
(3,067)
(3,553)
Amortization of acquired real estate leases
27,713 
21,608 
19,507 
Amortization of deferred leasing costs
2,145 
1,599 
1,122 
Other non-cash expenses
2,181 
1,268 
1,598 
Loss on asset impairment
2,016 
10,142 
494 
Increase in carrying value of assets held for sale
(2,344)
 
 
Net gain on sale of properties
(774)
(8,168)
 
Equity in earnings of investees
(10,963)
(334)
(316)
Loss on issuance of shares by an equity investee
53 
 
 
Distributions of earnings from equity investees
17,046 
 
 
Change in assets and liabilities:
 
 
 
Restricted cash
(591)
(136)
183 
Deferred leasing costs
(3,326)
(4,279)
(5,183)
Rents receivable
(337)
(1,565)
3,454 
Other assets
(419)
(1,063)
257 
Accounts payable and accrued expenses
6,400 
2,492 
(940)
Due to related persons
(402)
(760)
45 
Cash provided by operating activities
130,725 
108,391 
100,308 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Real estate acquisitions and deposits
(56,350)
(112,574)
(213,626)
Real estate improvements
(21,635)
(23,252)
(18,841)
Investment in Select Income REIT
(689,969)
 
 
Investment in Affiliates Insurance Company
(825)
 
 
Distributions in excess of earnings from equity investees
(3,594)
 
 
Proceeds from sale of properties, net
16,426 
18,319 
 
Cash used in investing activities
748,759 
117,507 
232,467 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Repayment of mortgage notes payable
(2,221)
(1,933)
(1,793)
Proceeds from issuance of common shares, net
349,787 
 
166,718 
Proceeds from issuance of senior notes, net of discount
347,217 
 
 
Proceeds from unsecured term loan
1,050,000 
 
350,000 
Repayment of unsecured term loan
(850,000)
 
 
Borrowings on unsecured revolving credit facility
344,500 
216,500 
230,500 
Repayments on unsecured revolving credit facility
(501,500)
(109,000)
(526,500)
Financing fees
(12,765)
 
(1,964)
Distributions to common shareholders
(100,856)
(94,043)
(82,819)
Cash provided by financing activities
624,162 
11,524 
134,142 
Increase in cash and cash equivalents
6,128 
2,408 
1,983 
Cash and cash equivalents at beginning of period
7,663 
5,255 
3,272 
Cash and cash equivalents at end of period
13,791 
7,663 
5,255 
Supplemental cash flow information:
 
 
 
Interest paid
21,334 
15,336 
15,469 
Income taxes paid
126 
169 
117 
Non-cash investing activities:
 
 
 
Real estate acquisition funded with the assumption of mortgage debt
(97,524)
 
 
Non-cash financing activities:
 
 
 
Assumption of mortgage debt
$ 97,524 
 
 
Organization
Organization

Note 1. Organization

Government Properties Income Trust, or the Company, we or us, was organized as a real estate investment trust, or REIT, under Maryland law on February 17, 2009 to concentrate our former parent’s ownership of properties that were majority leased to government tenants and to expand such investments. In June 2009, we completed our initial public offering and we became a separate publicly owned company. 

As of December 31, 2014, excluding one property ( one building) classified as discontinued operations, we owned 72 properties ( 92 buildings), or the Properties, located in 31 states and the District of Columbia containing approximately 11.0 million rentable square feet.  As of December 31, 2014 we also owned 21,500,000 common shares of beneficial interest, par value $.01 per share, or approximately 35.9%, of the then outstanding common shares of Select Income REIT, or SIR. 

Summary of Significant Accounting Policies
Summary of Significant Accounting Policies

Note 2. Summary of Significant Accounting Policies

Basis of Presentation.  These consolidated financial statements include the accounts of us and our subsidiaries, all of which are 100% owned directly or indirectly by us. All intercompany transactions and balances with or among our consolidated subsidiaries have been eliminated.

We account for our investments in Affiliates Insurance Company, or AIC, and SIR using the equity method of accounting. Significant influence is present through common representation on the boards of trustees or directors of us, AIC and SIR. Our Managing Trustees are also the managing trustees of SIR.  Our Managing Trustees are also owners of Reit Management & Research LLC, or RMR, which is the manager of us, AIC and SIR, each of our Trustees is a director of AIC and one of our Independent Trustees is also an independent trustee of SIR. See Notes 6 and 11 for a further discussion of our investments in AIC and SIR.

Real Estate Properties.  We record our properties at cost and provide depreciation on real estate investments on a straight line basis over estimated useful lives generally ranging from 7 to 40 years.  In some circumstances, we engage independent real estate appraisal firms to provide market information and evaluations which are relevant to our purchase price allocations and determinations of useful lives; however, we are ultimately responsible for the purchase price allocations and determinations of useful lives.

We allocate the purchase prices of our properties to land, building and improvements based on determinations of the fair values of these assets assuming the properties are vacant. We determine the fair value of each property using methods similar to those used by independent appraisers. For properties qualifying as acquired businesses under Accounting Standards Codification 805, Business Combinations, we allocate a portion of the purchase price of our properties to above market and below market leases based on the present value (using an interest rate which reflects the risks associated with acquired in place leases at the time each property was acquired by us) of the difference, if any, between (i) the contractual amounts to be paid pursuant to the acquired in place leases and (ii) our estimates of fair market lease rates for the corresponding leases, measured over a period equal to the terms of the respective leases. We allocate a portion of the purchase price to acquired in place leases and tenant relationships based upon market estimates to lease up the property based on the leases in place at the time of purchase.  We allocate this aggregate value between acquired in place lease values and tenant relationships based on our evaluation of the specific characteristics of each tenant’s lease. However, we have not separated the value of tenant relationships from the value of acquired in place leases because such value and related amortization expense is immaterial to the accompanying consolidated financial statements. In making these allocations, we consider factors such as estimated carrying costs during the expected lease up periods, including real estate taxes, insurance and other operating income and expenses and costs, such as leasing commissions, legal and other related expenses, to execute similar leases in current market conditions at the time a property was acquired by us. If the value of tenant relationships becomes material in the future, we may separately allocate those amounts and amortize the allocated amount over the estimated life of the relationships.

We amortize capitalized above market lease values (included in acquired in place real estate leases in our consolidated balance sheets) and below market lease values (presented as assumed real estate lease obligations in our consolidated balance sheets) as a reduction or increase, respectively, to rental income over the terms of the associated leases. Such amortization resulted in net decreases to rental income of $868,  $1,123, and $2,056 during the years ended December 31, 2014,  2013 and 2012, respectively. We amortize the value of acquired in place leases (included in acquired real estate leases in our consolidated balance sheets), exclusive of the value of above market and below market acquired in place leases, over the terms of the associated leases. Such amortization, which is included in depreciation and amortization expense, amounted to $26,844,  $20,482, and $17,390 during the years ended December 31, 2014,  2013 and 2012, respectively. When a lease is terminated prior to its stated expiration, we write off the unamortized amounts relating to that lease.

Capitalized above market lease values were $39,040 and $38,487 as of December 31, 2014 and 2013, respectively, net of accumulated amortization of $18,288 and $14,271, respectively. Capitalized below market lease values were $26,605 and $27,304 as of December 31, 2014 and 2013, respectively, net of accumulated amortization of $10,681 and $8,220, respectively.

The value of acquired in place leases, exclusive of the value of above market and below market acquired in place leases, were $198,157 and $167,256 as of December 31, 2014 and 2013, respectively, net of accumulated amortization of $68,829 and $49,207, respectively. Future amortization of net intangible lease assets and liabilities, to be recognized over the current terms of the associated leases as of December 31, 2014 are estimated to be $28,601 in 2015, $26,001 in 2016, $23,734 in 2017, $19,462 in 2018, $14,413 in 2019 and $21,945 thereafter.

We regularly evaluate whether events or changes in circumstances have occurred that could indicate an impairment in the value of long lived assets. If there is an indication that the carrying value of an asset is not recoverable, we estimate the projected undiscounted cash flows to determine if an impairment loss should be recognized. We determine the amount of any impairment loss by comparing the historical carrying value to estimated fair value. We estimate fair value through an evaluation of recent financial performance and projected discounted cash flows using standard industry valuation techniques. In addition to consideration of impairment upon the events or changes in circumstances described above, we regularly evaluate the remaining lives of our long lived assets. If we change our estimate of the remaining lives, we allocate the carrying value of the affected assets over their revised remaining lives.

Cash and Cash Equivalents.  We consider highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents.

Restricted Cash.  Restricted cash consists of amounts escrowed for future real estate taxes, insurance, leasing costs, capital expenditures and debt service, as required by certain of our mortgage debts.

Deferred Leasing Costs.  Deferred leasing costs include brokerage, legal and other fees associated with our entering leases and we amortize those costs, which are included in depreciation and amortization expense, on a straight line basis over the terms of the respective leases. Deferred leasing costs totaled $15,401 and $13,935 at December 31, 2014 and 2013, respectively, and accumulated amortization of deferred leasing costs totaled $3,951 and $2,317 at December 31 2014 and 2013, respectively. Future amortization of deferred leasing costs to be recognized during the current terms of our existing leases as of December 31, 2014, are estimated to be $2,035 in 2015, $1,915 in 2016, $1,459 in 2017, $1,306 in 2018, $1,205 in 2019 and $3,530 thereafter.

Deferred Financing Fees.  Deferred financing fees include issuance or assumption costs related to borrowings and we amortize those costs as interest expense over the terms of the respective loans. Deferred financing fees totaled $14,055 and $9,335 at December 31, 2014 and 2013, respectively, and accumulated amortization of deferred financing fees totaled $1,273 and $5,424 at December 31, 2014 and 2013, respectively. Future amortization of deferred financing fees to be recognized with respect to our loans as of December 31, 2014 are estimated to be $2,917 in 2015, $2,637 in 2016, $2,548 in 2017, $2,548 in 2018, $1,346 in 2019 and $786 thereafter.

Revenue Recognition. We recognize rental income from operating leases that contain fixed contractual rent changes on a straight line basis over the term of the lease agreements. Certain of our leases with government tenants provide the tenant the right to terminate its lease if its respective legislature or other funding authority does not appropriate the funding necessary for the government tenant to meet its lease obligations.  We have determined the fixed non-cancelable lease term of these leases to be the fully executed term of the lease because we believe the occurrence of termination to be a remote contingency based on both our historical experience and our assessment of the likelihood of lease cancellation.  We increased rental income by $4,501,  $2,739 and $3,428 to record revenue on a straight line basis during the years ended December 31, 2014,  2013 and 2012, respectively. Rents receivable include $15,017 and $10,515 of straight line rent receivables at December 31, 2014 and 2013, respectively.

Income Taxes.  We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, or the IRC, and, accordingly, we generally will not be subject to federal income taxes provided we distribute our taxable income and meet certain other requirements to qualify as a REIT. We are, however, subject to certain state and local taxes.

Cumulative Other Comprehensive Income (Loss).  Cumulative other comprehensive income (loss) represents our share of the comprehensive income (loss) of AIC and SIR.  See Notes 6 and 11 for further information regarding these investments.

Reclassifications.  Certain reclassifications have been made to the prior years’ financial statements to conform to the current year’s presentation.

Use of Estimates.  Preparation of these financial statements in conformity with U.S. generally accepted accounting principles, or GAAP, requires us to make estimates and assumptions that may affect the amounts reported in these consolidated financial statements and related notes. The actual results could differ from these estimates.

Per Common Share Amounts. We calculate basic earnings per common share by dividing net income by the weighted average number of our common shares of beneficial ownership, $.01 par value, or common shares, or our common shares, outstanding during the period. We calculate diluted earnings per share using the more dilutive of the two class method or the treasury stock method. 

Segment Reporting.  We operate in two business segments: ownership of properties that are primarily leased to government tenants and our equity method investment in SIR.

 

Per Common Share Amounts
Per Common Share Amounts

Note 3.    Per Common Share Amounts

The following table provides a reconciliation of the weighted average number of common shares used in the calculation of basic and diluted earnings per share. Unvested share awards that contain non-forfeitable rights to dividends are considered participating securities and are included in our calculation of diluted earnings per share using the more dilutive of the two-class method, or the treasury stock method. Other potentially dilutive common shares, including contingently issuable common shares under our business management agreement with RMR, if any, and the related impact on earnings, are considered when calculating diluted earnings per share (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

For the year ended December 31,

 

 

 

2014

 

2013

 

2012

Weighted average common shares for basic earnings per share

 

61,313 

 

 

54,606 

 

 

48,558 

Effect of dilutive securities: unvested share awards

 

86 

 

 

79 

 

 

86 

Weighted average common shares for diluted earnings per share

 

61,399 

 

 

54,685 

 

 

48,644 

 

We had no anti-dilutive common share equivalents outstanding for the years ended December 31, 2014, 2013 and 2012.

Recent Accounting Pronouncements
Recent Accounting Pronouncements

Note 4.     Recent Accounting Pronouncements

In April 2014, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.  This update amends the criteria for reporting discontinued operations to, among other things, raise the threshold for disposals to qualify as discontinued operations. This update is effective for interim and annual reporting periods, beginning after December 15, 2014, with early adoption permitted, but only for disposals or classifications as held for sale which have not been reported in financial statements previously issued or available for issuance. We adopted this ASU effective July 1, 2014.  As a result, the results of operations and gains or losses on the sale of properties that were not previously classified as a discontinued operation, that are disposed of or classified as held for sale in the ordinary course of business and do not meet the criteria for classification as a discontinued operation described above after July 1, 2014, are included in continuing operations in our consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which provides guidance for revenue recognition. This update is effective for interim and annual reporting periods beginning after December 15, 2016.  We are currently in the process of evaluating the impact, if any, the adoption of this ASU will have on our consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements – Going Concern: Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.  The update requires an entity to evaluate whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the financial statements are available to be issued when applicable) and to provide related footnote disclosures in certain circumstances.  The update is effective for the annual reporting periods beginning after December 15, 2015, and for annual and interim periods thereafter with early adoption permitted.  The implementation of this update is not expected to result in any significant changes to the disclosures in our consolidated financial statements. 

Real Estate Properties
Real Estate Properties

Note 5. Real Estate Properties

As of December 31, 2014, we owned 72 properties (92 buildings), with an undepreciated carrying value of $1,712,776 excluding one property (one building) classified as discontinued operations and including one property (one building) held for sale and included in continuing operations. We generally lease space in our properties on a gross lease or modified gross lease basis pursuant to fixed term operating leases expiring between 2015 and 2029. Certain of our government tenants have the right to terminate their leases before the stated term of their leases expire. Our leases generally require us to pay all or some property operating expenses and to provide all or most property management services. During the year ended December 31, 2014, we entered into 50 leases for 632,376 rentable square feet for a weighted (by revenue) average lease term of 5.4 years and we made commitments for approximately $12,416 of leasing related costs. We have unspent leasing related obligations of approximately  $7,545 as of December 31, 2014.

Our future minimum lease payments related to our properties, excluding one property classified as discontinued operations and estimated real estate tax and other expense reimbursements, scheduled to be received during the current terms of the existing leases as of December 31, 2014 are as follows:

 

 

 

 

 

 

 

 

2014

$

222,845 

 

 

2015

 

207,019 

 

 

2016

 

180,634 

 

 

2017

 

151,512 

 

 

2018

 

123,106 

 

 

Thereafter

 

262,559 

 

 

 

$

1,147,675 

 

As of December 31, 2014, excluding one property classified as discontinued operations, government tenants who currently represent approximately 5.0% of our total future minimum lease payments have currently exercisable rights to terminate their leases before the stated terms of their leases expire. In 2015,  2016,  2017,  2018,  2019,  2020,  2022 and 2023, early termination rights become exercisable by other government tenants who currently represent an additional approximately 1.8%,  5.9%,  3.1%,  1.6%,  9.4%,  6.7%,  1.5% and 2.2% of our total future minimum lease payments, respectively. In addition as of December 31, 2014,  13 of our government tenants have the currently exercisable right to terminate their leases if their respective legislature or other funding authority does not appropriate the funding necessary for the government tenant to meet its lease obligations. These 13 tenants represent approximately 14.1% of our total future minimum lease payments as of December 31, 2014.  

Acquisition Activities

During the year ended December 31, 2014, we acquired four office properties (five buildings) for an aggregate purchase price of $167,525, including the assumption of $97,524 of mortgage debt and excluding acquisition costs.  We allocated the purchase prices of these acquisitions based on the estimated fair values of the acquired assets and assumed liabilities as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

    

    

    

    

Number

    

    

    

    

 

    

    

 

    

    

 

    

    

 

    

    

 

    

    

 

    

Premium

 

 

 

 

 

 

of

 

 

 

 

 

 

 

 

 

Buildings

 

 

 

 

Acquired

 

Other

 

on

Acquisition

 

 

 

 

 

Properties/

 

Square

 

Purchase

 

 

 

 

and

 

Acquired

 

Lease

 

Assumed

 

Assumed

Date

 

Location

 

Type

 

Buildings

 

Feet

 

Price(1)

 

Land

 

Improvements

 

Leases

 

Obligations

 

Liabilities

 

Debt

March 2014

 

Fairfax, VA

 

Office

 

1 / 1

 

83,130 

 

$

19,775 

 

$

2,964 

 

$

12,840 

 

$

3,971 

 

$

 —

 

$

(233)

 

$

 —

May 2014

 

Richmond, VA

 

Office

 

1 / 1

 

173,932 

 

 

22,500 

 

 

2,614 

 

 

15,930 

 

 

4,003 

 

 

(47)

 

 

 

 

 —

May 2014

 

Reston, VA

 

Office

 

1 / 2

 

406,388 

 

 

112,250 

 

 

9,066 

 

 

78,658 

 

 

28,071 

 

 

(398)

 

 

(93)

 

 

(3,147)

September 2014

 

Phoenix, AZ

 

Office

 

1 / 1

 

66,743 

 

 

13,000 

 

 

1,917 

 

 

7,416 

 

 

3,667 

 

 

 —

 

 

 —

 

 

 —

 

 

 

 

 

 

4 / 5

 

730,193 

 

$

167,525 

 

$

16,561 

 

$

114,844 

 

$

39,712 

 

$

(445)

 

$

(326)

 

$

(3,147)

(1)

Purchase price excludes acquisition related costs.

In March 2014, we acquired an office property (one building) located in Fairfax, VA with 83,130 rentable square feet. This property is 100% leased to the U.S. Government. The purchase price was $19,775, including the assumption of $14,524 of mortgage debt and excluding acquisition costs.

In May 2014, we acquired an office property (one building) located in Richmond, VA with 173,932 rentable square feet. This property is 94.6% leased to the Commonwealth of Virginia and occupied by six agencies. The purchase price was $22,500, excluding acquisition costs.

Also in May 2014, we acquired an office property (two buildings) located in Reston, VA with a total of 406,388 rentable square feet. This property is 100% leased to the U.S. Government. The purchase price was $112,250, including the assumption of $83,000 of mortgage debt and excluding acquisition costs.

In September 2014, we acquired an office property (one building) located in Phoenix, AZ with 66,743 rentable square feet. This property is 100% leased to the State of Arizona and occupied by Northern Arizona University. The purchase price was $13,000, excluding acquisition costs.

Disposition Activities – Continuing Operations

In August 2014, a U.S. Government tenant notified us that it intended to exercise its option to acquire the office property (one building) it leased from us located in Riverdale, MD with 337,500 rentable square feet and a net book value of $30,448 as of December 31, 2014, after recording a $2,016 loss on asset impairment during the year ended December 31, 2014. The sale of this property was completed in February 2015 and the sale price was $30,600, excluding closing costs.  As of December 31, 2014, we have classified this property as held for sale but have not classified the results of operations for this property as discontinued operations in our consolidated financial statements pursuant to our early adoption of ASU No. 2014-08 as described in Note 2.  See Note 9 regarding the fair value of our assets and liabilities. Summarized balance sheet information for the property classified as held for sale is as follows:

 

 

 

 

 

 

 

 

 

    

December 31,

    

 

 

 

2014

 

 

Real estate properties, net

 

$

29,896 

 

 

Rents receivable

 

 

605 

 

 

Other assets

 

 

2,296 

 

 

Assets of property held for sale

 

$

32,797 

 

 

 

 

 

 

 

 

Other liabilities

 

$

343 

 

 

Liabilities of property held for sale

 

$

343 

 

 

Disposition Activities – Discontinued Operations

During the year ended December 31, 2013, we began marketing for sale an office property (one building) located in Phoenix, AZ with 97,145 rentable square feet and recognized a loss on asset impairment of $8,344 to reduce the carrying value of this asset to its then estimated fair value of $2,300.  During the three months ended March 31, 2014, we increased the carrying value of this asset by $2,344 to its then estimated fair value of $4,644.  In February 2014, we sold this property for $5,000, excluding closing costs.  We recognized no gain or loss on this sale.

In July 2014, we entered into an agreement to sell an office property (one building) located in San Diego, CA with 94,272 rentable square feet.  In September 2014, we sold this property for $12,100, excluding closing costs.  We recognized a gain on sale of $774 during the year ended December 31, 2014.

In April 2014, we entered into an agreement to sell an office property (one building) located in Falls Church, VA with 164,746 rentable square feet and a net book value of $12,282 at December 31, 2014.  The contract sales price is $16,500, excluding closing costs.  The closing of this sale is subject to conditions, including the purchaser obtaining certain zoning entitlements, and is currently expected to occur in 2015. We can provide no assurance that the sale of this property will occur. See Note 9 regarding the fair value of our assets and liabilities.

Results of operations for the two properties (two buildings) we sold in February 2013 and March 2013, the two properties (two buildings) we sold in February 2014 and September 2014 and one of the properties (one building) held for sale at December 31, 2014, which was held for sale prior to our early adoption of ASU No. 2014-08, are classified as discontinued operations in our consolidated financial statements. Summarized balance sheet and income statement information for the properties classified as discontinued operations is as follows:

Balance Sheets:

 

 

 

 

 

 

 

 

 

 

 

 

    

December 31,

    

December 31,

 

 

 

 

2014

 

2013

 

 

Real estate properties, net

 

$

12,260 

 

$

25,574 

 

 

Rents receivable

 

 

782 

 

 

381 

 

 

Other assets

 

 

123 

 

 

42 

 

 

Assets of discontinued operations

 

$

13,165 

 

$

25,997 

 

 

 

 

 

 

 

 

 

 

 

Other liabilities

 

$

150 

 

$

276 

 

 

Liabilities of discontinued operations

 

$

150 

 

$

276 

 

 

Statements of Operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31,

 

 

 

    

2014

    

2013

 

2012

    

 

Rental income

 

$

1,673 

 

$

4,580 

 

$

7,376 

 

 

Real estate taxes

 

 

(427)

 

 

(678)

 

 

(928)

 

 

Utility expenses

 

 

(226)

 

 

(539)

 

 

(1,043)

 

 

Other operating expenses

 

 

(459)

 

 

(966)

 

 

(1,484)

 

 

Depreciation and amortization

 

 

 —

 

 

(1,025)

 

 

(2,096)

 

 

General and administrative

 

 

(181)

 

 

(287)

 

 

(431)

 

 

Loss on asset impairment

 

 

 —

 

 

(10,142)

 

 

(494)

 

 

Increase in carrying value of asset held for sale

 

 

2,344 

 

 

 

 

 —

 

 

Net gain on sale of properties

 

 

774 

 

 

8,168 

 

 

 —

 

 

Income (loss) from discontinued operations

 

$

3,498 

 

$

(889)

 

$

900 

 

 

Related Party Transactions
Related Party Transactions

Note 6. Related Person Transactions

We have adopted written Governance Guidelines that describe the consideration and approval of any related person transactions. Under these Governance Guidelines, we may not enter into any transaction in which any Trustee or executive officer, any member of the immediate family of any Trustee or executive officer or any other related person, has or will have a direct or indirect material interest unless that transaction has been disclosed or made known to our Board of Trustees and our Board of Trustees reviews and approves or ratifies the transaction by the affirmative vote of a majority of the disinterested Trustees, even if the disinterested Trustees constitute less than a quorum. If there are no disinterested Trustees, the transaction must be reviewed, authorized and approved or ratified by both (i) the affirmative vote of a majority of our Board of Trustees and (ii) the affirmative vote of a majority of our Independent Trustees. In determining whether to approve or ratify a transaction, our Board of Trustees, or disinterested Trustees or Independent Trustees, as the case may be, also act in accordance with any applicable provisions of our declaration of trust and bylaws, consider all of the relevant facts and circumstances and approve only those transactions that they determine are fair and reasonable to us and our shareholders. All related person transactions described below were reviewed and approved or ratified by a majority of the disinterested Trustees or otherwise in accordance with our policies, declaration of trust and bylaws, each as described above. In the case of transactions with us by RMR employees (other than our Trustees and executive officers) subject to our Code of Business Conduct and Ethics, the employee must seek approval from an executive officer who has no interest in the matter for which approval is being requested. Copies of our Governance Guidelines and Code of Business Conduct and Ethics are available on our website, www.govreit.com.

RMR: We have no employees. The personnel and various services we require to operate our business are provided to us by RMR. We have two agreements with RMR to provide management and administrative services to us: (i) a business management agreement, which relates to our business generally, and (ii) a property management agreement, which relates to our property level operations.

One of our Managing Trustees, Mr. Barry Portnoy, is Chairman, majority owner and an employee of RMR. Our other Managing Trustee, Mr. Adam Portnoy, is the son of Mr. Barry Portnoy, and an owner, President, Chief Executive Officer and a director of RMR. Each of our executive officers is also an officer of RMR. Our Independent Trustees also serve as independent directors or independent trustees of other companies to which RMR or its affiliates provide management services. Mr. Barry Portnoy serves as a managing director or managing trustee of all of those companies and Mr. Adam Portnoy serves as a managing trustee of a majority of those companies. In addition, officers of RMR serve as our officers and officers of other companies to which RMR or its affiliates provide management services.

Our Board of Trustees has given our Compensation Committee, which is comprised exclusively of our Independent Trustees, authority to act on our behalf with respect to our management agreements with RMR. Our Governance Guidelines and the charter of our Compensation Committee together require the committee to annually review the terms of these agreements, evaluate RMR's performance under the agreements and determine whether to renew, amend or terminate the management agreements.

In 2013, our Compensation Committee retained FTI Consulting, Inc., a nationally recognized compensation consultant experienced in REIT compensation programs, to assist the committee in developing the terms of the incentive fee payable to RMR under our business management agreement with RMR beginning in 2014. In connection with retaining this consultant, our Compensation Committee determined that the consultant did not have any conflicts of interest which would prevent the consultant from advising the committee.

On December 23, 2013, we and RMR amended and restated our business management agreement, effective with respect to services performed on or after January 1, 2014. Under our business management agreement as so amended and restated:

·

The annual amount of the base management fee to be paid to RMR by us for each applicable period is equal to the lesser of:

 

o

the sum of (a) 0.5% of the average aggregate historical cost of our real estate assets acquired from a REIT to which RMR provided business management or property management services, or the Transferred Assets, immediately prior to the contribution, sale or other transfer of such property to us, plus (b) 0.7% of the average aggregate historical cost of our real estate investments excluding the Transferred Assets up to $250,000, plus (c) 0.5% of the average historical cost of our real estate investments excluding the Transferred Assets exceeding $250,000; and

 

o

the sum of (a) 0.7% of the average closing price per share of our common shares on the New York Stock Exchange, or the NYSE, during such period, multiplied by the average number of our common shares outstanding during such period, plus the daily weighted average of the aggregate liquidation preference of each class of our preferred shares outstanding during such period, plus the daily weighted average of the aggregate principal amount of our consolidated indebtedness during such period, or, together, our Average Market Capitalization, up to $250,000, plus (b) 0.5% of our Average Market Capitalization exceeding $250,000.  

The average aggregate historical cost of our real estate investments includes our consolidated assets invested, directly or indirectly, in equity interests in or loans secured by real estate and personal property owned in connection with such real estate (including acquisition related costs and costs which may be allocated to intangibles or are unallocated), all before reserves for depreciation, amortization, impairment charges or bad debts or other similar noncash reserves.

·

Although the fee calculation is stated in annual percentages, the base management fee is paid monthly to RMR, 90% in cash and 10% in our common shares, which are fully-vested when issued. The number of our common shares to be issued in payment of the base management fee for each month equals the value of 10% of the total base management fee for that month divided by the average daily closing price of our common shares during that month.

 

·

The incentive management fee which may be earned by RMR for an annual period is an amount, subject to a cap based on the value of our outstanding common shares, equal to 12% of the product of (a) our equity market capitalization on the last trading day on the year immediately prior to the relevant measurement period and (b) the amount (expressed as a percentage) by which the total returns per share realized by the holders of our common shares (i.e., share price appreciation plus dividends) exceeds the total shareholder return of the SNL US REIT Equity Index (in each case subject to certain adjustments) for the relevant measurement period. The measurement periods are generally three-year periods ending with the year for which the incentive management fee is being calculated, with shorter periods applicable in the case of the calculation of the incentive management fee for 2014 ( one year) and 2015 ( two years).

 

·

The incentive management fee is payable in our common shares, with one-third of our common shares issued in payment of an incentive management fee vested on the date of issuance, and the remaining two-thirds vesting thereafter in two equal annual installments. If the issuance of common shares in payment of a portion of the base management fee or incentive management fee would be limited by applicable law and regulations, such portion of the applicable fee is instead paid in cash. All common shares issued in payment of the incentive management fee shall be fully vested upon termination of the business management agreement, subject to certain exceptions. In addition, RMR may, in certain circumstances, be required to return to us or forfeit some or all of the common shares paid or payable to it in payment of the incentive management fee.

 

·

RMR and certain eligible transferees of our common shares issued in payment of the base management fee or incentive management fee are entitled to demand registration rights, exercisable not more frequently than twice per year, and to "piggy-back" registration rights, with certain expenses to be paid by us. We and applicable selling shareholders also have agreed to indemnify each other (and their officers, trustees, directors and controlling persons) against certain liabilities, including liabilities under the Securities Act of 1933, as amended, or the Securities Act, in connection with any such registration.

The amended and restated terms of our business management agreement described above were approved by our Compensation Committee, which is comprised solely of our Independent Trustees, and the terms of the incentive fee were developed by our Compensation Committee in consultation with FTI Consulting, Inc., an independent compensation consultant.

For 2013 and 2012, our business management agreement provided for the base business management fee to be paid to RMR at an annual rate equal to the sum of (a) 0.5% of the historical cost of the Transferred Assets, plus (b) with respect to other properties we acquired excluding the Transferred Assets, 0.7% of our aggregate cost of those properties up to and including $250,000, and 0.5% thereafter. In addition, for 2013 and 2012, our business management agreement provided for RMR to be paid an incentive fee equal to 15% of the product of (i) the weighted average of our common shares outstanding on a fully diluted basis during a fiscal year and (ii) the excess, if any, of the FFO Per Share, as defined in the business management agreement, for such fiscal year over the FFO Per Share for the preceding fiscal year. This incentive fee was payable in common shares and it was subject to a cap on the value of the incentive fee being no greater than $0.02 per share of our total shares outstanding.

Pursuant to our business management agreement with RMR, we recognized business management fees of $10,226,  $9,341 and $9,077 for 2014, 2013 and 2012, respectively. These amounts are included in general and administrative expenses in our consolidated financial statements.  In accordance with the terms of our business management agreement, we issued, in aggregate, 42,442 of our common shares to RMR as payment for a portion of the base business management fee we recognized for 2014. In March 2013 and 2012, we issued 20,230 and 39,141 of our common shares to RMR for the incentive fees for 2012 and 2011, respectively, pursuant to our business management agreement. No incentive fee was payable to RMR under our business management agreement for 2014 or 2013.

Our property management agreement with RMR provides for management fees equal to 3.0% of gross collected rents and construction supervision fees equal to 5.0% of construction costs. The aggregate property management and construction supervision fees we recognized were $8,203,  $7,877 and $7,018 for 2014, 2013 and 2012, respectively. These amounts are included in operating expenses or have been capitalized, as appropriate, in our consolidated financial statements.

RMR also provides internal audit services to us in return for our share of the total internal audit costs incurred by RMR for us and other publicly owned companies managed by RMR and its affiliates, which amounts are subject to approval by our Compensation Committee. Our Audit Committee appoints our Director of Internal Audit. Our share of RMR's costs of providing this internal audit function was approximately $286,  $203 and $193 for 2014, 2013 and 2012, respectively, which amounts are included in general and administrative expenses in our consolidated financial statements. These allocated costs are in addition to the business and property management fees we paid to RMR.

We are generally responsible for all of our operating expenses, including certain expenses incurred by RMR on our behalf. We are generally not responsible for payment of RMR's employment, office or administration expenses incurred to provide management services to us, except for the employment and related expenses of RMR employees assigned to work exclusively or partly at our owned properties, our share of the wages, benefits and other related costs of centralized accounting personnel and our share of the staff employed by RMR who perform our internal audit function. Pursuant to our business management agreement, RMR may from time to time negotiate on our behalf with certain third party vendors and suppliers for the procurement of goods and services to us. As part of this arrangement, we may enter into agreements with RMR and other companies to which RMR provides management services for the purpose of obtaining more favorable terms from such vendors and suppliers.

The current terms of both our business management agreement with RMR and our property management agreement with RMR end on December 31, 2015 and automatically renew for successive one year terms unless we or RMR gives notice of non-renewal before the end of an applicable term. On May 9, 2014, we and RMR entered into amendments to our business management agreement and property management agreement, which were approved by our Compensation Committee, comprised solely of our Independent Trustees.  As amended, RMR may terminate the agreements upon 120 days’ written notice.  Prior to these amendments, RMR could terminate the agreements upon 60 days’ written notice and could also terminate the property management agreement upon five business days’ notice if we underwent a change of control.  Both prior to and after giving effect to these amendments, we have the right to terminate the agreements upon 60 days’ written notice, subject to approval by a majority vote of our Independent Trustees.  As amended, if we terminate or elect not to renew the business management agreement other than for cause, as defined, we are obligated to pay RMR a termination fee equal to 2.75 times the sum of the annual base management fee and the annual internal audit services expense, which amounts are based on averages during the 24 consecutive calendar months prior to the date of notice of nonrenewal or termination.  In addition, if we terminate or elect not to renew the property management agreement other than for cause, as defined, within 12 months prior to or following our giving notice of termination or non-renewal of the business management agreement other than for cause, we are obligated to pay RMR a termination fee equal to 12 times the average monthly property management fee for the six months prior to the effective date of the nonrenewal or termination.  The amendments provide for certain proportional adjustments to the termination fees if we merge with another REIT to which RMR is providing management services or if we spin-off a subsidiary of ours to which we contributed properties and to which RMR is providing management services both at the time of the spin-off and on the date of the expiration or termination of the agreement. Also, as amended, RMR agrees to provide certain transition services to us for 120 days following an applicable termination by us or notice of termination by RMR.  Both the business management agreement with RMR and the property management agreement with RMR include arbitration provisions for the resolution of disputes.

Under our business management agreement with RMR, we acknowledge that RMR may engage in other activities or businesses and act as the manager to any other person or entity (including other REITs) even though such person or entity has investment policies and objectives similar to ours and we are not entitled to preferential treatment in receiving information, recommendations and other services from RMR. Previously our business management agreement had provided that, with certain exceptions, if we determined to offer for sale or other disposition any real property that, at such time, is of a type within the investment focus of another REIT to which RMR provides management services, we would first offer that property for purchase or disposition to that REIT and negotiate in good faith for such purchase or disposition. This right of first offer provision was eliminated when the business management agreement was amended and restated on December 23, 2013.

RMR leases from us approximately 2,433 square feet of office space for two of its regional offices. We earned approximately $61,  $31 and $32 in rental income from RMR for leased office space for 2014, 2013 and 2012, respectively, not all of which was leased to RMR for the entire three year period.  Our office space leases with RMR are terminable by RMR if our management agreements with RMR are terminated. We may enter additional leases with RMR for its regional offices in the future.

Under our equity compensation plan adopted in 2009, or the 2009 Plan, we grant restricted shares to certain employees of RMR, some of whom are our officers. We granted a total of 51,150 restricted shares with an aggregate value of $1,191,  48,350 restricted shares with an aggregate value of $1,142, and 43,917 restricted shares with an aggregate value of $1,043 to such persons in 2014, 2013 and 2012, respectively, based upon the closing price of our common shares on the NYSE on the dates of grants. One fifth of those restricted shares vested on the grant dates and one fifth vests on each of the next four anniversaries of the grant dates. These share grants to RMR employees are in addition to the fees we pay to RMR. On occasion, we have entered into arrangements with former employees of RMR in connection with the termination of their employment with RMR, providing for the acceleration of vesting of restricted shares previously granted to them under the 2009 Plan. Additionally, each of our President and Chief Operating Officer and Treasurer and Chief Financial Officer received grants of restricted shares of other companies to which RMR provides management services in their capacities as officers of RMR.

On July 8, 2014, we and RMR entered into an agreement with Equity Commonwealth (formerly known as CommonWealth REIT), or EQC, pursuant to which we and RMR purchased shares of SIR from EQC on July 9, 2014.  For more information regarding this transaction, see below under “ EQC” and “ SIR”.

EQC: We were formed as a 100% owned subsidiary of EQC. In 2009, we completed our IPO, pursuant to which we ceased to be a majority owned subsidiary of EQC. One of our Managing Trustees, Mr. Barry Portnoy, was a managing trustee of EQC until March 25, 2014. Our other Managing Trustee, Mr. Adam Portnoy, was the president of EQC until May 23, 2014 and a managing trustee of EQC until March 25, 2014.  RMR provided business and property management services to EQC until EQC terminated its business and property management agreements with RMR on September 30, 2014.  After that termination, RMR’s services to EQC have been limited to management services in respect of EQC’s Australian assets and certain transition services.  

On March 15, 2013, EQC sold all 9,950,000 of our common shares it owned in a public offering. In connection with this public offering, on March 11, 2013, we entered into a registration agreement with EQC under which EQC agreed to pay all expenses incurred by us relating to the registration and sale of our common shares owned by EQC in the offering, pursuant to which EQC paid us $310.  In addition, under the registration agreement, EQC agreed to indemnify us and our officers, Trustees and controlling persons, and we agreed to indemnify EQC and its officers, trustees and controlling persons, against certain liabilities related to the public offering, including liabilities under the Securities Act.

On July 8, 2014, we and RMR entered into a stock purchase agreement, or the purchase agreement, with EQC, pursuant to which, on July 9, 2014, we acquired from EQC 21,500,000 common shares of SIR, and RMR acquired from EQC 500,000 SIR common shares. Our cash purchase price was equal to approximately $677,500, or $31.51 per share, plus approximately $11,300, or $0.53 per share, of accrued dividends as defined in the purchase agreement, for a total of approximately $688,800, before acquisition related costs. RMR purchased its 500,000 SIR common shares on the same terms, including for the same per share amounts that we paid. Under the purchase agreement, in the event that we or RMR consummates any sale of SIR common shares prior to July 9, 2015 and the price per share paid by the purchaser is greater than $31.51, we or RMR, as applicable, are required to pay to EQC an amount equal to 50% of the product of (i) the number of SIR common shares sold in the transaction times (ii) the excess of (x) the price per share paid by the purchaser and (y) $31.51. The foregoing requirement applies to any SIR common shares we or RMR own. In addition, we and RMR agreed, among other things, to indemnify EQC for certain claims related to the acquisition. In connection with the indemnity, we and RMR entered into an allocation agreement with regard to our respective liabilities in the event of a claim for indemnification.  As a result of this purchase, we are SIR's largest shareholder owning approximately 35.9% and 24.3% of SIR’s outstanding common shares as of December 31, 2014 and February 17, 2015, respectively. Additionally, in connection with this purchase, and in light of the fact that we would own greater than 10% of SIR’s outstanding common shares, SIR exempted us and our affiliates (as defined in the Maryland General Corporation Law), including, without limitation, RMR, from being “interested stockholders” under the Maryland Business Combination Act.

On July 23, 2014, we and EQC agreed to terminate the provisions of a transaction agreement that we entered in 2009 with EQC in connection with our IPO.  The agreement had placed restrictions on both our and EQC’s investments in real property and provided certain rights of first refusal with respect to properties which we or EQC determined to divest. 

We do not consider EQC to be an affiliate of us.

SIR: We are SIR's largest shareholder. Concurrently with the execution and delivery of the merger agreement, or the Merger Agreement, for the acquisition by SIR of Cole Corporate Income Trust, Inc., a Maryland corporation, or CCIT, we entered into a voting and standstill agreement with CCIT and American Realty Capital Properties, Inc., a Maryland corporation and parent of the advisor of CCIT, or ARCP, or the Voting Agreement.  SIR’s acquisition of CCIT pursuant to the Merger Agreement was completed on January 29, 2015. Pursuant to the Voting Agreement, we agreed to vote all of the SIR common shares beneficially owned by us in favor of the issuance of SIR common shares to the stockholders of CCIT as contemplated by the Merger Agreement, upon and subject to the terms and conditions of the Voting Agreement and the Merger Agreement.  The Voting Agreement also contains standstill provisions pursuant to which ARCP has agreed, among other things, not to make unsolicited proposals to acquire us or SIR for a period of 36 months. Concurrently with our entering into the Voting Agreement, RMR, which also provides management services to SIR, and Messrs. Barry Portnoy and Adam Portnoy, RMR’s principals, our Managing Trustees and managing trustees of SIR, also entered into a voting and standstill agreement on terms and conditions substantially similar to the Voting Agreement that also includes a standstill in respect of Senior Housing Properties Trust, a Maryland REIT, or SNH. One of our Independent Trustees also serves as an independent trustee of SIR, two of our Independent Trustees also serve as independent trustees of SNH and our President and Chief Operating Officer also serves as the president and chief operating officer of SIR. 

AIC: We, RMR, SIR and four other companies to which RMR provides management services currently own AIC, an Indiana insurance company, and are parties to an amended and restated shareholders agreement regarding AIC.  On May 9, 2014, as a result of a change in control of EQC, as defined in the amended and restated shareholders agreement, we and the other AIC shareholders purchased pro rata the AIC shares EQC owned in accordance with the terms of that agreement.  Pursuant to that purchase, we purchased 2,857 AIC shares from EQC for $825.  Following these purchases, we and the other remaining six AIC shareholders each own approximately 14.3% of AIC.  As of December 31, 2014, we have invested $6,019 in AIC since we became an equity owner of AIC in 2009.

All of our Trustees and most of the trustees and directors of the other AIC shareholders currently serve on the board of directors of AIC.  RMR provides management and administrative services to AIC pursuant to a management and administrative services agreement with AIC.  Our Governance Guidelines provide that any material transaction between us and AIC shall be reviewed, authorized and approved or ratified by the affirmative votes of both a majority of our Board of Trustees and a majority of our Independent Trustees. The shareholders agreement among us, the other shareholders of AIC and AIC includes arbitration provisions for the resolution of disputes.

In 2012 and 2013, we and the other shareholders of AIC purchased a one-year property insurance policy providing $500,000 of coverage pursuant to an insurance program arranged by AIC and with respect to which AIC is a reinsurer of certain coverage amounts. Our annual premium for this property insurance was $1,161 and $410 in 2013 and 2012, respectively, before adjustments made for acquisitions or dispositions we made during those periods. In June 2014, we and the other shareholders of AIC renewed our participation in this program. In connection with that renewal, we purchased a one-year property insurance policy providing $500,000 of coverage, with respect to which AIC is a reinsurer of certain coverage amounts. We paid AIC a premium, including taxes and fees, of approximately $526 in connection with that policy, which amount may be adjusted from time to time as we acquire or dispose of properties that are included in the policy.  Although we own less than 20% of AIC, we use the equity method to account for this investment because we believe that we have significant influence over AIC as all of our Trustees are also directors of AIC. Our investment in AIC had a carrying value of $6,946,  $6,031 and $5,747 as of December 31, 2014, 2013 and 2012, respectively, which amounts are included in other assets on our consolidated balance sheets. We recognized income of $87,  $334 and $316 related to our investment in AIC for 2014, 2013 and 2012, respectively.

We periodically consider the possibilities for expanding our insurance relationships with AIC to include other types of insurance and may in the future participate in additional insurance offerings AIC may provide or arrange. We may invest additional amounts in AIC in the future if the expansion of this insurance business requires additional capital, but we are not obligated to do so. By participating in this insurance business with RMR and the other companies to which RMR provides management services, we expect that we may benefit financially by possibly reducing our insurance expenses or by realizing our pro rata share of any profits of this insurance business.

Directors' and Officers' Liability Insurance:  In July 2013, we, RMR and five companies to which RMR then provided management services purchased a combined directors' and officers' liability insurance policy providing $10,000 in aggregate primary non-indemnifiable coverage and $5,000 in aggregate excess coverage and we also purchased from an unrelated third party insurer a separate directors' and officers' liability insurance policy providing $5,000 in coverage. We paid aggregate premiums of approximately $333 for these policies. In June 2014, we, RMR and four other companies to which RMR provides management services extended our and their combined directors’ and officers’ liability insurance policy, and we extended our separate directors’ and officers’ liability insurance policy, in each case for an interim period. We paid aggregate premiums of approximately $50 for these extensions.  In September 2014, we purchased a two year combined directors' and officers' insurance policy with RMR and five other companies to which RMR provides management services that provides $10,000 in aggregate primary coverage, including certain errors and omission coverage.  At that time, we also purchased separate additional one year directors' and officers' liability insurance policies that provide $20,000 of aggregate excess coverage plus $5,000 of excess non-indemnifiable coverage.  The total premium payable by us for these policies purchased in September 2014 was approximately $479 

Concentration
Concentration

Note 7. Concentration

Tenant and Credit Concentration

We define annualized rental income as the annualized contractual base rents from our tenants pursuant to our lease agreements with them as of the measurement date, plus straight line rent adjustments and estimated recurring expense reimbursements to be paid to us, and excluding lease value amortization. The U.S. Government, 12 state governments and the United Nations combined were responsible for approximately 93.0%,  92.6% and 93.8% of our annualized rental income, excluding properties classified as discontinued operations, as of December 31, 2014, 2013 and 2012, respectively. The U.S. Government is our largest tenant by annualized rental income and was responsible for approximately 69.0%,  69.0% and 71.0% of our annualized rental income, excluding properties classified as discontinued operations, as of December 31, 2014, 2013 and 2012, respectively.

Geographic Concentration

At December 31, 2014, our 72 properties (92 buildings), excluding one property classified as discontinued operations, were located in 31 states and the District of Columbia.  Properties located in Maryland,  California,  the District of Columbia,  Virginia,  Georgia,  New York and Massachusetts were responsible for approximately 11.2%,  11.0%,  9.9%,  9.8%,  8.9%,  8.2% and 5.5% of our annualized rental income as of December 31, 2014, respectively. 

Indebtedness
Indebtedness

Note 8.  Indebtedness

At December 31, 2014 and 2013, our outstanding indebtedness consisted of the following:

 

 

 

 

 

 

 

 

 

    

December 31,

    

December 31,

 

 

2014

 

2013

 

 

 

 

 

 

 

Unsecured revolving credit facility

 

$

 —

 

$

157,000 

Unsecured term loan, due in 2017

 

 

 —

 

 

350,000 

Unsecured term loan, due in 2020

 

 

300,000 

 

 

 —

Unsecured term loan, due in 2022

 

 

250,000 

 

 

 —

Senior unsecured notes, 3.75% interest rate, including unamortized discount of $2,577, due in 2019

 

 

347,423 

 

 

 —

Mortgage note payable, 5.55% interest rate, including unamortized premium of $2,167, due in 2016(1)

 

 

85,167 

 

 

Mortgage note payable, 5.73% interest rate, including unamortized premium of $177, due in 2015(1)

 

 

47,418 

 

 

48,377 

Mortgage note payable, 6.21% interest rate, due in 2016(1)

 

 

23,833 

 

 

24,147 

Mortgage note payable, 5.88% interest rate, due in 2021(1)

 

 

14,374 

 

 

Mortgage note payable, 7.00% interest rate, including unamortized premium of $605, due in 2019(1)

 

 

9,563 

 

 

9,919 

Mortgage note payable, 8.15% interest rate, including unamortized premium of $398, due in 2021(1)

 

 

7,339 

 

 

8,284 

 

 

$

1,085,117 

 

$

597,727 

(1)

We assumed these mortgages in connection with our acquisitions of certain properties.  The stated interest rates for these mortgage debts are the contractually stated rates.  We recorded the assumed mortgages at estimated fair value on the date of acquisition and we are amortizing the fair value premiums, if any, to interest expense over the respective terms of the mortgages to reduce interest expense to the estimated market interest rates as of the date of acquisition.

In March 2014, we assumed a mortgage with a balance of $14,524 in connection with a property acquisition.  This mortgage note is secured by the acquired property, bears interest at 5.88% per annum and is amortized on a 30 year schedule (which commenced upon the original issuance of the note by its former obligor) until maturity in August 2021.  We did not record a premium or discount on this assumed debt because we believed the interest rate payable under this mortgage was equal to the rate we would have had to pay for debt with the same maturity at the time we assumed this obligation.

In May 2014, we assumed a mortgage with a balance of $83,000 in connection with a property acquisition.  This mortgage note is secured by the acquired property, bears interest at 5.55% per annum and monthly payments of interest only are due until maturity in April 2016.  We recorded a $3,147 premium on this assumed debt, which reduced its effective interest rate to 3.50%, because we believed the interest rate payable under this mortgage was above the rate we would have had to pay for debt with the same maturity at the time we assumed this obligation.

On November 21, 2014, we replaced our then existing $550,000 unsecured revolving credit facility and $350,000 unsecured term loan with $1,300,000 of new credit facilities, consisting of our $750,000 unsecured revolving credit facility, a $250,000 unsecured term loan and a $300,000 unsecured term loan.  We recognized a loss on early extinguishment of debt of $766 during the year ended December 31, 2014 due to the write off of unamortized deferred financing fees related to the repayment and termination of our $550,000 unsecured revolving credit facility and our $350,000 unsecured term loan.

The maturity date of our revolving credit facility is January 31, 2019 and, subject to the payment of an extension fee and meeting certain other conditions, includes an option for us to extend the stated maturity date of our revolving credit facility by one year to January 31, 2020. Borrowings under our revolving credit facility bear interest at a rate of LIBOR plus a premium, which was 125 basis points as of December 31, 2014. We also pay a facility fee of 25 basis points per annum on the total amount of lending commitments under our revolving credit facility. Both the interest rate premium and the facility fee are subject to adjustment based upon changes to our credit ratings. As of December 31, 2014, the interest rate payable on borrowings under our revolving credit facility was 1.4%.  We had no borrowings outstanding under our new credit facility for the period from November 21, 2014, the date we entered into the credit agreement, to December 31, 2014, and we have $750,000 available under our new credit facility as of December 31, 2014.

The weighted average annual interest rate for borrowings under our then existing $550,000 unsecured revolving credit facility was 1.7%,  1.7% and 1.8%, respectively, for the period January 1, 2014 to November 20, 2014 and the years ended December 31, 2013 and 2012, respectively. 

Our $300,000 unsecured term loan, which matures on March 31, 2020, is prepayable without penalty at any time.  The amount outstanding under our $300,000 term loan bears interest at LIBOR plus a premium, which was 140 basis points as of December 31, 2014.  The interest rate premium is subject to adjustment based upon changes to our credit ratings.  As of December 31, 2014, the interest rate for the amount outstanding under our $300,000 term loan was 1.6%The weighted average interest rate under our $300,000 term loan was 1.9% for the period from November 21, 2014, the date we entered into the credit agreement, to December 31, 2014.

Our $250,000 unsecured term loan, which matures on March 31, 2022, is prepayable at any time.  If our $250,000 term loan is repaid prior to November 22, 2015, a prepayment premium of 2.0% of the amount repaid would be incurred.  If our $250,000 term loan is repaid during the period from November 22, 2015 to November 21, 2016, a prepayment premium of 1.0% of the amount repaid would be incurred.  Subsequent to November 21, 2016, no prepayment premiums would be incurred.  The amount outstanding under our $250,000 term loan bears interest at LIBOR plus a premium, which was 180 basis points as of December 31, 2014.  The interest rate premium is subject to adjustment based upon changes to our credit ratings.  As of December 31, 2014, the interest rate for the amount outstanding under our $250,000 term loan was 2.0%.  The weighted average interest rate under our $250,000 term loan was 2.3% for the period from November 21, 2014, the date we entered into the credit agreement, to December 31, 2014.

In addition, our credit agreement includes a feature under which the maximum borrowing availability under the new facilities may be increased to up to $2,500,000 on a combined basis in certain circumstances.

We had a $350,000 unsecured term loan that was scheduled to mature on January 11, 2017, and was prepayable without penalty at any time. Our $350,000 unsecured term loan bore interest at a rate of LIBOR plus a premium, which was 175 basis points as of November 20, 2014.  The interest rate premium was subject to adjustment based upon changes to our credit ratings. This $350,000 unsecured term loan was fully repaid on November 21, 2014 with proceeds from our $250,000 term loan and our $300,000 term loan. The weighted average interest rate for the amount outstanding under our then existing $350,000 term loan was 1.9% for both the period from January 1, 2014 to November 20, 2014 and 1.9% for the year ended December 31, 2013 and 2.0% for the period January 12, 2012, the date we entered into the loan agreement, to December 31, 2012.    

On July 9, 2014, we entered into a $500,000 unsecured term loan.    This term loan was scheduled to mature on July 8, 2015, and was prepayable without penalty at any time.  Our $500,000 unsecured term loan bore interest at a rate of LIBOR plus a premium, which was 175 basis points as of July 9, 2014.  The interest rate premium was subject to adjustment based upon changes to our credit ratings.  We used the net proceeds of our new term loan to fund a portion of the purchase price of the SIR common shares we acquired on July 9, 2014.  On July 29, 2014, we sold 15,525,000 of our common shares of beneficial interest, $.01 par value per share, or our common shares, in a public offering at a price of $23.50 per share for net proceeds of approximately $349,787, after deducting the underwriting discount and other offering expenses.  On August 18, 2014, we issued $350,000 of 3.75% unsecured senior notes due August 15, 2019 in a public offering for net proceeds of approximately $344,293, after deducting the underwriting discount and other offering expenses.  The net proceeds from these offerings were used to fully repay amounts outstanding under our $500,000 term loan and to reduce amounts outstanding under our then existing revolving credit facility.  We recorded a loss on early extinguishment of debt of $541 during the year ended December 31, 2014 which represented the unamortized deferred financing fees related to the $500,000 term loan. See Notes 6 and 11 for further information regarding our SIR investment.

Our credit agreement provides for acceleration of payment of all amounts due thereunder upon the occurrence and continuation of certain events of default, such as a change of control of us, which includes RMR ceasing to act as our business manager and property manager. Our senior unsecured notes indenture its supplement and our credit agreement also contain a number of covenants, including covenants that restrict our ability to incur debts or to make distributions under certain circumstances and require us to maintain financial ratios and a minimum net worth.  We believe we were in compliance with the terms and conditions of the respective covenants under our senior unsecured notes indenture and its supplement and our credit agreement at December 31, 2014.

At December 31, 2014,  six of our properties (eight buildings) with an aggregate net book value of $258,869 secured six mortgage notes that were assumed in connection with the acquisition of such properties. Our mortgage notes are non-recourse and do not contain any material financial covenants.

Fair Value of Assets and Liabilities
Fair Value of Assets and Liabilities

Note 9. Fair Value of Assets and Liabilities

Our assets and liabilities at December 31, 2014 include cash and cash equivalents, restricted cash, rents receivable, mortgage notes payable, accounts payable, senior unsecured notes, term loans, amounts due to related persons, other accrued expenses and security deposits. At December 31, 2014, the fair values of our financial instruments approximated their carrying values in our consolidated financial statements due to their short term nature or variable interest rates, except as follows:

 

 

 

 

 

 

 

 

 

    

Carrying Amount

    

Fair Value

Senior unsecured notes, 3.75% interest rate, including unamortized discount of $2,577, due in 2019

 

$

347,423 

 

$

356,129 

Mortgage note payable, 5.55% interest rate, including unamortized premium of $2,167, due in 2016(1)

 

 

85,167 

 

 

85,171 

Mortgage note payable, 5.73% interest rate, including unamortized premium of $177, due in 2015(1)

 

 

47,418 

 

 

48,233 

Mortgage note payable, 6.21% interest rate, due in 2016(1)

 

 

23,833 

 

 

25,394 

Mortgage note payable, 5.88% interest rate, due in 2021(1)

 

 

14,374 

 

 

15,249 

Mortgage note payable, 7.00% interest rate, including unamortized premium of $605, due in 2019(1)

 

 

9,563 

 

 

10,275 

Mortgage note payable, 8.15% interest rate, including unamortized premium of $398, due in 2021(1)

 

 

7,339 

 

 

7,956 

 

 

$

535,117 

 

$

548,407 

(1)

We assumed these mortgages in connection with our acquisitions of certain properties.  The stated interest rates for these mortgage debts are the contractually stated rates.  We recorded the assumed mortgages at estimated fair value on the date of acquisition and we are amortizing the fair value premiums, if any, to interest expense over the respective terms of the mortgages to reduce interest expense to the estimated market interest rates as of the date of acquisition.

We estimate the fair value of our unsecured senior notes using an average of the bid and ask price of the notes (Level 1 inputs as defined in the fair value hierarchy under GAAP). We estimate the fair values of our mortgage notes payable by using discounted cash flow analyses and currently prevailing market terms as of the measurement date (Level 3 inputs as defined in the fair value hierarchy under GAAP).  Because Level 3 inputs are unobservable, our estimated fair value may differ materially from the actual fair value.

The table below presents two of our assets measured on a non-recurring basis at fair value at December 31, 2014, categorized by the level of inputs used in the valuation of these assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

    

 

    

Quoted Prices in

    

    

 

    

Significant

 

 

 

 

 

Active Markets for

 

Significant Other

 

Unobservable

 

 

 

 

 

Identical Assets

 

Observable Inputs

 

Inputs

Description

 

Total

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

 

 

 

 

 

 

 

 

 

 

 

 

Property held for sale and classified as discontinued operations(1)

 

$

12,260 

 

$

 

$

 

$

12,260 

Property held for sale and classified as held for sale in continuing operations(2)

 

 

29,896 

 

 

 

 

 

 

29,896 

 

 

$

42,156 

 

$

 

$

 

$

42,156 

(1)

The estimated fair value at December 31, 2014 of this property, for which a loss on asset impairment was recognized during the year ended December 31, 2013, is based upon broker estimates of value less estimated sales costs (Level 3 inputs as defined in the fair value hierarchy under GAAP).

(2)

The estimated fair value at December 31, 2014 of this property, for which a loss on asset impairment was recognized during the year ended December 31, 2014, is based upon sales price less estimated sales costs (Level 3 inputs as defined in the fair value hierarchy under GAAP).

During the three months ended March 31, 2014, we increased the carrying value of a property held for sale due to an increase in its estimated fair value.  We sold this property in February 2014.  See Note 5 for additional information regarding this property.

Shareholders' Equity
Shareholders' Equity

Note 10. Shareholders’ Equity

Common Share Awards

We have common shares available for issuance under the terms of our 2009 Plan. As described in Note 6, we awarded common shares to our officers and certain employees of RMR in 2012, 2013 and 2014. We also awarded each of our Trustees 2,500 common shares in 2014 with an aggregate market value of $318  ($64 per Trustee), 2,000 common shares in 2013 with an aggregate market value of $266  ($53 per Trustee) and 2,000 common shares in 2012 with an aggregate market value of $224  ($45 per Trustee) as part of their annual compensation, based upon the closing price of our common shares on the NYSE on the date of grant. The common shares awarded to our Trustees vested immediately. The common shares awarded to our officers and certain employees of RMR vest in five equal annual installments beginning on the date of grant. We include and base the value of awarded shares in general and administrative expenses at the time the awards vest.

A summary of shares granted and vested under the terms of our 2009 Plan for the years ended December 31, 2014, 2013 and 2012, is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2014

 

2013

 

2012

 

 

 

 

Weighted

 

 

 

Weighted

 

 

 

Weighted

 

 

Number

 

Average

 

Number

 

Average

 

Number

 

Average

 

 

of

 

Grant Date

 

of

 

Grant Date

 

of

 

Grant Date

 

 

Shares

 

Fair Value

 

Shares

 

Fair Value

 

Shares

 

Fair Value

Unvested shares, beginning of year

85,451 

 

$

23.71 

 

76,104 

 

$

23.82 

 

64,270 

 

$

23.89 

Shares granted

63,650 

 

 

23.70 

 

58,350 

 

 

24.12 

 

93,058 

 

 

23.72 

Shared forfeited or repurchased

 -

 

 

 -

 

(450)

 

 

23.68 

 

(820)

 

 

23.99 

Shares vested

(58,763)

 

 

24.17 

 

(48,553)

 

 

24.38 

 

(80,404)

 

 

23.76 

Unvested shares, end of year

90,338 

 

 

23.40 

 

85,451 

 

 

23.71 

 

76,104 

 

 

23.82 

The 90,338 unvested shares as of December 31, 2014 are scheduled to vest as follows: 34,040 shares in 2015, 26,952 shares in 2016, 19,116 shares in 2017 and 10,230 in 2018. As of December 31, 2014, the estimated future compensation expense for the unvested shares was $2,079 based on the closing share price of our common shares on the NYSE on December 31, 2014 of $23.01. The weighted average period over which the compensation expense will be recorded is approximately 22 months. During the years ended December 31, 2014, 2013 and 2012, we recorded $1,165,  $1,269 and $1,598, respectively, of compensation expense related to our 2009 Plan. At December 31, 2014,  1,659,562 of our common shares remained available for issuance under the 2009 Plan.

Share Issuances

In July 2014, we sold 15,525,000 of our common shares in a public offering at a price of $23.50 per share for net proceeds of $349,787.  

During the year ended December 31, 2014 and the period January 1, 2015 to February 19, 2015, we issued 38,559 and 7,749, respectively, of our common shares to RMR as part of the business management fee payable by us under our business management agreement. See Note 6 for further information regarding this agreement.

Distributions

On February 21, 2014,  May 21, 2014,  August 22, 2014 and November 20, 2014 we paid a $0.43 per share distribution to our common shareholders. On January 12, 2015, we declared a dividend payable to common shareholders of record on January 23, 2015 in the amount of $0.43 per share. We expect to pay this distribution on or about February 26, 2015.

Cash distributions per share paid or payable by us to our common shareholders for the year ended December 31, 2014, 2013, and 2012 were $1.72,  $1.72 and $1.69, respectively. The characterization of our distributions paid or accrued in 2014 was 55.12% ordinary income, 41.94% return of capital and 2.94% IRC Section 1250 gain. The characterization of our distributions paid or accrued in 2013 was 82.92% ordinary income, 9.55% return of capital, 7.01% capital gain and 0.52% IRC Section 1250 gain. The characterization of our distributions paid or accrued in 2012 was 80.36% ordinary income and 19.64% return of capital.

Segment Information
Segment Information

Note 12. Segment Information

We operate in two business segments: ownership of properties that are primarily leased to government tenants and our equity method investment in SIR:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2014

 

 

Investment

 

Investment

 

 

 

 

 

 

 

    

in Real Estate

    

in SIR

    

Corporate

    

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income 

 

$

251,031 

 

$

 —

 

$

 —

 

$

251,031 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Real estate taxes

 

 

28,389 

 

 

 —

 

 

 —

 

 

28,389 

Utility expenses

 

 

19,369 

 

 

 —

 

 

 —

 

 

19,369 

Other operating expenses

 

 

45,982 

 

 

 —

 

 

 —

 

 

45,982 

Depreciation and amortization

 

 

66,593 

 

 

 —

 

 

 —

 

 

66,593 

Loss on asset impairment

 

 

2,016 

 

 

 —

 

 

 —

 

 

2,016 

Acquisition related costs

 

 

1,344 

 

 

 —

 

 

 —

 

 

1,344 

General and administrative

 

 

 —

 

 

 —

 

 

15,809 

 

 

15,809 

Total expenses

 

 

163,693 

 

 

 —

 

 

15,809 

 

 

179,502 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

 

87,338 

 

 

 —

 

 

(15,809)

 

 

71,529 

Interest and other income

 

 

 —

 

 

 —

 

 

69 

 

 

69 

Interest expense

 

 

(7,820)

 

 

 —

 

 

(20,228)

 

 

(28,048)

Loss on early extinguishment of debt

 

 

 —

 

 

 —

 

 

(1,307)

 

 

(1,307)

Income (loss) from continuing operations before income taxes and

 

 

 

 

 

 

 

 

 

 

 

 

equity in earnings of investees

 

 

79,518 

 

 

 —

 

 

(37,275)

 

 

42,243 

Income tax expense

 

 

 —

 

 

 —

 

 

(117)

 

 

(117)

Loss on issuance of shares by an equity investee

 

 

 —

 

 

(53)

 

 

 —

 

 

(53)

Equity in earnings of investees

 

 

 —

 

 

10,876 

 

 

87 

 

 

10,963 

Income from continuing operations

 

 

79,518 

 

 

10,823 

 

 

(37,305)

 

 

53,036 

Income from discontinued operations

 

 

3,498 

 

 

 —

 

 

 —

 

 

3,498 

Net income (loss)

 

$

83,016 

 

$

10,823 

 

$

(37,305)

 

$

56,534 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets

 

$

1,714,130 

 

$

680,137 

 

$

33,348 

 

$

2,427,615 

 

Selected Quarterly Financial Data (Unaudited)
Selected Quarterly Financial Data (Unaudited)

Note 13. Selected Quarterly Financial Data (Unaudited)

The following is a summary of our unaudited quarterly results of operations for 2014 and 2013.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2014

 

 

First

 

Second

 

Third

 

Fourth

 

 

Quarter

 

Quarter

 

Quarter

 

Quarter

Rental income

$

59,820 

 

$

62,428 

 

$

64,158 

 

$

64,625 

Net income

 

15,190 

 

 

14,608 

 

 

12,622 

 

 

14,114 

Net income per common share (basic and diluted)

 

0.28 

 

 

0.27 

 

 

0.19 

 

 

0.20 

Common distributions paid

 

0.43 

 

 

0.43 

 

 

0.43 

 

 

0.43 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2013

 

 

First

 

Second

 

Third

 

Fourth

 

 

Quarter

 

Quarter

 

Quarter

 

Quarter

Rental income

$

56,304 

 

$

55,934 

 

$

56,401 

 

$

58,271 

Net income

 

24,726 

 

 

15,204 

 

 

1,966 

 

 

12,724 

Net income per common share (basic and diluted)

 

0.45 

 

 

0.28 

 

 

0.04 

 

 

0.23 

Common distributions paid

 

0.43 

 

 

0.43 

 

 

0.43 

 

 

0.43 

 

Pro Forma Information (unaudited)
Pro Forma Information (unaudited)

Note 14. Pro Forma Information (unaudited)

During the years ended December  31, 2014, we purchased four properties (five buildings) for an aggregate purchase price of $167,525, including the assumption of $97,524 of mortgage debt and excluding acquisition costs.  The following table presents our pro forma results of operations as if these acquisitions and financing activities were completed on January 1, 2013. This pro forma data is not necessarily indicative of what our actual results of operations would have been for the periods presented, nor does it represent the results of operations for any future period. Differences could result from various factors, including but not limited to, additional property acquisitions, property sales, changes in interest rates and changes in our debt or equity capital and such differences could be significant.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Years ended December 31,

 

 

    

    

2014

    

2013

 

 

Total Revenues

 

$

258,604 

 

$

246,006 

 

 

Net income

 

 

57,214 

 

 

51,500 

 

 

Per share data (basic and diluted):

 

 

 

 

 

 

 

 

Net income

 

$

0.93 

 

$

0.94 

 

 

During the year ended December 31, 2014, we recognized revenues of $11,240 and operating income of $1,438 arising from the above referenced acquisitions.

SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION

[  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GOVERNMENT PROPERTIES INCOME TRUST

 

SCHEDULE III

 

REAL ESTATE AND ACCUMULATED DEPRECIATION

 

December 31, 2014

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Initial Cost to Company

 

Capitalized

 

Cost amount carried at Close of Period

 

 

 

 

 

Original

 

 

 

 

 

 

 

 

 

Buildings and

 

Subsequent to

 

 

 

Buildings and

 

 

 

Accumulated

 

Date(s)

 

Construction

 

Property

 

Location

 

Encumbrances(1)

 

Land

 

Equipment

 

Acquisition

 

Land

 

Equipment

 

Total (2)

 

Depreciation(3)

 

Acquired

 

Date(s)

 131 Clayton Street

 

Montgomery, AL

 

$                     - 

 

$                  920 

 

$                        9,084 

 

$                       16 

 

$                        920 

 

$                        9,100 

 

$                   10,020 

 

$                          (796)

 

6/22/2011

 

2007

 4344 Carmichael Road

 

Montgomery, AL

 

 -

 

1,374 

 

11,658 

 

 -

 

1,374 

 

11,658 

 

13,032 

 

(291)

 

12/17/2013

 

2009

15451 North 28th Avenue

 

Phoenix, AZ

 

 -

 

1,917 

 

7,416 

 

 -

 

1,917 

 

7,416 

 

9,333 

 

(62)

 

9/10/2014

 

1996

 711 14th Avenue

 

Safford, AZ

 

 -

 

460 

 

11,708 

 

106 

 

460 

 

11,814 

 

12,274 

 

(1,322)

 

6/16/2010

 

1992

 10949 N. Mather Boulevard

 

Rancho Cordova, CA

 

 -

 

562 

 

16,923 

 

 -

 

562 

 

16,923 

 

17,485 

 

(494)

 

10/30/2013

 

2012

 4181 Ruffin Road

 

San Diego, CA

 

 -

 

5,250 

 

10,549 

 

3,698 

 

5,250 

 

14,247 

 

19,497 

 

(1,624)

 

7/16/2010

 

1981

 4560 Viewridge Road

 

San Diego, CA

 

 -

 

4,269 

 

18,316 

 

906 

 

4,347 

 

19,144 

 

23,491 

 

(8,635)

 

3/31/1997

 

1996

 5045 East Butler Street

 

Fresno, CA

 

 -

 

7,276 

 

61,118 

 

 

7,277 

 

61,125 

 

68,402 

 

(18,910)

 

8/29/2012

 

1971

 9800 Goethe Road

 

Sacramento, CA

 

 -

 

1,550 

 

12,263 

 

1,491 

 

1,550 

 

13,754 

 

15,304 

 

(1,798)

 

12/23/2009

 

1988

10 

 9815 Goethe Road

 

Sacramento, CA

 

 -

 

1,450 

 

9,465 

 

1,523 

 

1,450 

 

10,988 

 

12,438 

 

(869)

 

9/14/2011

 

1992

11 

 Capital Place

 

Sacramento, CA

 

 -

 

2,290 

 

35,891 

 

3,804 

 

2,290 

 

39,695 

 

41,985 

 

(4,898)

 

12/17/2009

 

1988

12 

 Sky Park Centre

 

San Diego, CA

 

 -

 

685 

 

5,530 

 

 

685 

 

5,534 

 

6,219 

 

(1,734)

 

6/24/2002

 

1986

13 

 Turning Basin Business Park

 

Stockton, CA

 

 -

 

563 

 

5,470 

 

 -

 

563 

 

5,470 

 

6,033 

 

(330)

 

7/20/2012

 

2012

14 

 12795 West Alameda Parkway

 

Lakewood, CO

 

7,339 

 

2,640 

 

23,777 

 

1,045 

 

2,640 

 

24,822 

 

27,462 

 

(3,047)

 

1/15/2010

 

1997

15 

 16194 West 45th Street

 

Golden, CO

 

 -

 

494 

 

152 

 

6,457 

 

495 

 

6,608 

 

7,103 

 

(2,732)

 

3/31/1997

 

1997

16 

Corporate Center

 

Lakewood, CO

 

 -

 

2,886 

 

27,537 

 

3,849 

 

2,887 

 

31,385 

 

34,272 

 

(8,841)

 

10/11/2002

 

1981

17 

 20 Massachusetts Avenue

 

Washington, DC

 

 -

 

12,008 

 

51,528 

 

20,858 

 

12,228 

 

72,166 

 

84,394 

 

(27,669)

 

3/31/1997

 

1996

18 

 625 Indiana Avenue

 

Washington, DC

 

 -

 

26,000 

 

25,955 

 

3,437 

 

26,000 

 

29,392 

 

55,392 

 

(3,238)

 

8/17/2010

 

1989

19 

 7850 Southwest 6th Court

 

Plantation, FL

 

 -

 

4,800 

 

30,592 

 

383 

 

4,800 

 

30,975 

 

35,775 

 

(2,816)

 

5/12/2011

 

1999

20 

 8900 Grand Oak Circle

 

Tampa, FL

 

9,563 

 

1,100 

 

11,773 

 

133 

 

1,100 

 

11,906 

 

13,006 

 

(1,261)

 

10/15/2010

 

1994

21 

 181 Spring Street NW

 

Atlanta, GA

 

 -

 

4,047 

 

20,017 

 

 

4,048 

 

20,017 

 

24,065 

 

(1,209)

 

7/25/2012

 

2005

22 

 220 E. Bryan Street

 

Savannah, GA

 

 -

 

950 

 

2,376 

 

46 

 

950 

 

2,422 

 

3,372 

 

(274)

 

7/16/2010

 

1990

23 

 4712 Southpark Boulevard

 

Ellenwood, GA

 

 -

 

1,390 

 

19,635 

 

 -

 

1,390 

 

19,635 

 

21,025 

 

(1,186)

 

7/25/2012

 

2007

24 

Corporate Square

 

Atlanta, GA

 

 -

 

3,996 

 

29,762 

 

4,666 

 

3,996 

 

34,428 

 

38,424 

 

(8,270)

 

7/16/2004

 

1967

25 

 Executive Park

 

Atlanta, GA

 

 -

 

1,521 

 

11,826 

 

3,869 

 

1,521 

 

15,695 

 

17,216 

 

(3,195)

 

7/16/2004

 

1972

26 

 One Georgia Center

 

Atlanta, GA

 

 -

 

10,250 

 

27,933 

 

175 

 

10,250 

 

28,108 

 

38,358 

 

(2,297)

 

9/30/2011

 

1968

27 

 GSA Boise Portfolio

 

Boise, ID

 

 -

 

3,390 

 

29,026 

 

330 

 

3,391 

 

29,355 

 

32,746 

 

(1,701)

 

9/11/2012

 

1996; 1997; 2002

28 

 2020 S. Arlington Heights

 

Arlington Heights, IL

 

 -

 

1,450 

 

13,160 

 

846 

 

1,450 

 

14,006 

 

15,456 

 

(1,770)

 

12/29/2009

 

2002

29 

 Intech Park

 

Indianapolis, IN

 

47,418 

 

4,170 

 

68,888 

 

2,264 

 

4,170 

 

71,152 

 

75,322 

 

(5,748)

 

10/14/2011

 

2000; 2001; 2008

30 

 400 State Street

 

Kansas City, KS

 

 -

 

640 

 

9,932 

 

1,345 

 

640 

 

11,277 

 

11,917 

 

(1,315)

 

6/16/2010

 

1990

31 

 7125 Industrial Road

 

Florence, KY

 

 -

 

1,698 

 

11,722 

 

10 

 

1,698 

 

11,732 

 

13,430 

 

(586)

 

12/31/2012

 

1980

32 

 25 Newport Avenue

 

Quincy, MA

 

 -

 

2,700 

 

9,199 

 

348 

 

2,700 

 

9,547 

 

12,247 

 

(922)

 

2/16/2011

 

1985

33 

 251 Causeway Street

 

Boston, MA

 

 -

 

5,100 

 

17,293 

 

684 

 

5,100 

 

17,977 

 

23,077 

 

(1,915)

 

8/17/2010

 

1988

34 

 75 Pleasant Street

 

Malden, MA

 

 -

 

1,050 

 

31,086 

 

118 

 

1,050 

 

31,204 

 

32,254 

 

(3,565)

 

5/24/2010

 

2008

35 

 One Montvale Avenue

 

Stoneham, MA

 

 -

 

1,670 

 

11,035 

 

930 

 

1,670 

 

11,965 

 

13,635 

 

(1,277)

 

6/16/2010

 

1987

36 

 20400 Century Boulevard

 

Germantown, MD

 

 -

 

2,305 

 

9,890 

 

740 

 

2,347 

 

10,588 

 

12,935 

 

(4,738)

 

3/31/1997

 

1995

37 

 2115 East Jefferson Street

 

Rockville, MD

 

 -

 

3,349 

 

11,152 

 

 -

 

3,349 

 

11,152 

 

14,501 

 

(372)

 

8/27/2013

 

2003

38 

 3300 75th Avenue

 

Landover, MD

 

23,833 

 

4,110 

 

36,371 

 

402 

 

4,110 

 

36,773 

 

40,883 

 

(4,423)

 

2/26/2010

 

2004

39 

 4201 Patterson Avenue

 

Baltimore, MD

 

 -

 

900 

 

8,097 

 

2,240 

 

901 

 

10,336 

 

11,237 

 

(3,421)

 

10/15/1998

 

1989

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GOVERNMENT PROPERTIES INCOME TRUST

 

SCHEDULE III

 

REAL ESTATE AND ACCUMULATED DEPRECIATION

 

December 31, 2014

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Initial Cost to Company

 

Capitalized

 

Cost amount carried at Close of Period

 

 

 

 

 

Original

 

 

 

 

 

 

 

 

 

Buildings and

 

Subsequent to

 

 

 

Buildings and

 

 

 

Accumulated

 

Date(s)

 

Construction

 

Building

 

City

 

Encumbrances(1)

 

Land

 

Equipment

 

Acquisition

 

Land

 

Equipment

 

Total (2)

 

Depreciation(3)

 

Acquired

 

Date(s)

40 

 1401 Rockville Pike

 

Rockville, MD

 

$                     - 

 

$               3,251 

 

$                      29,258 

 

$                  5,460 

 

$                      3,248 

 

$                       34,721 

 

$                    37,969 

 

$                     (13,286)

 

2/2/1998

 

1986 
41 

 Meadows Business Park

 

Woodlawn, MD

 

 -

 

3,735 

 

21,509 

 

213 

 

3,735 

 

21,722 

 

25,457 

 

(2,117)

 

2/15/2011

 

1973 
42 

 Rutherford Business Park

 

Windsor Mill, MD

 

 -

 

1,598 

 

10,219 

 

 

1,598 

 

10,227 

 

11,825 

 

(533)

 

11/16/2012

 

1972 
43 

 11411 E. Jefferson Avenue

 

Detroit, MI

 

 -

 

630 

 

18,002 

 

 -

 

630 

 

18,002 

 

18,632 

 

(2,100)

 

4/23/2010

 

2009 
44 

 330 South Second Avenue

 

Minneapolis, MN

 

 -

 

3,990 

 

18,186 

 

7,640 

 

3,990 

 

25,826 

 

29,816 

 

(2,407)

 

7/16/2010

 

1980 
45 

 Rosedale Corporate Plaza

 

Roseville, MN

 

 -

 

672 

 

6,045 

 

1,295 

 

672 

 

7,340 

 

8,012 

 

(2,423)

 

12/1/1999

 

1987 
46 

 1300 Summit Street

 

Kansas City, MO

 

 -

 

2,776 

 

12,070 

 

197 

 

2,776 

 

12,267 

 

15,043 

 

(684)

 

11/16/2012

 

2011 
47 

 4241-4300 NE 34th Street

 

Kansas City, MO

 

 -

 

1,443 

 

6,193 

 

3,769 

 

1,780 

 

9,625 

 

11,405 

 

(4,249)

 

3/31/1997

 

1995 
48 

 1220 Echelon Parkway

 

Jackson, MS

 

 -

 

440 

 

25,458 

 

49 

 

440 

 

25,507 

 

25,947 

 

(1,541)

 

7/25/2012

 

2009 
49 

 10-12 Celina Avenue

 

Nashua, NH

 

 -

 

3,000 

 

14,052 

 

154 

 

3,000 

 

14,206 

 

17,206 

 

(1,900)

 

8/31/2009

 

1997 
50 

 50 West State Street

 

Trenton, NJ

 

 -

 

5,000 

 

38,203 

 

1,334 

 

5,000 

 

39,537 

 

44,537 

 

(3,889)

 

12/30/2010

 

1989 
51 

 435 Montano Boulevard

 

Albuquerque, NM

 

 -

 

710 

 

1,651 

 

147 

 

710 

 

1,798 

 

2,508 

 

(254)

 

7/16/2010

 

1984 
52 

 138 Delaware Avenue

 

Buffalo, NY

 

 -

 

4,405 

 

18,899 

 

5,016 

 

4,485 

 

23,835 

 

28,320 

 

(8,837)

 

3/31/1997

 

1994 
53 

 305 East 46th Street

 

New York, NY

 

 -

 

36,800 

 

66,661 

 

1,217 

 

36,800 

 

67,878 

 

104,678 

 

(5,991)

 

5/27/2011

 

2008 
54 

 5000 Corporate Court

 

Holtsville, NY

 

 -

 

6,530 

 

17,711 

 

1,106 

 

6,530 

 

18,817 

 

25,347 

 

(1,551)

 

8/31/2011

 

2000 
55 

 Airline Corporate Center

 

Colonie, NY

 

 -

 

790 

 

6,400 

 

 -

 

790 

 

6,400 

 

7,190 

 

(400)

 

6/22/2012

 

2004 
56 

 4600 25th Avenue

 

Salem, OR

 

 -

 

6,510 

 

17,973 

 

3,920 

 

6,510 

 

21,893 

 

28,403 

 

(1,672)

 

12/20/2011

 

2007 
57 

 Synergy Business Park

 

Columbia, SC

 

 -

 

1,439 

 

11,143 

 

2,488 

 

1,439 

 

13,631 

 

15,070 

 

(2,039)

 

5/10/2006; 9/17/2010

 

1982; 1985

58 

 One Memphis Place

 

Memphis, TN

 

 -

 

1,630 

 

5,645 

 

897 

 

1,630 

 

6,542 

 

8,172 

 

(730)

 

9/17/2010

 

1985 
59 

 701 Clay Road

 

Waco, TX

 

 -

 

2,030 

 

8,708 

 

2,100 

 

2,060 

 

10,778 

 

12,838 

 

(4,081)

 

12/23/1997

 

1997 
60 

 Aquia Commerce Center

 

Stafford, VA

 

 -

 

2,090 

 

7,465 

 

162 

 

2,090 

 

7,627 

 

9,717 

 

(665)

 

6/22/2011

 

1988; 1999

61 

 Enterchange at Meadowville

 

Chester, VA

 

 -

 

1,478 

 

9,594 

 

235 

 

1,478 

 

9,829 

 

11,307 

 

(320)

 

8/28/2013

 

2011 
62 

 Pender Business Park

 

Fairfax, VA

 

 -

 

2,529 

 

21,386 

 

87 

 

2,529 

 

21,473 

 

24,002 

 

(623)

 

11/4/2013

 

2000 
63 

3920 Pender Drive

 

Fairfax, VA

 

14,374 

 

2,964 

 

12,840 

 

 

2,963 

 

12,850 

 

15,813 

 

(241)

 

3/21/2014

 

1981 
64 

1759 & 1760 Business Park Drive

 

Reston, VA

 

85,167 

 

9,066 

 

78,658 

 

51 

 

9,066 

 

78,709 

 

87,775 

 

(1,147)

 

5/28/2014

 

1987 
65 

9960 Maryland Drive1

 

Richmond, VA

 

 -

 

2,614 

 

15,930 

 

29 

 

2,614 

 

15,959 

 

18,573 

 

(232)

 

5/20/2014

 

1994 
66 

 65 Bowdoin Street

 

S. Burlington, VT

 

 -

 

700 

 

8,416 

 

120 

 

700 

 

8,536 

 

9,236 

 

(1,007)

 

4/9/2010

 

2009 
67 

 840 North Broadway

 

Everett, WA

 

 -

 

3,360 

 

15,376 

 

159 

 

3,360 

 

15,535 

 

18,895 

 

(965)

 

6/28/2012

 

1985 
68 

 Stevens Center

 

Richland, WA

 

 -

 

3,970 

 

17,035 

 

769 

 

4,042 

 

17,732 

 

21,774 

 

(7,732)

 

3/31/1997

 

1995 
69 

 11050 West Liberty Drive

 

Milwaukee, WI

 

 -

 

945 

 

4,539 

 

132 

 

945 

 

4,671 

 

5,616 

 

(424)

 

6/9/2011

 

2006 
70 

 2029 Stonewall Jackson Drive

 

Falling Waters, WV

 

 -

 

906 

 

3,886 

 

263 

 

922 

 

4,133 

 

5,055 

 

(1,795)

 

3/31/1997

 

1993 
71 

 5353 Yellowstone Road

 

Cheyenne, WY

 

 -

 

1,915 

 

8,217 

 

1,193 

 

1,950 

 

9,375 

 

11,325 

 

(4,405)

 

3/31/1997

 

1995 

 

 

 

 

 

$         187,694 

 

$           253,096 

 

$                 1,322,433 

 

$              106,951 

 

$                  254,008 

 

$                  1,428,472 

 

$               1,682,480 

 

$                   (219,791)

 

 

 

 

 

(1)

Includes the unamortized balance of the fair value adjustments. 

(2)

Excludes value of real estate intangibles. Aggregate cost for federal income tax purposes is approximately $1,953,910.

(3)

Depreciation on building and improvements is provided for periods ranging up to 40 years and on equipment up to 12 years.

 

GOVERNMENT PROPERTIES INCOME TRUST

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2014

(dollars in thousands)

 

Analysis of the carrying amount of real estate properties and accumulated depreciation:

[  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real Estate

 

Accumulated

 

 

 

 

Properties

 

Depreciation

Balance at December 31, 2011

$

1,288,453 

 

$

139,210 

 

Additions

 

192,560 

 

 

30,601 

 

Disposals

 

(13,150)

 

 

(13,150)

Balance at December 31, 2012

 

1,467,863 

 

 

156,661 

 

Additions

 

103,413 

 

 

33,688 

 

Disposals

 

(2,714)

 

 

(2,714)

Balance at December 31, 2013

 

1,568,562 

 

 

187,635 

 

Additions

 

151,316 

 

 

37,671 

 

Loss on asset impairment

 

(7,058)

 

 

(5,071)

 

Disposals

 

(444)

 

 

(444)

 

Reclassification of assets held for sale

 

(29,896)

 

 

 -

Balance at December 31, 2014

$

1,682,480 

 

$

219,791 

 

Summary of Significant Accounting Policies (Policies)

Basis of Presentation.  These consolidated financial statements include the accounts of us and our subsidiaries, all of which are 100% owned directly or indirectly by us. All intercompany transactions and balances with or among our consolidated subsidiaries have been eliminated.

We account for our investments in Affiliates Insurance Company, or AIC, and SIR using the equity method of accounting. Significant influence is present through common representation on the boards of trustees or directors of us, AIC and SIR. Our Managing Trustees are also the managing trustees of SIR.  Our Managing Trustees are also owners of Reit Management & Research LLC, or RMR, which is the manager of us, AIC and SIR, each of our Trustees is a director of AIC and one of our Independent Trustees is also an independent trustee of SIR. See Notes 6 and 11 for a further discussion of our investments in AIC and SIR.

Real Estate Properties.  We record our properties at cost and provide depreciation on real estate investments on a straight line basis over estimated useful lives generally ranging from 7 to 40 years.  In some circumstances, we engage independent real estate appraisal firms to provide market information and evaluations which are relevant to our purchase price allocations and determinations of useful lives; however, we are ultimately responsible for the purchase price allocations and determinations of useful lives.

We allocate the purchase prices of our properties to land, building and improvements based on determinations of the fair values of these assets assuming the properties are vacant. We determine the fair value of each property using methods similar to those used by independent appraisers. For properties qualifying as acquired businesses under Accounting Standards Codification 805, Business Combinations, we allocate a portion of the purchase price of our properties to above market and below market leases based on the present value (using an interest rate which reflects the risks associated with acquired in place leases at the time each property was acquired by us) of the difference, if any, between (i) the contractual amounts to be paid pursuant to the acquired in place leases and (ii) our estimates of fair market lease rates for the corresponding leases, measured over a period equal to the terms of the respective leases. We allocate a portion of the purchase price to acquired in place leases and tenant relationships based upon market estimates to lease up the property based on the leases in place at the time of purchase.  We allocate this aggregate value between acquired in place lease values and tenant relationships based on our evaluation of the specific characteristics of each tenant’s lease. However, we have not separated the value of tenant relationships from the value of acquired in place leases because such value and related amortization expense is immaterial to the accompanying consolidated financial statements. In making these allocations, we consider factors such as estimated carrying costs during the expected lease up periods, including real estate taxes, insurance and other operating income and expenses and costs, such as leasing commissions, legal and other related expenses, to execute similar leases in current market conditions at the time a property was acquired by us. If the value of tenant relationships becomes material in the future, we may separately allocate those amounts and amortize the allocated amount over the estimated life of the relationships.

We amortize capitalized above market lease values (included in acquired in place real estate leases in our consolidated balance sheets) and below market lease values (presented as assumed real estate lease obligations in our consolidated balance sheets) as a reduction or increase, respectively, to rental income over the terms of the associated leases. Such amortization resulted in net decreases to rental income of $868,  $1,123, and $2,056 during the years ended December 31, 2014,  2013 and 2012, respectively. We amortize the value of acquired in place leases (included in acquired real estate leases in our consolidated balance sheets), exclusive of the value of above market and below market acquired in place leases, over the terms of the associated leases. Such amortization, which is included in depreciation and amortization expense, amounted to $26,844,  $20,482, and $17,390 during the years ended December 31, 2014,  2013 and 2012, respectively. When a lease is terminated prior to its stated expiration, we write off the unamortized amounts relating to that lease.

Capitalized above market lease values were $39,040 and $38,487 as of December 31, 2014 and 2013, respectively, net of accumulated amortization of $18,288 and $14,271, respectively. Capitalized below market lease values were $26,605 and $27,304 as of December 31, 2014 and 2013, respectively, net of accumulated amortization of $10,681 and $8,220, respectively.

The value of acquired in place leases, exclusive of the value of above market and below market acquired in place leases, were $198,157 and $167,256 as of December 31, 2014 and 2013, respectively, net of accumulated amortization of $68,829 and $49,207, respectively. Future amortization of net intangible lease assets and liabilities, to be recognized over the current terms of the associated leases as of December 31, 2014 are estimated to be $28,601 in 2015, $26,001 in 2016, $23,734 in 2017, $19,462 in 2018, $14,413 in 2019 and $21,945 thereafter.

We regularly evaluate whether events or changes in circumstances have occurred that could indicate an impairment in the value of long lived assets. If there is an indication that the carrying value of an asset is not recoverable, we estimate the projected undiscounted cash flows to determine if an impairment loss should be recognized. We determine the amount of any impairment loss by comparing the historical carrying value to estimated fair value. We estimate fair value through an evaluation of recent financial performance and projected discounted cash flows using standard industry valuation techniques. In addition to consideration of impairment upon the events or changes in circumstances described above, we regularly evaluate the remaining lives of our long lived assets. If we change our estimate of the remaining lives, we allocate the carrying value of the affected assets over their revised remaining lives.

Cash and Cash Equivalents.  We consider highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents.

Restricted Cash.  Restricted cash consists of amounts escrowed for future real estate taxes, insurance, leasing costs, capital expenditures and debt service, as required by certain of our mortgage debts.

Deferred Leasing Costs.  Deferred leasing costs include brokerage, legal and other fees associated with our entering leases and we amortize those costs, which are included in depreciation and amortization expense, on a straight line basis over the terms of the respective leases. Deferred leasing costs totaled $15,401 and $13,935 at December 31, 2014 and 2013, respectively, and accumulated amortization of deferred leasing costs totaled $3,951 and $2,317 at December 31 2014 and 2013, respectively. Future amortization of deferred leasing costs to be recognized during the current terms of our existing leases as of December 31, 2014, are estimated to be $2,035 in 2015, $1,915 in 2016, $1,459 in 2017, $1,306 in 2018, $1,205 in 2019 and $3,530 thereafter.

Deferred Financing Fees.  Deferred financing fees include issuance or assumption costs related to borrowings and we amortize those costs as interest expense over the terms of the respective loans. Deferred financing fees totaled $14,055 and $9,335 at December 31, 2014 and 2013, respectively, and accumulated amortization of deferred financing fees totaled $1,273 and $5,424 at December 31, 2014 and 2013, respectively. Future amortization of deferred financing fees to be recognized with respect to our loans as of December 31, 2014 are estimated to be $2,917 in 2015, $2,637 in 2016, $2,548 in 2017, $2,548 in 2018, $1,346 in 2019 and $786 thereafter.

Revenue Recognition. We recognize rental income from operating leases that contain fixed contractual rent changes on a straight line basis over the term of the lease agreements. Certain of our leases with government tenants provide the tenant the right to terminate its lease if its respective legislature or other funding authority does not appropriate the funding necessary for the government tenant to meet its lease obligations.  We have determined the fixed non-cancelable lease term of these leases to be the fully executed term of the lease because we believe the occurrence of termination to be a remote contingency based on both our historical experience and our assessment of the likelihood of lease cancellation.  We increased rental income by $4,501,  $2,739 and $3,428 to record revenue on a straight line basis during the years ended December 31, 2014,  2013 and 2012, respectively. Rents receivable include $15,017 and $10,515 of straight line rent receivables at December 31, 2014 and 2013, respectively.

Income Taxes.  We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, or the IRC, and, accordingly, we generally will not be subject to federal income taxes provided we distribute our taxable income and meet certain other requirements to qualify as a REIT. We are, however, subject to certain state and local taxes.

Cumulative Other Comprehensive Income (Loss).  Cumulative other comprehensive income (loss) represents our share of the comprehensive income (loss) of AIC and SIR.  See Notes 6 and 11 for further information regarding these investments.

Reclassifications.  Certain reclassifications have been made to the prior years’ financial statements to conform to the current year’s presentation.

Use of Estimates.  Preparation of these financial statements in conformity with U.S. generally accepted accounting principles, or GAAP, requires us to make estimates and assumptions that may affect the amounts reported in these consolidated financial statements and related notes. The actual results could differ from these estimates.

Per Common Share Amounts. We calculate basic earnings per common share by dividing net income by the weighted average number of our common shares of beneficial ownership, $.01 par value, or common shares, or our common shares, outstanding during the period. We calculate diluted earnings per share using the more dilutive of the two class method or the treasury stock method. 

Segment Reporting.  We operate in two business segments: ownership of properties that are primarily leased to government tenants and our equity method investment in SIR.

Per Common Share Amounts (Tables)
Per Common Share Amounts

 

 

 

 

 

 

 

 

 

 

 

 

For the year ended December 31,

 

 

 

2014

 

2013

 

2012

Weighted average common shares for basic earnings per share

 

61,313 

 

 

54,606 

 

 

48,558 

Effect of dilutive securities: unvested share awards

 

86 

 

 

79 

 

 

86 

Weighted average common shares for diluted earnings per share

 

61,399 

 

 

54,685 

 

 

48,644 

 

Real Estate Properties (Tables)

 

 

 

 

 

 

2014

$

222,845 

 

 

2015

 

207,019 

 

 

2016

 

180,634 

 

 

2017

 

151,512 

 

 

2018

 

123,106 

 

 

Thereafter

 

262,559 

 

 

 

$

1,147,675 

 

 

 

    

    

    

    

    

Number

    

    

    

    

 

    

    

 

    

    

 

    

    

 

    

    

 

    

    

 

    

Premium

 

 

 

 

 

 

of

 

 

 

 

 

 

 

 

 

Buildings

 

 

 

 

Acquired

 

Other

 

on

Acquisition

 

 

 

 

 

Properties/

 

Square

 

Purchase

 

 

 

 

and

 

Acquired

 

Lease

 

Assumed

 

Assumed

Date

 

Location

 

Type

 

Buildings

 

Feet

 

Price(1)

 

Land

 

Improvements

 

Leases

 

Obligations

 

Liabilities

 

Debt

March 2014

 

Fairfax, VA

 

Office

 

1 / 1

 

83,130 

 

$

19,775 

 

$

2,964 

 

$

12,840 

 

$

3,971 

 

$

 —

 

$

(233)

 

$

 —

May 2014

 

Richmond, VA

 

Office

 

1 / 1

 

173,932 

 

 

22,500 

 

 

2,614 

 

 

15,930 

 

 

4,003 

 

 

(47)

 

 

 

 

 —

May 2014

 

Reston, VA

 

Office

 

1 / 2

 

406,388 

 

 

112,250 

 

 

9,066 

 

 

78,658 

 

 

28,071 

 

 

(398)

 

 

(93)

 

 

(3,147)

September 2014

 

Phoenix, AZ

 

Office

 

1 / 1

 

66,743 

 

 

13,000 

 

 

1,917 

 

 

7,416 

 

 

3,667 

 

 

 —

 

 

 —

 

 

 —

 

 

 

 

 

 

4 / 5

 

730,193 

 

$

167,525 

 

$

16,561 

 

$

114,844 

 

$

39,712 

 

$

(445)

 

$

(326)

 

$

(3,147)

(1)

Purchase price excludes acquisition related costs.

 

 

 

 

 

 

 

 

    

December 31,

    

 

 

 

2014

 

 

Real estate properties, net

 

$

29,896 

 

 

Rents receivable

 

 

605 

 

 

Other assets

 

 

2,296 

 

 

Assets of property held for sale

 

$

32,797 

 

 

 

 

 

 

 

 

Other liabilities

 

$

343 

 

 

Liabilities of property held for sale

 

$

343 

 

 

Balance Sheets:

 

 

 

 

 

 

 

 

 

 

 

 

    

December 31,

    

December 31,

 

 

 

 

2014

 

2013

 

 

Real estate properties, net

 

$

12,260 

 

$

25,574 

 

 

Rents receivable

 

 

782 

 

 

381 

 

 

Other assets

 

 

123 

 

 

42 

 

 

Assets of discontinued operations

 

$

13,165 

 

$

25,997 

 

 

 

 

 

 

 

 

 

 

 

Other liabilities

 

$

150 

 

$

276 

 

 

Liabilities of discontinued operations

 

$

150 

 

$

276 

 

 

Statements of Operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31,

 

 

 

    

2014

    

2013

 

2012

    

 

Rental income

 

$

1,673 

 

$

4,580 

 

$

7,376 

 

 

Real estate taxes

 

 

(427)

 

 

(678)

 

 

(928)

 

 

Utility expenses

 

 

(226)

 

 

(539)

 

 

(1,043)

 

 

Other operating expenses

 

 

(459)

 

 

(966)

 

 

(1,484)

 

 

Depreciation and amortization

 

 

 —

 

 

(1,025)

 

 

(2,096)

 

 

General and administrative

 

 

(181)

 

 

(287)

 

 

(431)

 

 

Loss on asset impairment

 

 

 —

 

 

(10,142)

 

 

(494)

 

 

Increase in carrying value of asset held for sale

 

 

2,344 

 

 

 

 

 —

 

 

Net gain on sale of properties

 

 

774 

 

 

8,168 

 

 

 —

 

 

Income (loss) from discontinued operations

 

$

3,498 

 

$

(889)

 

$

900 

 

 

Indebtedness (Tables)
Composition of outstanding indebtedness

 

    

December 31,

    

December 31,

 

 

2014

 

2013

 

 

 

 

 

 

 

Unsecured revolving credit facility

 

$

 —

 

$

157,000 

Unsecured term loan, due in 2017

 

 

 —

 

 

350,000 

Unsecured term loan, due in 2020

 

 

300,000 

 

 

 —

Unsecured term loan, due in 2022

 

 

250,000 

 

 

 —

Senior unsecured notes, 3.75% interest rate, including unamortized discount of $2,577, due in 2019

 

 

347,423 

 

 

 —

Mortgage note payable, 5.55% interest rate, including unamortized premium of $2,167, due in 2016(1)

 

 

85,167 

 

 

Mortgage note payable, 5.73% interest rate, including unamortized premium of $177, due in 2015(1)

 

 

47,418 

 

 

48,377 

Mortgage note payable, 6.21% interest rate, due in 2016(1)

 

 

23,833 

 

 

24,147 

Mortgage note payable, 5.88% interest rate, due in 2021(1)

 

 

14,374 

 

 

Mortgage note payable, 7.00% interest rate, including unamortized premium of $605, due in 2019(1)

 

 

9,563 

 

 

9,919 

Mortgage note payable, 8.15% interest rate, including unamortized premium of $398, due in 2021(1)

 

 

7,339 

 

 

8,284 

 

 

$

1,085,117 

 

$

597,727 

(1)

We assumed these mortgages in connection with our acquisitions of certain properties.  The stated interest rates for these mortgage debts are the contractually stated rates.  We recorded the assumed mortgages at estimated fair value on the date of acquisition and we are amortizing the fair value premiums, if any, to interest expense over the respective terms of the mortgages to reduce interest expense to the estimated market interest rates as of the date of acquisition.

Fair Value of Assets and Liabilities (Tables)

Senior unsecured notes, 3.75% interest rate, including unamortized discount of $2,577, due in 2019

 

$

347,423 

 

$

356,129 

Mortgage note payable, 5.55% interest rate, including unamortized premium of $2,167, due in 2016(1)

 

 

85,167 

 

 

85,171 

Mortgage note payable, 5.73% interest rate, including unamortized premium of $177, due in 2015(1)

 

 

47,418 

 

 

48,233 

Mortgage note payable, 6.21% interest rate, due in 2016(1)

 

 

23,833 

 

 

25,394 

Mortgage note payable, 5.88% interest rate, due in 2021(1)

 

 

14,374 

 

 

15,249 

Mortgage note payable, 7.00% interest rate, including unamortized premium of $605, due in 2019(1)

 

 

9,563 

 

 

10,275 

Mortgage note payable, 8.15% interest rate, including unamortized premium of $398, due in 2021(1)

 

 

7,339 

 

 

7,956 

 

 

$

535,117 

 

$

548,407 

(1)

We assumed these mortgages in connection with our acquisitions of certain properties.  The stated interest rates for these mortgage debts are the contractually stated rates.  We recorded the assumed mortgages at estimated fair value on the date of acquisition and we are amortizing the fair value premiums, if any, to interest expense over the respective terms of the mortgages to reduce interest expense to the estimated market interest rates as of the date of acquisition.

 

    

    

 

    

Quoted Prices in

    

    

 

    

Significant

 

 

 

 

 

Active Markets for

 

Significant Other

 

Unobservable

 

 

 

 

 

Identical Assets

 

Observable Inputs

 

Inputs

Description

 

Total

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

 

 

 

 

 

 

 

 

 

 

 

 

Property held for sale and classified as discontinued operations(1)

 

$

12,260 

 

$

 

$

 

$

12,260 

Property held for sale and classified as held for sale in continuing operations(2)

 

 

29,896 

 

 

 

 

 

 

29,896 

 

 

$

42,156 

 

$

 

$

 

$

42,156 

(1)

The estimated fair value at December 31, 2014 of this property, for which a loss on asset impairment was recognized during the year ended December 31, 2013, is based upon broker estimates of value less estimated sales costs (Level 3 inputs as defined in the fair value hierarchy under GAAP).

(2)

The estimated fair value at December 31, 2014 of this property, for which a loss on asset impairment was recognized during the year ended December 31, 2014, is based upon sales price less estimated sales costs (Level 3 inputs as defined in the fair value hierarchy under GAAP).

Shareholders' Equity (Tables)
Summary of shares granted and vested under the terms of the entity's 2009 Plan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2014

 

2013

 

2012

 

 

 

 

Weighted

 

 

 

Weighted

 

 

 

Weighted

 

 

Number

 

Average

 

Number

 

Average

 

Number

 

Average

 

 

of

 

Grant Date

 

of

 

Grant Date

 

of

 

Grant Date

 

 

Shares

 

Fair Value

 

Shares

 

Fair Value

 

Shares

 

Fair Value

Unvested shares, beginning of year

85,451 

 

$

23.71 

 

76,104 

 

$

23.82 

 

64,270 

 

$

23.89 

Shares granted

63,650 

 

 

23.70 

 

58,350 

 

 

24.12 

 

93,058 

 

 

23.72 

Shared forfeited or repurchased

 -

 

 

 -

 

(450)

 

 

23.68 

 

(820)

 

 

23.99 

Shares vested

(58,763)

 

 

24.17 

 

(48,553)

 

 

24.38 

 

(80,404)

 

 

23.76 

Unvested shares, end of year

90,338 

 

 

23.40 

 

85,451 

 

 

23.71 

 

76,104 

 

 

23.82 

 

Equity Investment in Select Income REIT (Tables) (SIR)

 

Consolidated Balance Sheets:

 

 

 

 

 

 

 

 

 

    

December 31,

    

December 31,

 

 

2014

 

2013

Real estate properties, net

 

$

1,772,510 

 

$

1,579,234 

Acquired real estate leases, net

 

 

120,700 

 

 

129,426 

Cash and cash equivalents

 

 

13,504 

 

 

20,025 

Rents receivable, net

 

 

68,385 

 

 

55,335 

Other assets, net

 

 

18,132 

 

 

17,839 

Total assets

 

$

1,993,231 

 

$

1,801,859 

 

 

 

 

 

 

 

Revolving credit facility

 

$

77,000 

 

$

159,000 

Term loan

 

 

350,000 

 

 

350,000 

Mortgage notes payable

 

 

18,816 

 

 

27,147 

Assumed real estate lease obligations, net

 

 

26,475 

 

 

26,966 

Other liabilities

 

 

40,493 

 

 

40,055 

Shareholders' equity

 

 

1,480,447 

 

 

1,198,691 

Total liabilities and shareholders' equity

 

$

1,993,231 

 

$

1,801,859 

 

Consolidated Statements of Income:

 

 

 

 

 

 

 

 

 

 

 

 

Years Ended December 31,

 

 

2014

 

2013

 

2012

Rental income

 

$

189,743 

 

$

159,011 

 

$

105,559 

Tenant reimbursements and other income

 

 

32,937 

 

 

29,312 

 

 

17,231 

  Total revenues

 

 

222,680 

 

 

188,323 

 

 

122,790 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

40,799 

 

 

36,382 

 

 

23,796 

Depreciation and amortization

 

 

41,054 

 

 

31,091 

 

 

14,860 

Acquisition related costs

 

 

7,348 

 

 

2,002 

 

 

2,470 

General and administrative

 

 

14,881 

 

 

12,423 

 

 

8,203 

  Total expenses

 

 

104,082 

 

 

81,898 

 

 

49,329 

Operating income

 

 

118,598 

 

 

106,425 

 

 

73,461 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(12,974)

 

 

(13,763)

 

 

(7,565)

Gain on early extinguishment of debt

 

 

243 

 

 

 —

 

 

 —

Income before income tax expense and equity in earnings of an investee

 

 

105,867 

 

 

92,662 

 

 

65,896 

Income tax expense (benefit)

 

 

(175)

 

 

96 

 

 

(290)

Equity in earnings of an investee

 

 

87 

 

 

334 

 

 

269 

Income before gain on sale of property

 

 

105,779 

 

 

93,092 

 

 

65,875 

Gain on sale of property

 

 

116 

 

 

 —

 

 

 —

Net income

 

$

105,895 

 

$

93,092 

 

$

65,875 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding (basic)

 

 

55,964 

 

 

44,539 

 

 

27,117 

Weighted average common shares outstanding (diluted)

 

 

56,035 

 

 

44,592 

 

 

27,122 

Net income per common share (basic and diluted)

 

$

1.89 

 

$

2.09 

 

$

2.43 

 

Segment Information (Tables)
Schedule of ownership of properties that are primarily leased to government tenants and our equity method investment in SIR

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2014

 

 

Investment

 

Investment

 

 

 

 

 

 

 

    

in Real Estate

    

in SIR

    

Corporate

    

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income 

 

$

251,031 

 

$

 —

 

$

 —

 

$

251,031 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Real estate taxes

 

 

28,389 

 

 

 —

 

 

 —

 

 

28,389 

Utility expenses

 

 

19,369 

 

 

 —

 

 

 —

 

 

19,369 

Other operating expenses

 

 

45,982 

 

 

 —

 

 

 —

 

 

45,982 

Depreciation and amortization

 

 

66,593 

 

 

 —

 

 

 —

 

 

66,593 

Loss on asset impairment

 

 

2,016 

 

 

 —

 

 

 —

 

 

2,016 

Acquisition related costs

 

 

1,344 

 

 

 —

 

 

 —

 

 

1,344 

General and administrative

 

 

 —

 

 

 —

 

 

15,809 

 

 

15,809 

Total expenses

 

 

163,693 

 

 

 —

 

 

15,809 

 

 

179,502 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

 

87,338 

 

 

 —

 

 

(15,809)

 

 

71,529 

Interest and other income

 

 

 —

 

 

 —

 

 

69 

 

 

69 

Interest expense

 

 

(7,820)

 

 

 —

 

 

(20,228)

 

 

(28,048)

Loss on early extinguishment of debt

 

 

 —

 

 

 —

 

 

(1,307)

 

 

(1,307)

Income (loss) from continuing operations before income taxes and

 

 

 

 

 

 

 

 

 

 

 

 

equity in earnings of investees

 

 

79,518 

 

 

 —

 

 

(37,275)

 

 

42,243 

Income tax expense

 

 

 —

 

 

 —

 

 

(117)

 

 

(117)

Loss on issuance of shares by an equity investee

 

 

 —

 

 

(53)

 

 

 —

 

 

(53)

Equity in earnings of investees

 

 

 —

 

 

10,876 

 

 

87 

 

 

10,963 

Income from continuing operations

 

 

79,518 

 

 

10,823 

 

 

(37,305)

 

 

53,036 

Income from discontinued operations

 

 

3,498 

 

 

 —

 

 

 —

 

 

3,498 

Net income (loss)

 

$

83,016 

 

$

10,823 

 

$

(37,305)

 

$

56,534 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets

 

$

1,714,130 

 

$

680,137 

 

$

33,348 

 

$

2,427,615 

 

Selected Quarterly Financial Data (Unaudited) (Tables)
Summary of unaudited quarterly results of operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2014

 

 

First

 

Second

 

Third

 

Fourth

 

 

Quarter

 

Quarter

 

Quarter

 

Quarter

Rental income

$

59,820 

 

$

62,428 

 

$

64,158 

 

$

64,625 

Net income

 

15,190 

 

 

14,608 

 

 

12,622 

 

 

14,114 

Net income per common share (basic and diluted)

 

0.28 

 

 

0.27 

 

 

0.19 

 

 

0.20 

Common distributions paid

 

0.43 

 

 

0.43 

 

 

0.43 

 

 

0.43 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2013

 

 

First

 

Second

 

Third

 

Fourth

 

 

Quarter

 

Quarter

 

Quarter

 

Quarter

Rental income

$

56,304 

 

$

55,934 

 

$

56,401 

 

$

58,271 

Net income

 

24,726 

 

 

15,204 

 

 

1,966 

 

 

12,724 

Net income per common share (basic and diluted)

 

0.45 

 

 

0.28 

 

 

0.04 

 

 

0.23 

Common distributions paid

 

0.43 

 

 

0.43 

 

 

0.43 

 

 

0.43 

 

Pro Forma Information (unaudited) (Tables)
Schedule of pro forma results of operations

 

 

 

 

 

 

 

 

 

 

 

 

Years ended December 31,

 

 

    

    

2014

    

2013

 

 

Total Revenues

 

$

258,604 

 

$

246,006 

 

 

Net income

 

 

57,214 

 

 

51,500 

 

 

Per share data (basic and diluted):

 

 

 

 

 

 

 

 

Net income

 

$

0.93 

 

$

0.94 

 

 

Organization (Details) (USD $)
3 Months Ended
Dec. 31, 2014
state
sqft
building
property
Jul. 29, 2014
Dec. 31, 2013
Dec. 31, 2014
Discontinued operations
building
property
Dec. 31, 2014
SIR
Organization
 
 
 
 
 
Number of properties owned
72 
 
 
 
Number of buildings
92 
 
 
 
Number of states in which owned properties located
31 
 
 
 
 
Rentable area of properties (in square feet)
11,000,000 
 
 
 
 
SIR Common shares of beneficial interest acquired pursuant to stock purchase agreement
 
 
 
 
21,500,000 
Common shares of beneficial interest, par value (in dollars per share)
$ 0.01 
$ 0.01 
$ 0.01 
 
$ 0.01 
Percentage of interest
 
 
 
 
35.90% 
Summary of Significant Accounting Policies (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
segment
Dec. 31, 2013
Dec. 31, 2012
Summary of Significant Accounting Policies
 
 
 
Percentage of Ownership in Subsidiaries
100.00% 
 
 
Real Estate Properties
 
 
 
Increases (decreases) to rental income from amortization of capitalized above market and below market leases
$ 868 
$ 1,123 
$ 2,056 
Amortization of the value of leases
27,713 
21,608 
19,507 
Capitalized value of leases
150,080 
142,266 
 
Deferred Financing Fees
 
 
 
Deferred financing fees, gross
14,055 
9,335 
 
Accumulated amortization of deferred financing fees
1,273 
5,424 
 
Future amortization of deferred financing fees
 
 
 
2015
2,917 
 
 
2016
2,637 
 
 
2017
2,548 
 
 
2018
2,548 
 
 
2019
1,346 
 
 
Thereafter
786 
 
 
Segment Reporting
 
 
 
Number of business segments
 
 
Minimum |
Buildings and improvements
 
 
 
Real Estate Properties
 
 
 
Estimated useful lives
7 years 
 
 
Maximum |
Buildings and improvements
 
 
 
Real Estate Properties
 
 
 
Estimated useful lives
40 years 
 
 
In place leases
 
 
 
Real Estate Properties
 
 
 
Amortization of the value of leases
26,844 
20,482 
17,390 
Continuing operations
 
 
 
Projected future amortization of net intangible lease assets and liabilities, excluding those classified as discontinued operations
 
 
 
2015
28,601 
 
 
2016
26,001 
 
 
2017
23,734 
 
 
2018
19,462 
 
 
2019
14,413 
 
 
Thereafter
21,945 
 
 
Deferred Leasing Costs
 
 
 
Deferred leasing costs, gross
15,401 
13,935 
 
Accumulated amortization of deferred leasing costs
3,951 
2,317 
 
Revenue Recognition
 
 
 
Increase in rental income to record revenue on straight line basis
4,501 
2,739 
3,428 
Straight line rent receivables (liabilities)
15,017 
10,515 
 
Continuing operations |
In place leases
 
 
 
Real Estate Properties
 
 
 
Capitalized value of leases
198,157 
167,256 
 
Accumulated amortization of capitalized lease values
68,829 
49,207 
 
Continuing operations |
Above market lease
 
 
 
Real Estate Properties
 
 
 
Capitalized value of leases
39,040 
38,487 
 
Accumulated amortization of capitalized lease values
18,288 
14,271 
 
Continuing operations |
Below market lease
 
 
 
Real Estate Properties
 
 
 
Capitalized value of leases
26,605 
27,304 
 
Accumulated amortization of capitalized lease values
10,681 
8,220 
 
Discontinued operations
 
 
 
Future amortization of deferred leasing costs, excluding those classified as discontinued operations
 
 
 
2015
2,035 
 
 
2016
1,915 
 
 
2017
1,459 
 
 
2018
1,306 
 
 
2019
1,205 
 
 
Thereafter
$ 3,530 
 
 
Per Common Share Amounts (Details)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Per Common Share Amounts
 
 
 
Weighted Average Number of Shares Outstanding, Basic
61,313 
54,606 
48,558 
Weighted Average Number Diluted Shares Outstanding Adjustment
86 
79 
86 
Weighted Average Number of Shares Outstanding, Diluted
61,399 
54,685 
48,644 
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount
Real Estate Properties (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended 12 Months Ended 1 Months Ended 1 Months Ended 1 Months Ended 1 Months Ended 3 Months Ended
Dec. 31, 2014
lease
sqft
building
property
Dec. 31, 2013
Dec. 31, 2014
Continuing operations
property
building
Dec. 31, 2014
Discontinued operations
property
building
Dec. 31, 2014
Office
property
building
Dec. 31, 2014
Acquisition
property
Dec. 31, 2014
Acquisition
Office
property
building
Dec. 31, 2014
Five buildings
sqft
Mar. 31, 2014
Fairfax, VA
Office
property
building
Mar. 31, 2014
Fairfax, VA
Acquisition
Office
U.S. Government
sqft
Mar. 31, 2014
Fairfax, VA
One building
Office
sqft
May 31, 2014
Richmond VA
Office
building
property
May 31, 2014
Richmond VA
Acquisition
Office
Commonwealth of Virginia and occupied by six state agencies
Agency
sqft
May 31, 2014
Richmond VA
One building
Office
sqft
May 31, 2014
Reston, VA
Office
property
May 31, 2014
Reston, VA
Office
building
May 31, 2014
Reston, VA
Acquisition
Office
U.S. Government
sqft
May 31, 2014
Reston, VA
Two buildings
Office
sqft
Sep. 30, 2014
Phoenix, AZ
Office
property
building
Sep. 30, 2014
Phoenix, AZ
Acquisition
Office
State of Arizona
sqft
Sep. 30, 2014
Phoenix, AZ
One building
Office
sqft
Dec. 31, 2014
Disposal Group, Not Discontinued Operations [Member]
Riverdale, MD
Office
U.S. Government
Aug. 31, 2014
Disposal Group, Not Discontinued Operations [Member]
Riverdale, MD
Office
U.S. Government
building
sqft
Real estate properties
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of properties owned
72 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of buildings
92 
 
 
 
 
 
 
 
 
 
 
 
 
Total real estate properties, at cost, gross
$ 1,682,480 
$ 1,568,562 
$ 1,712,776 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of leases entered
50 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average lease term
5 years 4 months 24 days 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Expenditures committed on leases
12,416 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Committed but unspent tenant related obligations estimated
7,545 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of properties acquired or agreed to be acquired
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of buildings acquired or agreed to be acquired
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Square Feet
632,376 
 
 
 
 
 
 
730,193 
 
 
83,130 
 
 
173,932 
 
 
 
406,388 
 
 
66,743 
 
 
Purchase Price
 
 
 
 
 
167,525 
167,525 
167,525 
 
19,775 
19,775 
 
22,500 
22,500 
 
 
112,250 
112,250 
 
13,000 
13,000 
 
 
Land
 
 
 
 
 
 
 
16,561 
 
 
2,964 
 
 
2,614 
 
 
 
9,066 
 
 
1,917 
 
 
Buildings and Improvements
 
 
 
 
 
 
 
114,844 
 
 
12,840 
 
 
15,930 
 
 
 
78,658 
 
 
7,416 
 
 
Acquired Leases
 
 
 
 
 
 
 
39,712 
 
 
3,971 
 
 
4,003 
 
 
 
28,071 
 
 
3,667 
 
 
Acquired Lease Obligations
 
 
 
 
 
 
 
(445)
 
 
 
 
 
(47)
 
 
 
(398)
 
 
 
 
 
Other Assumed Liabilities
 
 
 
 
 
 
 
(326)
 
 
(233)
 
 
 
 
 
 
(93)
 
 
 
 
 
Premium on assumed debt
 
 
 
 
 
 
 
(3,147)
 
 
 
 
 
 
 
 
 
(3,147)
 
 
 
 
 
Percentage of property leased
 
 
 
 
 
 
 
 
 
100.00% 
 
 
94.60% 
 
 
 
100.00% 
 
 
100.00% 
 
 
 
Amount of mortgage debt assumed in contract purchase price
 
 
 
 
 
 
97,524 
 
 
14,524 
 
 
 
 
 
 
83,000 
 
 
 
 
 
 
Rentable square feet of properties
11,000,000 
 
 
 
 
 
 
 
 
83,130 
 
 
173,932 
 
 
 
406,388 
 
 
66,743 
 
 
 
Loss on impairment recognized
2,016 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,016 
 
Option purchase price
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
30,600 
 
Net book value
1,462,689 
1,380,927 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
30,448 
Increase in carrying value of assets held for sale
2,344 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gain (loss) on sale of properties
774 
8,168 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of tenants
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rentable square feet of properties held for sale
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
337,500 
Future minimum lease payments related to properties excluding discontinued operations, scheduled to be received during the current terms of the existing leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2014
222,845 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2015
207,019 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2016
180,634 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2017
151,512 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2018
123,106 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Thereafter
262,559 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total future minimum lease payments
1,147,675 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance Sheet:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate properties
29,896 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rents receivable, net
605 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other assets, net
2,296 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets of Disposal Group, Including Discontinued Operation, Total
13,165 
25,997 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other liabilities
343 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities of Disposal Group, Including Discontinued Operation, Total
$ 150 
$ 276 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real Estate Properties (Details 2)
3 Months Ended
Dec. 31, 2014
tenant
Concentration risk relating to future minimum lease payments
 
Number of State Governments
12 
Future minimum lease payments |
Tenant concentration
 
Concentration risk relating to future minimum lease payments
 
Concentration risk, percentage
14.10% 
Concentration risk, percentage for termination right exercisable in 2015
1.80% 
Concentration risk, percentage for termination right exercisable in 2016
5.90% 
Concentration risk, percentage for termination right exercisable in 2017
3.10% 
Concentration risk, percentage for termination right exercisable in 2018
1.60% 
Concentration risk, percentage for termination right exercisable in 2019
9.40% 
Concentration risk, percentage for termination right exercisable in 2020
6.70% 
Concentration risk, percentage for termination right exercisable in 2022
1.50% 
Concentration risk, percentage for termination right exercisable in 2023
2.20% 
Number of State Governments
13 
Total future minimum lease payment percent for government tenants with early termination rights for lack of approved funding
5.00% 
Real Estate Properties (Details 3) (USD $)
In Thousands, unless otherwise specified
12 Months Ended 3 Months Ended 12 Months Ended 1 Months Ended 3 Months Ended 12 Months Ended 1 Months Ended
Dec. 31, 2014
building
sqft
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2014
Office
building
Sep. 30, 2014
Office
Phoenix, AZ
building
Dec. 31, 2014
Discontinued operations
Dec. 31, 2013
Discontinued operations
Dec. 31, 2012
Discontinued operations
Feb. 28, 2014
Discontinued operations
Office
Phoenix, AZ
Mar. 31, 2014
Discontinued operations
Office
Phoenix, AZ
Dec. 31, 2013
Discontinued operations
Office
Phoenix, AZ
sqft
building
Sep. 30, 2014
Discontinued operations
Office
San Diego, CA
Jul. 31, 2014
Discontinued operations
Office
San Diego, CA
building
sqft
Apr. 30, 2014
Discontinued operations
Office
Falls Church, VA
building
sqft
Real estate properties
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of Buildings
92 
 
 
 
 
 
 
 
 
Rentable square feet of properties
11,000,000 
 
 
 
 
 
 
 
 
 
97,145 
 
94,272 
164,746 
Balance Sheets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate properties
$ 29,896 
 
 
 
 
$ 12,260 
$ 25,574 
 
 
$ 4,644 
$ 2,300 
 
 
 
Rents receivable, net
605 
 
 
 
 
782 
381 
 
 
 
 
 
 
 
Other assets, net
2,296 
 
 
 
 
123 
42 
 
 
 
 
 
 
 
Assets of property held for sale
32,797 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets of Disposal Group, Including Discontinued Operation, Total
13,165 
25,997 
 
 
 
13,165 
25,997 
 
 
 
 
 
 
 
Other liabilities
343 
 
 
 
 
150 
276 
 
 
 
 
 
 
 
Liabilities of property held for sale
343 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities of Disposal Group, Including Discontinued Operation, Total
150 
276 
 
 
 
150 
276 
 
 
 
 
 
 
 
Statement of Operations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental income
 
 
 
 
 
1,673 
4,580 
7,376 
 
 
 
 
 
 
Real estate taxes
 
 
 
 
 
(427)
(678)
(928)
 
 
 
 
 
 
Utility expenses
 
 
 
 
 
(226)
(539)
(1,043)
 
 
 
 
 
 
Other operating expenses
 
 
 
 
 
(459)
(966)
(1,484)
 
 
 
 
 
 
Depreciation and amortization
 
 
 
 
 
 
(1,025)
(2,096)
 
 
 
 
 
 
General and administrative
 
 
 
 
 
(181)
(287)
(431)
 
 
 
 
 
 
Loss on asset impairment from discontinued operations
 
 
 
 
 
 
(10,142)
(494)
 
 
8,344 
 
 
 
Net book value
1,462,689 
1,380,927 
 
 
 
 
 
 
 
 
 
 
 
 
Increase in carrying value of asset held for sale
 
 
 
 
 
2,344 
 
 
 
2,344 
 
 
 
 
Net gain on sale of properties
 
 
 
 
 
774 
8,168 
 
 
 
774 
 
 
Real Estate Aggregate Sales Price
 
 
 
 
 
 
 
 
5,000 
 
 
12,100 
 
16,500 
Income (loss) from discontinued operations
3,498 
(889)
900 
 
 
3,498 
(889)
900 
 
 
 
 
 
 
Real estate properties
29,896 
 
 
 
 
12,260 
25,574 
 
 
4,644 
2,300 
 
 
 
Rents receivable, net
605 
 
 
 
 
782 
381 
 
 
 
 
 
 
 
Other assets, net
2,296 
 
 
 
 
123 
42 
 
 
 
 
 
 
 
Assets of Disposal Group, Including Discontinued Operation, Total
13,165 
25,997 
 
 
 
13,165 
25,997 
 
 
 
 
 
 
 
Other liabilities
343 
 
 
 
 
150 
276 
 
 
 
 
 
 
 
Liabilities of Disposal Group, Including Discontinued Operation, Total
$ 150 
$ 276 
 
 
 
$ 150 
$ 276 
 
 
 
 
 
 
 
Related Party Transactions (Details) (USD $)
0 Months Ended 1 Months Ended 2 Months Ended 12 Months Ended 6 Months Ended 12 Months Ended 12 Months Ended 0 Months Ended 12 Months Ended 1 Months Ended 12 Months Ended 12 Months Ended 0 Months Ended 12 Months Ended 0 Months Ended 0 Months Ended 27 Months Ended 0 Months Ended 3 Months Ended 12 Months Ended 24 Months Ended 3 Months Ended 12 Months Ended
Jul. 29, 2014
Jul. 31, 2014
Feb. 19, 2015
Dec. 31, 2014
trustee
sqft
Dec. 31, 2013
Dec. 31, 2012
Sep. 30, 2014
Jul. 29, 2014
Dec. 31, 2014
SIR
Dec. 31, 2014
SIR
Dec. 31, 2013
SIR
Dec. 31, 2012
SIR
Feb. 17, 2015
SIR
Jul. 9, 2014
SIR
Dec. 31, 2014
EQC
Jul. 9, 2014
EQC
SIR
Dec. 31, 2014
Acquisition
property
Dec. 31, 2014
Share Award Plan
Dec. 31, 2013
Share Award Plan
Dec. 31, 2012
Share Award Plan
Sep. 30, 2014
RMR
company
Jun. 30, 2014
RMR
company
Jul. 31, 2013
RMR
company
Dec. 31, 2014
RMR
agreement
Dec. 31, 2013
RMR
Dec. 31, 2012
RMR
Mar. 31, 2013
RMR
Mar. 31, 2012
RMR
Dec. 31, 2014
RMR
SIR
Jul. 9, 2014
RMR
EQC
SIR
Dec. 31, 2014
RMR
Office
sqft
Dec. 31, 2013
RMR
Office
Dec. 31, 2012
RMR
Office
Dec. 31, 2014
RMR
Share Award Plan
Officers and employees
Dec. 31, 2013
RMR
Share Award Plan
Officers and employees
Dec. 31, 2012
RMR
Share Award Plan
Officers and employees
Dec. 23, 2013
RMR
Minimum
May 9, 2014
RMR
Amended Agreement
Dec. 23, 2013
RMR
Amended Agreement
Dec. 23, 2013
RMR
Amended Agreement
installment
Dec. 23, 2013
RMR
Amended Agreement
Maximum
Dec. 23, 2013
RMR
Amended Agreement
Minimum
Mar. 15, 2013
EQC
Mar. 11, 2013
EQC
Mar. 25, 2014
EQC
May 9, 2014
AIC
Jun. 30, 2014
AIC
Dec. 31, 2014
AIC
company
Dec. 31, 2013
AIC
Dec. 31, 2012
AIC
Dec. 31, 2013
AIC
May 9, 2014
AIC
shareholder
Dec. 31, 2014
SIR
Dec. 31, 2014
SIR
trustee
Dec. 31, 2014
SNH
trustee
Related Party Transaction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number disinterested Trustees for the approval process to be initiated
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of agreements to avail management and administrative services
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number Managing Trustees as Chairman, majority owner and employee of affiliated entity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 1 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 1 
 
 
 
 
 
 
 
 
 
 
Period before which the written notice is required to be given for cancellation of business management agreement and the property management agreement
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
120 days 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Period before which the written notice is required to be given for cancellation of business management agreement and the property management agreement before amendment of the agreement
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
60 days 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of business days before which the notice is required to be given for termination of property management agreement
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5 days 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Termination fee factor
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.75 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number consecutive months for average fees and expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
24 months 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Termination of property management agreement in relation to business management agreement termination
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12 months 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of months used to calculate property management termination fee
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6 months 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Termination fee factor property management fee
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Period over which transition services will be provided by the related party after termination of the agreement
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
120 days 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Business management fees
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10,226,000 
9,341,000 
9,077,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of shares issued
 
 
7,749 
38,559 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property management and construction supervision fees
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8,203,000 
7,877,000 
7,018,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rentable square feet of properties
 
 
 
11,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,433 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of regional offices leased
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental income earned
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
61,000 
31,000 
32,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of interest in subsidiaries
 
 
 
100.00% 
 
 
 
 
 
 
 
 
 
 
100.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common shares registration and sale expenses paid by related party
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
310,000 
 
 
 
 
 
 
 
 
 
 
 
Par value of SIR common shares of beneficial interest acquired pursuant to stock purchase agreement (in dollars per share)
 
 
 
$ 0.01 
$ 0.01 
 
 
$ 0.01 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 0.01 
$ 0.01 
 
Cash purchase price excluding accrued dividends
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
677,500,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash purchase price excluding accrued dividends (in dollars per share)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 31.51 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accrued dividends
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11,300,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accrued dividends (in dollars per share)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 0.53 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash purchase price including accrued dividends
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
688,800,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of common shares sold in public offering
15,525,000 
15,525,000 
 
 
 
 
 
 
67,947 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9,950,000 
 
 
 
 
 
 
 
 
 
 
 
 
Equity Method Investment, Ownership Percentage
 
 
 
 
 
 
 
 
35.90% 
35.90% 
 
 
24.30% 
35.90% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
14.30% 
35.90% 
35.90% 
 
Percentage of the product of the number of SIR common shares sold in the transaction times the excess of the price per share paid by the purchaser and $31.51
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
50.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Threshold common share ownership before interested stockholder status exemption in Maryland
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SIR Common shares of beneficial interest acquired pursuant to stock purchase agreement
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
21,500,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
500,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
21,500,000 
 
 
Percentage of interest
 
 
 
 
 
 
 
 
35.90% 
35.90% 
 
 
24.30% 
35.90% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
14.30% 
35.90% 
35.90% 
 
Coverage of purchased property insurance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
500,000,000 
 
 
 
500,000,000 
 
 
 
 
Premium for property insurance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,161,000 
410,000 
 
 
 
 
 
Amount invested in equity investee
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6,019,000 
 
 
 
 
 
 
 
Investment at carrying value
 
 
 
680,137,000 
 
 
 
 
680,137,000 
680,137,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6,946,000 
6,031,000 
5,747,000 
6,031,000 
 
 
 
 
Recognized income (loss) related to investment
 
 
 
10,963,000 
334,000 
316,000 
 
 
17,113,000 
87,000 
334,000 
269,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
87,000 
334,000 
316,000 
 
 
 
 
 
Number of other companies to whom management services were provided by related party
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Period of standstill provision pursuant to which the counterparty agreed not to make unsolicited proposals to acquire entities as specified
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
36 months 
 
Number of Properties Acquired
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of independent trustees of the entity who also serve as independent trustees of the related party
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Premium paid for combined directors' and officers' liability insurance policy
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
50,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Aggregate coverage of combined directors' and officers' liability insurance policy purchased by the related party
 
 
 
 
 
 
10,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Aggregate additional coverage of combined directors' and officers' liability insurance policy purchased by the related party
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
20,000,000 
 
5,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Aggregate non-indemnifiable coverage of combined directors' and officers' liability insurance policy purchased by the related party
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Premium payable for combined directors' and officers' liability insurance policy
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
479,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Base management fee payable as a percentage of aggregate book value of real estate assets or transferred assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0.50% 
0.50% 
 
 
 
 
 
 
 
 
 
 
 
 
 
0.50% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Base management fee payable as a percentage of average historical cost of real estate investments, excluding transferred assets for investments up to specified amount
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0.70% 
0.70% 
 
 
 
 
 
 
 
 
 
 
 
 
 
0.70% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Threshold amount of real estate investments for payment of base management fee
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
250,000,000 
250,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
250,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Base management fee payable as a percentage of average historical cost of real estate investments, excluding transferred assets for investments exceeding specified amount
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0.50% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0.50% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Base management fee payable as a percentage of average closing price per share of common shares on NYSE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0.70% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Base management fee payable, average market capitalization
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
250,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Base management fee payable as a percentage of average market capitalization exceeding specified amount
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0.50% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Threshold amount of average market capitalization for payment of base management fee
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
250,000,000 
 
 
 
 
250,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
Base business management fee payable in cash (as a percent)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
90.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Base business management fee payable in common shares (as a percent)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
42,442.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Incentive management fee payable (as a percent)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Measurement period for incentive management fee
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3 years 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Measurement period for calculating 2014 management fee
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1 year 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Measurement period for calculating 2015 management fee
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2 years 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Portion of shares issued in payment of an incentive management fee
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
20,230.00% 
39,141.00% 
 
 
 
 
 
 
 
 
 
 
 
33.30% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Portion of remaining shares to be vested in equal annual installments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
66.60% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of equal annual installments for vesting of common shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Incentive fee as a percentage of product of weighted average diluted outstanding common shares and excess of FFO per share
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15.00% 
15.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Incentive fee paid in common shares maximum (in dollars per share)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 0.02 
$ 0.02 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Incentive fee payable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Management fees payable under property management agreement as a percentage of gross rents
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Construction supervision fees payable under property management agreement as a percentage of construction costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pro rata share of RMR's internal audit costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
286,000 
203,000 
193,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Period by which business management agreement and property management agreement get automatically renewed
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1 year 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Granted (in shares)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
63,650 
58,350 
93,058 
 
 
 
 
 
 
 
 
 
 
 
 
 
51,150 
48,350 
43,917 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Aggregate market value of shares awarded
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,191,000 
1,142,000 
1,043,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restricted shares vesting terms
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0.20 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Portion of the awards granted which will vest on each of the next four anniversaries of the grant date
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0.20 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of anniversaries of the grant date over which the awards vest
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4 years 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Aggregate coverage of separate directors' and officers' liability insurance policy purchased
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Premium paid in connection with the renewal, including taxes and fees
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
333,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
526,000 
 
 
 
 
 
 
 
 
Number of other companies owning outstanding shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares of related party purchased, formerly owned by former parent company
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,857 
 
 
 
 
 
 
 
 
 
Value of shares of related party purchased, formerly owned by former parent company
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 825,000 
 
 
 
 
 
 
 
 
 
Concentration (Details)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Concentration
 
 
 
Number of properties owned
72 
 
 
Number of buildings
92 
 
 
Number of states in which acquired properties located
31 
 
 
Number of state governments
12 
 
 
Annualized rental income, excluding properties classified as discontinued operations |
Maryland
 
 
 
Concentration
 
 
 
Annualized Rental income percent
11.2 
 
 
Annualized rental income, excluding properties classified as discontinued operations |
California
 
 
 
Concentration
 
 
 
Annualized Rental income percent
11.0 
 
 
Annualized rental income, excluding properties classified as discontinued operations |
Virginia
 
 
 
Concentration
 
 
 
Annualized Rental income percent
9.8 
 
 
Annualized rental income, excluding properties classified as discontinued operations |
District of Columbia
 
 
 
Concentration
 
 
 
Annualized Rental income percent
9.9 
 
 
Annualized rental income, excluding properties classified as discontinued operations |
Georgia
 
 
 
Concentration
 
 
 
Annualized Rental income percent
8.9 
 
 
Annualized rental income, excluding properties classified as discontinued operations |
New York
 
 
 
Concentration
 
 
 
Annualized Rental income percent
8.2 
 
 
Annualized rental income, excluding properties classified as discontinued operations |
Massachusetts
 
 
 
Concentration
 
 
 
Annualized Rental income percent
5.5 
 
 
Annualized rental income, excluding properties classified as discontinued operations |
Tenant concentration |
U.S. Government, state governments and the United Nations
 
 
 
Concentration
 
 
 
Annualized Rental income percent
93.0 
92.6 
93.8 
Annualized rental income, excluding properties classified as discontinued operations |
Tenant concentration |
U.S. Government
 
 
 
Concentration
 
 
 
Annualized Rental income percent
69.0 
69.0 
71.0 
Indebtedness (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
0 Months Ended 1 Months Ended 12 Months Ended 0 Months Ended 11 Months Ended 12 Months Ended 12 Months Ended 0 Months Ended 11 Months Ended 12 Months Ended 0 Months Ended 12 Months Ended 0 Months Ended 12 Months Ended 0 Months Ended 12 Months Ended 1 Months Ended 0 Months Ended
Jul. 29, 2014
Jul. 31, 2014
Dec. 31, 2014
loan
property
building
Dec. 31, 2012
Jul. 29, 2014
Dec. 31, 2013
Nov. 21, 2014
Unsecured revolving credit facility
Nov. 20, 2014
Unsecured revolving credit facility
Dec. 31, 2014
Unsecured revolving credit facility
Dec. 31, 2013
Unsecured revolving credit facility
Dec. 31, 2012
Unsecured revolving credit facility
Nov. 21, 2014
Unsecured revolving credit facility
Nov. 20, 2014
Unsecured term loan
Dec. 31, 2014
Unsecured revolving credit and unsecured term loan
Dec. 31, 2014
New credit facilities
Nov. 21, 2014
New credit facilities
Nov. 20, 2014
Unsecured term loan, due in 2017
Nov. 20, 2014
Unsecured term loan, due in 2017
Dec. 31, 2013
Unsecured term loan, due in 2017
Dec. 31, 2012
Unsecured term loan, due in 2017
Nov. 21, 2014
Unsecured term loan, due in 2020
Dec. 31, 2014
Unsecured term loan, due in 2020
Nov. 21, 2014
Unsecured term loan, due in 2020
Nov. 21, 2014
Unsecured term loan, due in 2022
Dec. 31, 2014
Unsecured term loan, due in 2022
Nov. 21, 2014
Unsecured term loan, due in 2022
Aug. 18, 2014
Senior Unsecured Note 3.75 Percent Due In 2019
Dec. 31, 2014
Senior Unsecured Note 3.75 Percent Due In 2019
Aug. 18, 2014
Senior Unsecured Note 3.75 Percent Due In 2019
Dec. 31, 2014
Mortgage note payable, 5.55% interest rate, due in 2016
May 31, 2014
Mortgage note payable, 5.55% interest rate, due in 2016
Acquisition
Dec. 31, 2014
5.73% Mortgage notes due in 2015
Dec. 31, 2013
5.73% Mortgage notes due in 2015
Dec. 31, 2014
6.21% Mortgage notes due in 2016
Dec. 31, 2013
6.21% Mortgage notes due in 2016
Dec. 31, 2014
Mortgage note payable, 5.88% interest rate, due in 2021
Mar. 31, 2014
Mortgage note payable, 5.88% interest rate, due in 2021
Acquisition
Dec. 31, 2014
7% Mortgage notes due in 2019
Dec. 31, 2013
7% Mortgage notes due in 2019
Dec. 31, 2014
8.15% Mortgage notes due in 2021
Dec. 31, 2013
8.15% Mortgage notes due in 2021
Jul. 9, 2014
Unsecured term loan, due in 2015
Jul. 9, 2014
Unsecured term loan, due in 2015
Indebtedness
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unsecured revolving credit facility
 
 
 
 
 
$ 157,000 
 
 
$ 0 
$ 157,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Face amount
 
 
 
 
 
 
 
 
 
 
 
 
350,000 
 
 
1,300,000 
 
 
 
 
 
300,000 
300,000 
 
 
250,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
500,000 
Unsecured term loan
 
 
550,000 
 
 
350,000 
 
 
 
 
 
 
 
 
 
 
 
 
350,000 
 
 
300,000 
 
 
250,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Senior Notes
 
 
347,423 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
347,423 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Senior Notes Issued Amount
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
350,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage notes payable, including premiums
 
 
187,694 
 
 
90,727 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
85,167 
83,000 
47,418 
48,377 
23,833 
24,147 
14,374 
14,524 
9,563 
9,919 
7,339 
8,284 
 
 
Total
 
 
1,085,117 
 
 
597,727 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate (as a percent)
 
 
 
 
 
 
 
 
1.40% 
 
 
 
 
 
 
 
 
 
 
 
 
1.60% 
 
 
2.00% 
 
 
3.75% 
3.75% 
5.55% 
 
5.73% 
 
6.21% 
 
5.88% 
 
7.00% 
 
8.15% 
 
 
 
Unamortized fair value discount included in mortgage notes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,577 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unamortized fair value premium included in mortgage notes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,167 
3,147 
177 
 
 
 
 
 
605 
 
398 
 
 
 
Effective interest rate (as a percent)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.30% 
 
 
 
 
 
3.50% 
 
 
 
 
 
 
 
 
 
 
 
 
Term of loan
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
30 years 
 
 
 
 
 
 
Maximum borrowing capacity on revolving credit facility
 
 
 
 
 
 
 
550,000 
 
 
 
750,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revolving credit facility, interest rate basis
 
 
 
 
 
 
LIBOR 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maximum borrowing capacity on debt instruments may be increased under certain conditions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,500,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Option to extend the maturity date subject to certain conditions and the payment of a fee
 
 
 
 
 
 
1 year 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Term loan, interest rate basis
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIBOR 
 
 
 
LIBOR 
 
 
LIBOR 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIBOR 
 
Interest rate premium (as a percent)
 
 
 
 
 
 
 
 
1.25% 
 
 
 
 
 
 
 
1.75% 
 
 
 
 
1.40% 
 
 
1.80% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1.75% 
 
Facility fee (as a percent)
 
 
 
 
 
 
0.25% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The weighted average annual interest rate (as a percent)
 
 
 
 
 
 
 
1.70% 
 
1.70% 
1.80% 
 
 
 
 
 
 
1.90% 
1.90% 
2.00% 
 
1.90% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loan prepayment premium prior to November 22, 2015 (as a percent)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loan prepayment premium prior to November 21, 2016 (as a percent)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amount available to be drawn
 
 
 
 
 
 
 
 
750,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of common shares sold in public offering
15,525,000 
15,525,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common Stock, Par or Stated Value Per Share
 
 
$ 0.01 
 
$ 0.01 
$ 0.01 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Price per share of shares sold
 
$ 23.50 
 
 
$ 23.50 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net proceeds on sale of shares
349,787 
349,787 
349,787 
166,718 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net proceeds from issance of debt
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
344,293 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss on early extinguishment of debt
 
 
1,307 
 
 
 
 
 
 
 
 
 
 
766 
 
 
 
 
 
 
 
 
 
 
 
 
 
541 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of assumed secured mortgage loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Aggregate net book value of secured properties
 
 
$ 258,869 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of properties secured by mortgage notes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of buildings secured by mortgage notes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair Value of Assets and Liabilities (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2014
Senior Unsecured Note 3.75 Percent Due In 2019
Aug. 18, 2014
Senior Unsecured Note 3.75 Percent Due In 2019
Dec. 31, 2014
Mortgage note payable, 5.55% interest rate, due in 2016
Dec. 31, 2014
5.73% Mortgage notes due in 2015
Dec. 31, 2013
5.73% Mortgage notes due in 2015
Dec. 31, 2014
6.21% Mortgage notes due in 2016
Dec. 31, 2013
6.21% Mortgage notes due in 2016
Dec. 31, 2014
Mortgage note payable, 5.88% interest rate, due in 2021
Dec. 31, 2014
7% Mortgage notes due in 2019
Dec. 31, 2013
7% Mortgage notes due in 2019
Dec. 31, 2014
8.15% Mortgage notes due in 2021
Dec. 31, 2013
8.15% Mortgage notes due in 2021
Dec. 31, 2014
Carrying Amount
Dec. 31, 2014
Carrying Amount
Senior Unsecured Note 3.75 Percent Due In 2019
Dec. 31, 2014
Carrying Amount
Mortgage note payable, 5.55% interest rate, due in 2016
Dec. 31, 2014
Carrying Amount
5.73% Mortgage notes due in 2015
Dec. 31, 2014
Carrying Amount
6.21% Mortgage notes due in 2016
Dec. 31, 2014
Carrying Amount
Mortgage note payable, 5.88% interest rate, due in 2021
Dec. 31, 2014
Carrying Amount
7% Mortgage notes due in 2019
Dec. 31, 2014
Carrying Amount
8.15% Mortgage notes due in 2021
Dec. 31, 2014
Fair Value
Dec. 31, 2014
Fair Value
Senior Unsecured Note 3.75 Percent Due In 2019
Dec. 31, 2014
Fair Value
Mortgage note payable, 5.55% interest rate, due in 2016
Dec. 31, 2014
Fair Value
5.73% Mortgage notes due in 2015
Dec. 31, 2014
Fair Value
6.21% Mortgage notes due in 2016
Dec. 31, 2014
Fair Value
Mortgage note payable, 5.88% interest rate, due in 2021
Dec. 31, 2014
Fair Value
7% Mortgage notes due in 2019
Dec. 31, 2014
Fair Value
8.15% Mortgage notes due in 2021
Fair Value of Financial Instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage notes payable, including premiums
$ 187,694 
$ 90,727 
 
 
$ 85,167 
$ 47,418 
$ 48,377 
$ 23,833 
$ 24,147 
$ 14,374 
$ 9,563 
$ 9,919 
$ 7,339 
$ 8,284 
$ 535,117 
 
$ 85,167 
$ 47,418 
$ 23,833 
$ 14,374 
$ 9,563 
$ 7,339 
$ 548,407 
 
$ 85,171 
$ 48,233 
$ 25,394 
$ 15,249 
$ 10,275 
$ 7,956 
Senior Notes
347,423 
 
347,423 
 
 
 
 
 
 
 
 
 
 
 
 
347,423 
 
 
 
 
 
 
 
356,129 
 
 
 
 
 
 
Unsecured Debt
550,000 
350,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate (as a percent)
 
 
3.75% 
3.75% 
5.55% 
5.73% 
 
6.21% 
 
5.88% 
7.00% 
 
8.15% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unamortized fair value premium included in mortgage notes
 
 
 
 
2,167 
177 
 
 
 
 
605 
 
398 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unamortized fair value discount included in mortgage notes
 
 
$ 2,577 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair Value of Assets and Liabilities (Details 2) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Fair Value of Assets and Liabilities
 
 
Property held for sale
$ 1,462,689 
$ 1,380,927 
Nonrecurring |
Fair Value
 
 
Fair Value of Assets and Liabilities
 
 
Property held for sale
42,156 
 
Nonrecurring |
Level 3 inputs
 
 
Fair Value of Assets and Liabilities
 
 
Property held for sale
42,156 
 
Continuing operations |
Nonrecurring |
Fair Value
 
 
Fair Value of Assets and Liabilities
 
 
Property held for sale
29,896 
 
Continuing operations |
Nonrecurring |
Level 3 inputs
 
 
Fair Value of Assets and Liabilities
 
 
Property held for sale
29,896 
 
Discontinued operations |
Nonrecurring |
Fair Value
 
 
Fair Value of Assets and Liabilities
 
 
Property held for sale
12,260 
 
Discontinued operations |
Nonrecurring |
Level 3 inputs
 
 
Fair Value of Assets and Liabilities
 
 
Property held for sale
$ 12,260 
 
Shareholders' Equity (Details) (Share Award Plan, USD $)
In Thousands, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Share Awards
 
 
 
Shares granted for equity compensation plan
63,650 
58,350 
93,058 
Number of Shares
 
 
 
Unvested shares at the beginning of the period
85,451 
76,104 
64,270 
Granted (in shares)
63,650 
58,350 
93,058 
Shared forfeited (in shares)
 
(450)
(820)
Vested (in shares)
(58,763)
(48,553)
(80,404)
Unvested shares at the end of the period
90,338 
85,451 
76,104 
Weighted Average Grant Date Fair Value
 
 
 
Unvested shares at the beginning of the period (in dollars per share)
$ 23.71 
$ 23.82 
$ 23.89 
Granted (in dollars per share)
$ 23.70 
$ 24.12 
$ 23.72 
Shared forfeited (in dollars per share)
 
$ 23.68 
$ 23.99 
Vested (in dollars per share)
$ 24.17 
$ 24.38 
$ 23.76 
Unvested shares at the end of the period (in dollars per share)
$ 23.40 
$ 23.71 
$ 23.82 
Vesting schedule of unvested shares
 
 
 
2015 (in shares)
34,040 
 
 
2016 (in shares)
26,952 
 
 
2017 (in shares)
19,116 
 
 
2018 (in shares)
10,230 
 
 
Share Awards, additional disclosures
 
 
 
Estimated future compensation expense for the unvested shares
$ 2,079 
 
 
Closing share price of the entity's common shares (in dollars per share)
$ 23.01 
 
 
Weighted average period of recognition of compensation expenses
22 months 
 
 
Compensation expense
1,165 
1,269 
1,598 
Shares available for issuance under the Award Plan
1,659,562 
 
 
Officers and employees |
RMR
 
 
 
Share Awards
 
 
 
Shares granted for equity compensation plan
51,150 
48,350 
43,917 
Aggregate market value of shares granted under the Award Plan
1,191 
1,142 
1,043 
Number of Shares
 
 
 
Granted (in shares)
51,150 
48,350 
43,917 
Trustees
 
 
 
Share Awards
 
 
 
Shares granted for equity compensation plan
2,500 
2,000 
2,000 
Aggregate market value of shares granted under the Award Plan
318 
266 
224 
Market value of common shares awarded to each trustee (in dollars)
$ 64 
$ 53 
$ 45 
Number of Shares
 
 
 
Granted (in shares)
2,500 
2,000 
2,000 
Shareholders' Equity (Details 2) (USD $)
In Thousands, except Share data, unless otherwise specified
0 Months Ended 1 Months Ended 2 Months Ended 3 Months Ended 12 Months Ended
Nov. 20, 2014
Aug. 23, 2014
Jul. 29, 2014
May 21, 2014
Feb. 21, 2014
Jul. 31, 2014
Feb. 19, 2015
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Jan. 23, 2015
Jul. 29, 2014
Distributions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash distribution to common shareholders (in dollars per share)
$ 0.43 
$ 0.43 
 
$ 0.43 
$ 0.43 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Distribution payable to common shareholders (in dollars per share)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 0.43 
 
Number of shares issued
 
 
 
 
 
 
7,749 
 
 
 
 
 
 
 
 
38,559 
 
 
 
 
Number of common shares sold in public offering
 
 
15,525,000 
 
 
15,525,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Price per share of shares sold
 
 
 
 
 
$ 23.50 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 23.50 
Net proceeds on sale of shares
 
 
$ 349,787 
 
 
$ 349,787 
 
 
 
 
 
 
 
 
 
$ 349,787 
 
$ 166,718 
 
 
Cash distribution per common share paid or accrued (in dollars per share)
 
 
 
 
 
 
 
$ 0.43 
$ 0.43 
$ 0.43 
$ 0.43 
$ 0.43 
$ 0.43 
$ 0.43 
$ 0.43 
$ 1.72 
$ 1.72 
$ 1.69 
 
 
Characterization of distributions paid or accrued as a percentage of ordinary income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
55.12% 
82.92% 
80.36% 
 
 
Characterization of distributions paid or accrued as a percentage of return of capital
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
41.94% 
9.55% 
19.64% 
 
 
Characterization of distributions paid or accrued as a percentage of capital gain
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7.01% 
 
 
 
Characterization of distributions paid or accrued as a percentage of Internal Revenue Code section 1250 gain
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.94% 
0.52% 
 
 
 
Equity Investment in Select Income REIT (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
0 Months Ended 1 Months Ended 3 Months Ended 12 Months Ended 6 Months Ended 12 Months Ended 0 Months Ended 3 Months Ended
Jul. 29, 2014
Jul. 31, 2014
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2014
SIR
Dec. 31, 2014
SIR
Dec. 31, 2013
SIR
Dec. 31, 2012
SIR
Feb. 17, 2015
SIR
Jul. 9, 2014
SIR
Jan. 29, 2015
SIR
Subsequent event
Mar. 31, 2015
SIR
Subsequent event
Equity Investment in Select Income REIT
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity investments, common shares owned
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
21,500,000 
 
 
Equity Method Investment, Ownership Percentage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
35.90% 
35.90% 
 
 
24.30% 
35.90% 
 
 
Investment at carrying value
 
 
$ 680,137 
 
 
 
 
 
 
 
$ 680,137 
 
 
 
$ 680,137 
$ 680,137 
 
 
 
 
 
 
Costs related to acquisition
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,174 
 
 
 
 
 
 
 
Equity Investments, market value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
524,815 
524,815 
 
 
 
 
 
 
Amortization of the difference between carrying value and share of underlying equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6,237 
 
 
 
 
 
 
 
Income (Loss) from Equity Method Investments
 
 
 
 
 
 
 
 
 
 
10,963 
334 
316 
 
17,113 
87 
334 
269 
 
 
 
 
The amount of investment in exceed the underlying equity of the investee
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
154,413 
 
 
Number of common shares sold in public offering
15,525,000 
15,525,000 
 
 
 
 
 
 
 
 
 
 
 
 
67,947 
 
 
 
 
 
 
 
Gain (Loss) on Disposition of Stock in Subsidiary or Equity Method Investee
 
 
 
 
 
 
 
 
 
 
(53)
 
 
 
53 
 
 
 
 
 
 
41,000 
Proceeds from Equity Method Investment, Dividends or Distributions
 
 
 
 
 
 
 
 
 
 
17,046 
 
 
 
20,640 
 
 
 
 
 
 
 
Number of shares issued to holders of CCIT common shares on acquisition
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
28,400,000 
 
Equity Method Investment Summarized Balance Sheet Information Abstract
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate properties, net
 
 
1,462,689 
 
 
 
1,380,927 
 
 
 
1,462,689 
1,380,927 
 
 
1,772,510 
1,772,510 
1,579,234 
 
 
 
 
 
Acquired real estate leases, net
 
 
150,080 
 
 
 
142,266 
 
 
 
150,080 
142,266 
 
 
120,700 
120,700 
129,426 
 
 
 
 
 
Cash and cash equivalents
 
 
13,791 
 
 
 
7,663 
 
 
 
13,791 
7,663 
5,255 
3,272 
13,504 
13,504 
20,025 
 
 
 
 
 
Rents receivable, net
 
 
36,239 
 
 
 
33,350 
 
 
 
36,239 
33,350 
 
 
68,385 
68,385 
55,335 
 
 
 
 
 
Other assets, net
 
 
12,205 
 
 
 
25,031 
 
 
 
12,205 
25,031 
 
 
18,132 
18,132 
17,839 
 
 
 
 
 
Total assets
 
 
2,427,615 
 
 
 
1,632,452 
 
 
 
2,427,615 
1,632,452 
 
 
1,993,231 
1,993,231 
1,801,859 
 
 
 
 
 
Revolving credit facility
 
 
 
 
 
 
157,000 
 
 
 
 
157,000 
 
 
77,000 
77,000 
159,000 
 
 
 
 
 
Term loan
 
 
550,000 
 
 
 
350,000 
 
 
 
550,000 
350,000 
 
 
350,000 
350,000 
350,000 
 
 
 
 
 
Mortgage notes payable, including premiums
 
 
187,694 
 
 
 
90,727 
 
 
 
187,694 
90,727 
 
 
18,816 
18,816 
27,147 
 
 
 
 
 
Assumed real estate lease obligations, net
 
 
15,924 
 
 
 
19,084 
 
 
 
15,924 
19,084 
 
 
26,475 
26,475 
26,966 
 
 
 
 
 
Other Liabilities
 
 
26,471 
 
 
 
23,216 
 
 
 
26,471 
23,216 
 
 
40,493 
40,493 
40,055 
 
 
 
 
 
Shareholders' equity
 
 
1,297,449 
 
 
 
989,675 
 
 
 
1,297,449 
989,675 
1,027,451 
891,668 
1,480,447 
1,480,447 
1,198,691 
 
 
 
 
 
Total liabilities and shareholders' equity
 
 
2,427,615 
 
 
 
1,632,452 
 
 
 
2,427,615 
1,632,452 
 
 
1,993,231 
1,993,231 
1,801,859 
 
 
 
 
 
Income Statements:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
189,743 
159,011 
105,559 
 
 
 
 
Tenant Reimbursements And Other Real Estate Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
32,937 
29,312 
17,231 
 
 
 
 
Real Estate Revenue, Net, Total
 
 
64,625 
64,158 
62,428 
59,820 
58,271 
56,401 
55,934 
56,304 
251,031 
226,910 
203,700 
 
 
222,680 
188,323 
122,790 
 
 
 
 
Operating expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
40,799 
36,382 
23,796 
 
 
 
 
Depreciation and amortization
 
 
 
 
 
 
 
 
 
 
66,593 
55,699 
49,070 
 
 
41,054 
31,091 
14,860 
 
 
 
 
Acquisition related costs
 
 
 
 
 
 
 
 
 
 
1,344 
2,439 
1,614 
 
 
7,348 
2,002 
2,470 
 
 
 
 
General and administrative
 
 
 
 
 
 
 
 
 
 
15,809 
12,710 
11,924 
 
 
14,881 
12,423 
8,203 
 
 
 
 
Total expenses
 
 
 
 
 
 
 
 
 
 
179,502 
154,808 
137,934 
 
 
104,082 
81,898 
49,329 
 
 
 
 
Operating income
 
 
 
 
 
 
 
 
 
 
71,529 
72,102 
65,766 
 
 
118,598 
106,425 
73,461 
 
 
 
 
Interest Expense
 
 
 
 
 
 
 
 
 
 
28,048 
16,831 
16,892 
 
 
(12,974)
(13,763)
(7,565)
 
 
 
 
Gains (Losses) on Extinguishment of Debt
 
 
 
 
 
 
 
 
 
 
(1,307)
 
 
 
 
243 
 
 
 
 
 
 
(Loss) income from continuing operations before income tax expense and equity in earnings of investees
 
 
 
 
 
 
 
 
 
 
42,243 
55,308 
48,903 
 
 
105,867 
92,662 
65,896 
 
 
 
 
Income tax expense
 
 
 
 
 
 
 
 
 
 
117 
133 
159 
 
 
(175)
96 
(290)
 
 
 
 
Equity in earnings of investees
 
 
 
 
 
 
 
 
 
 
10,963 
334 
316 
 
17,113 
87 
334 
269 
 
 
 
 
Income before gain on sale of property
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
105,779 
93,092 
65,875 
 
 
 
 
Net gain on sale of properties from discontinued operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
116 
 
 
 
 
 
 
Net income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 105,895 
$ 93,092 
$ 65,875 
 
 
 
 
Weighted average common shares outstanding (basic) (in shares)
 
 
 
 
 
 
 
 
 
 
61,313,000 
54,606,000 
48,558,000 
 
 
55,964,000 
44,539,000 
27,117,000 
 
 
 
 
Weighted average common shares outstanding (diluted) (in shares)
 
 
 
 
 
 
 
 
 
 
61,399,000 
54,685,000 
48,644,000 
 
 
56,035,000 
44,592,000 
27,122,000 
 
 
 
 
Net income, basic and diluted (in dollars per share)
 
 
 
 
 
 
 
 
 
 
$ 0.92 
$ 1.00 
$ 1.03 
 
 
$ 1.89 
$ 2.09 
$ 2.43 
 
 
 
 
Segment Information (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Segment Information.
 
 
 
 
 
 
 
 
 
 
 
Rental income
$ 64,625 
$ 64,158 
$ 62,428 
$ 59,820 
$ 58,271 
$ 56,401 
$ 55,934 
$ 56,304 
$ 251,031 
$ 226,910 
$ 203,700 
Expenses:
 
 
 
 
 
 
 
 
 
 
 
Real Estate Tax Expense
 
 
 
 
 
 
 
 
28,389 
25,710 
22,485 
Utility expenses
 
 
 
 
 
 
 
 
19,369 
17,116 
15,767 
Other operating expenses
 
 
 
 
 
 
 
 
45,982 
41,134 
37,074 
Depreciation and amortization
 
 
 
 
 
 
 
 
66,593 
55,699 
49,070 
Loss on asset impairment
 
 
 
 
 
 
 
 
2,016 
 
 
Acquisition related costs
 
 
 
 
 
 
 
 
1,344 
2,439 
1,614 
General and administrative
 
 
 
 
 
 
 
 
15,809 
12,710 
11,924 
Total expenses
 
 
 
 
 
 
 
 
179,502 
154,808 
137,934 
Operating Income (Loss)
 
 
 
 
 
 
 
 
71,529 
72,102 
65,766 
Investment Income, Interest
 
 
 
 
 
 
 
 
69 
37 
29 
Interest expense
 
 
 
 
 
 
 
 
(28,048)
(16,831)
(16,892)
Loss on early extinguishment of debt
 
 
 
 
 
 
 
 
(1,307)
 
 
Loss on issuance of shares by an equity investee
 
 
 
 
 
 
 
 
(53)
 
 
Income from continuing operations before income tax expense and equity in earnings of investees
 
 
 
 
 
 
 
 
42,243 
55,308 
48,903 
Income tax expense
 
 
 
 
 
 
 
 
(117)
(133)
(159)
Equity in earnings of investees
 
 
 
 
 
 
 
 
10,963 
334 
316 
Income from continuing operations
 
 
 
 
 
 
 
 
53,036 
55,509 
49,060 
Income (loss) from discontinued operations
 
 
 
 
 
 
 
 
3,498 
(889)
900 
Net income
14,114 
12,622 
14,608 
15,190 
12,724 
1,966 
15,204 
24,726 
56,534 
54,620 
49,960 
Total assets
2,427,615 
 
 
 
1,632,452 
 
 
 
2,427,615 
1,632,452 
 
Operating Segments |
Investment in Real Estate
 
 
 
 
 
 
 
 
 
 
 
Segment Information.
 
 
 
 
 
 
 
 
 
 
 
Rental income
 
 
 
 
 
 
 
 
251,031 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
 
 
Real Estate Tax Expense
 
 
 
 
 
 
 
 
28,389 
 
 
Utility expenses
 
 
 
 
 
 
 
 
19,369 
 
 
Other operating expenses
 
 
 
 
 
 
 
 
45,982 
 
 
Depreciation and amortization
 
 
 
 
 
 
 
 
66,593 
 
 
Loss on asset impairment
 
 
 
 
 
 
 
 
2,016 
 
 
Acquisition related costs
 
 
 
 
 
 
 
 
1,344 
 
 
Total expenses
 
 
 
 
 
 
 
 
163,693 
 
 
Operating Income (Loss)
 
 
 
 
 
 
 
 
87,338 
 
 
Interest expense
 
 
 
 
 
 
 
 
(7,820)
 
 
Income from continuing operations before income tax expense and equity in earnings of investees
 
 
 
 
 
 
 
 
79,518 
 
 
Income from continuing operations
 
 
 
 
 
 
 
 
79,518 
 
 
Income (loss) from discontinued operations
 
 
 
 
 
 
 
 
3,498 
 
 
Net income
 
 
 
 
 
 
 
 
83,016 
 
 
Total assets
1,714,130 
 
 
 
 
 
 
 
1,714,130 
 
 
Operating Segments |
Investment in SIR
 
 
 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
 
 
Equity in earnings of investees
 
 
 
 
 
 
 
 
10,876 
 
 
Income from continuing operations
 
 
 
 
 
 
 
 
10,823 
 
 
Net income
 
 
 
 
 
 
 
 
10,823 
 
 
Total assets
680,137 
 
 
 
 
 
 
 
680,137 
 
 
Corporate, Non-Segment
 
 
 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
 
 
General and administrative
 
 
 
 
 
 
 
 
15,809 
 
 
Total expenses
 
 
 
 
 
 
 
 
15,809 
 
 
Operating Income (Loss)
 
 
 
 
 
 
 
 
(15,809)
 
 
Investment Income, Interest
 
 
 
 
 
 
 
 
69 
 
 
Interest expense
 
 
 
 
 
 
 
 
(20,228)
 
 
Loss on early extinguishment of debt
 
 
 
 
 
 
 
 
(1,307)
 
 
Income from continuing operations before income tax expense and equity in earnings of investees
 
 
 
 
 
 
 
 
(37,275)
 
 
Income tax expense
 
 
 
 
 
 
 
 
(117)
 
 
Equity in earnings of investees
 
 
 
 
 
 
 
 
87 
 
 
Income from continuing operations
 
 
 
 
 
 
 
 
(37,305)
 
 
Net income
 
 
 
 
 
 
 
 
(37,305)
 
 
Total assets
$ 33,348 
 
 
 
 
 
 
 
$ 33,348 
 
 
Selected Quarterly Financial Data (Unaudited) (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Selected Quarterly Financial Data (Unaudited)
 
 
 
 
 
 
 
 
 
 
 
Rental income
$ 64,625 
$ 64,158 
$ 62,428 
$ 59,820 
$ 58,271 
$ 56,401 
$ 55,934 
$ 56,304 
$ 251,031 
$ 226,910 
$ 203,700 
Net income
$ 14,114 
$ 12,622 
$ 14,608 
$ 15,190 
$ 12,724 
$ 1,966 
$ 15,204 
$ 24,726 
$ 56,534 
$ 54,620 
$ 49,960 
Per Share data:
 
 
 
 
 
 
 
 
 
 
 
Income from discontinued operations, basic and diluted (in dollars per share)
$ 0.20 
$ 0.19 
$ 0.27 
$ 0.28 
$ 0.23 
$ 0.04 
$ 0.28 
$ 0.45 
$ 0.06 
$ (0.02)
$ 0.02 
Common distributions declared (in dollars per share)
$ 0.43 
$ 0.43 
$ 0.43 
$ 0.43 
$ 0.43 
$ 0.43 
$ 0.43 
$ 0.43 
$ 1.72 
$ 1.72 
$ 1.69 
Pro Forma Information (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Pro Forma Information
 
 
 
Mortgage debt assumed
$ 97,524 
 
 
Pro forma results of operations
 
 
 
Total revenues
258,604 
246,006 
 
Net income
57,214 
51,500 
 
Net income, basic and diluted (in dollars per share)
$ 0.92 
$ 1.00 
$ 1.03 
Revenue from the acquisitions
11,240 
 
 
Operating income from the acquisitions
1,438 
 
 
Acquisition
 
 
 
Pro Forma Information
 
 
 
Number of Properties Acquired
 
 
Number of Buildings Acquired
 
 
Real Estate Aggregate Purchase Price
$ 167,525 
 
 
Pro forma results of operations
 
 
 
Net income, basic and diluted (in dollars per share)
$ 0.93 
$ 0.94 
 
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Real estate and accumulated depreciation
 
 
 
 
Encumbrances
$ 187,694 
 
 
 
Initial Cost to Company
 
 
 
 
Land
253,096 
 
 
 
Buildings and Equipment
1,322,433 
 
 
 
Costs Capitalized Subsequent to Acquisition
106,951 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
254,008 
 
 
 
Buildings and Equipment
1,428,472 
 
 
 
Total
1,682,480 
1,568,562 
1,467,863 
1,288,453 
Accumulated Depreciation
(219,791)
(187,635)
(156,661)
(139,210)
Aggregate cost for federal income tax purposes
1,953,910 
 
 
 
Useful life of buildings and improvements
40 years 
 
 
 
Useful life of equipment
12 years 
 
 
 
131 Clayton Street, Montgomery, AL
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
920 
 
 
 
Buildings and Equipment
9,084 
 
 
 
Costs Capitalized Subsequent to Acquisition
16 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
920 
 
 
 
Buildings and Equipment
9,100 
 
 
 
Total
10,020 
 
 
 
Accumulated Depreciation
(796)
 
 
 
4344 Carmichael Road, Montgomery, AL
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
1,374 
 
 
 
Buildings and Equipment
11,658 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
1,374 
 
 
 
Buildings and Equipment
11,658 
 
 
 
Total
13,032 
 
 
 
Accumulated Depreciation
(291)
 
 
 
15451 North 28th Avenue, Phoenix, AZ
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
1,917 
 
 
 
Buildings and Equipment
7,416 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
1,917 
 
 
 
Buildings and Equipment
7,416 
 
 
 
Total
9,333 
 
 
 
Accumulated Depreciation
(62)
 
 
 
711 14th Avenue, Safford, AZ
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
460 
 
 
 
Buildings and Equipment
11,708 
 
 
 
Costs Capitalized Subsequent to Acquisition
106 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
460 
 
 
 
Buildings and Equipment
11,814 
 
 
 
Total
12,274 
 
 
 
Accumulated Depreciation
(1,322)
 
 
 
10949 N. Mather Boulevard, Rancho Cordova, CA
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
562 
 
 
 
Buildings and Equipment
16,923 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
562 
 
 
 
Buildings and Equipment
16,923 
 
 
 
Total
17,485 
 
 
 
Accumulated Depreciation
(494)
 
 
 
4181 Ruffin Road, San Diego, CA
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
5,250 
 
 
 
Buildings and Equipment
10,549 
 
 
 
Costs Capitalized Subsequent to Acquisition
3,698 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
5,250 
 
 
 
Buildings and Equipment
14,247 
 
 
 
Total
19,497 
 
 
 
Accumulated Depreciation
(1,624)
 
 
 
4560 Viewridge Road, San Diego, CA
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
4,269 
 
 
 
Buildings and Equipment
18,316 
 
 
 
Costs Capitalized Subsequent to Acquisition
906 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
4,347 
 
 
 
Buildings and Equipment
19,144 
 
 
 
Total
23,491 
 
 
 
Accumulated Depreciation
(8,635)
 
 
 
5045 East Butler Street, Fresno, CA
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
7,276 
 
 
 
Buildings and Equipment
61,118 
 
 
 
Costs Capitalized Subsequent to Acquisition
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
7,277 
 
 
 
Buildings and Equipment
61,125 
 
 
 
Total
68,402 
 
 
 
Accumulated Depreciation
(18,910)
 
 
 
9800 Goethe Road, Sacramento, CA
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
1,550 
 
 
 
Buildings and Equipment
12,263 
 
 
 
Costs Capitalized Subsequent to Acquisition
1,491 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
1,550 
 
 
 
Buildings and Equipment
13,754 
 
 
 
Total
15,304 
 
 
 
Accumulated Depreciation
(1,798)
 
 
 
9815 Goethe Road, Sacramento, CA
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
1,450 
 
 
 
Buildings and Equipment
9,465 
 
 
 
Costs Capitalized Subsequent to Acquisition
1,523 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
1,450 
 
 
 
Buildings and Equipment
10,988 
 
 
 
Total
12,438 
 
 
 
Accumulated Depreciation
(869)
 
 
 
Capital Place, Sacramento, CA
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
2,290 
 
 
 
Buildings and Equipment
35,891 
 
 
 
Costs Capitalized Subsequent to Acquisition
3,804 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
2,290 
 
 
 
Buildings and Equipment
39,695 
 
 
 
Total
41,985 
 
 
 
Accumulated Depreciation
(4,898)
 
 
 
Sky Park Centre, San Diego, CA
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
685 
 
 
 
Buildings and Equipment
5,530 
 
 
 
Costs Capitalized Subsequent to Acquisition
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
685 
 
 
 
Buildings and Equipment
5,534 
 
 
 
Total
6,219 
 
 
 
Accumulated Depreciation
(1,734)
 
 
 
Turning Basin Business Park, Stockton, CA
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
563 
 
 
 
Buildings and Equipment
5,470 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
563 
 
 
 
Buildings and Equipment
5,470 
 
 
 
Total
6,033 
 
 
 
Accumulated Depreciation
(330)
 
 
 
12795 West Alameda Parkway, Lakewood, CO
 
 
 
 
Real estate and accumulated depreciation
 
 
 
 
Encumbrances
7,339 
 
 
 
Initial Cost to Company
 
 
 
 
Land
2,640 
 
 
 
Buildings and Equipment
23,777 
 
 
 
Costs Capitalized Subsequent to Acquisition
1,045 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
2,640 
 
 
 
Buildings and Equipment
24,822 
 
 
 
Total
27,462 
 
 
 
Accumulated Depreciation
(3,047)
 
 
 
16194 West 45th Street, Golden, CO
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
494 
 
 
 
Buildings and Equipment
152 
 
 
 
Costs Capitalized Subsequent to Acquisition
6,457 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
495 
 
 
 
Buildings and Equipment
6,608 
 
 
 
Total
7,103 
 
 
 
Accumulated Depreciation
(2,732)
 
 
 
Corporate Center, Lakewood, CO
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
2,886 
 
 
 
Buildings and Equipment
27,537 
 
 
 
Costs Capitalized Subsequent to Acquisition
3,849 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
2,887 
 
 
 
Buildings and Equipment
31,385 
 
 
 
Total
34,272 
 
 
 
Accumulated Depreciation
(8,841)
 
 
 
20 Massachusetts Avenue, Washington, DC
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
12,008 
 
 
 
Buildings and Equipment
51,528 
 
 
 
Costs Capitalized Subsequent to Acquisition
20,858 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
12,229 
 
 
 
Buildings and Equipment
72,166 
 
 
 
Total
84,395 
 
 
 
Accumulated Depreciation
(27,669)
 
 
 
625 Indiana Avenue, Washington DC, DC
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
26,000 
 
 
 
Buildings and Equipment
25,955 
 
 
 
Costs Capitalized Subsequent to Acquisition
3,437 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
26,000 
 
 
 
Buildings and Equipment
29,392 
 
 
 
Total
55,392 
 
 
 
Accumulated Depreciation
(3,238)
 
 
 
7850 Southwest 6th Court, Plantation, FL
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
4,800 
 
 
 
Buildings and Equipment
30,592 
 
 
 
Costs Capitalized Subsequent to Acquisition
383 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
4,800 
 
 
 
Buildings and Equipment
30,975 
 
 
 
Total
35,775 
 
 
 
Accumulated Depreciation
(2,816)
 
 
 
8900 Grand Oak Circle, Tampa, FL
 
 
 
 
Real estate and accumulated depreciation
 
 
 
 
Encumbrances
9,563 
 
 
 
Initial Cost to Company
 
 
 
 
Land
1,100 
 
 
 
Buildings and Equipment
11,773 
 
 
 
Costs Capitalized Subsequent to Acquisition
133 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
1,100 
 
 
 
Buildings and Equipment
11,906 
 
 
 
Total
13,006 
 
 
 
Accumulated Depreciation
(1,261)
 
 
 
181 Spring Street NW, Atlanta, GA
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
4,047 
 
 
 
Buildings and Equipment
20,017 
 
 
 
Costs Capitalized Subsequent to Acquisition
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
4,048 
 
 
 
Buildings and Equipment
20,017 
 
 
 
Total
24,065 
 
 
 
Accumulated Depreciation
(1,209)
 
 
 
220 E. Bryan Street, Savannah, GA
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
950 
 
 
 
Buildings and Equipment
2,376 
 
 
 
Costs Capitalized Subsequent to Acquisition
46 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
950 
 
 
 
Buildings and Equipment
2,422 
 
 
 
Total
3,372 
 
 
 
Accumulated Depreciation
(274)
 
 
 
4712 Southpark Boulevard, Ellenwood, GA
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
1,390 
 
 
 
Buildings and Equipment
19,635 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
1,390 
 
 
 
Buildings and Equipment
19,635 
 
 
 
Total
21,025 
 
 
 
Accumulated Depreciation
(1,186)
 
 
 
Corporate Square, Atlanta, GA
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
3,996 
 
 
 
Buildings and Equipment
29,762 
 
 
 
Costs Capitalized Subsequent to Acquisition
4,666 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
3,996 
 
 
 
Buildings and Equipment
34,428 
 
 
 
Total
38,424 
 
 
 
Accumulated Depreciation
(8,270)
 
 
 
Executive Park, Atlanta, GA
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
1,521 
 
 
 
Buildings and Equipment
11,826 
 
 
 
Costs Capitalized Subsequent to Acquisition
3,869 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
1,521 
 
 
 
Buildings and Equipment
15,695 
 
 
 
Total
17,216 
 
 
 
Accumulated Depreciation
(3,195)
 
 
 
One Georgia Center, Atlanta, GA
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
10,250 
 
 
 
Buildings and Equipment
27,933 
 
 
 
Costs Capitalized Subsequent to Acquisition
175 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
10,250 
 
 
 
Buildings and Equipment
28,108 
 
 
 
Total
38,358 
 
 
 
Accumulated Depreciation
(2,297)
 
 
 
South Vinnell Way, Boise, ID
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
3,390 
 
 
 
Buildings and Equipment
29,026 
 
 
 
Costs Capitalized Subsequent to Acquisition
330 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
3,390 
 
 
 
Buildings and Equipment
29,355 
 
 
 
Total
32,745 
 
 
 
Accumulated Depreciation
(1,701)
 
 
 
2020 S. Arlington Heights, Arlington Heights, IL
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
1,450 
 
 
 
Buildings and Equipment
13,160 
 
 
 
Costs Capitalized Subsequent to Acquisition
846 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
1,450 
 
 
 
Buildings and Equipment
14,006 
 
 
 
Total
15,456 
 
 
 
Accumulated Depreciation
(1,770)
 
 
 
Intech Park, Indianapolis, IN
 
 
 
 
Real estate and accumulated depreciation
 
 
 
 
Encumbrances
47,418 
 
 
 
Initial Cost to Company
 
 
 
 
Land
4,170 
 
 
 
Buildings and Equipment
68,888 
 
 
 
Costs Capitalized Subsequent to Acquisition
2,264 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
4,170 
 
 
 
Buildings and Equipment
71,152 
 
 
 
Total
75,322 
 
 
 
Accumulated Depreciation
(5,748)
 
 
 
400 State Street, Kansas City, KS
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
640 
 
 
 
Buildings and Equipment
9,932 
 
 
 
Costs Capitalized Subsequent to Acquisition
1,345 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
640 
 
 
 
Buildings and Equipment
11,277 
 
 
 
Total
11,917 
 
 
 
Accumulated Depreciation
(1,315)
 
 
 
7125 Industrial Road, Florence, KY
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
1,698 
 
 
 
Buildings and Equipment
11,722 
 
 
 
Costs Capitalized Subsequent to Acquisition
10 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
1,698 
 
 
 
Buildings and Equipment
11,732 
 
 
 
Total
13,430 
 
 
 
Accumulated Depreciation
(586)
 
 
 
25 Newport Avenue, Quincy, MA
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
2,700 
 
 
 
Buildings and Equipment
9,199 
 
 
 
Costs Capitalized Subsequent to Acquisition
348 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
2,700 
 
 
 
Buildings and Equipment
9,547 
 
 
 
Total
12,247 
 
 
 
Accumulated Depreciation
(922)
 
 
 
251 Causeway Street, Boston, MA
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
5,100 
 
 
 
Buildings and Equipment
17,293 
 
 
 
Costs Capitalized Subsequent to Acquisition
684 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
5,100 
 
 
 
Buildings and Equipment
17,977 
 
 
 
Total
23,077 
 
 
 
Accumulated Depreciation
(1,915)
 
 
 
75 Pleasant Street, Malden, MA
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
1,050 
 
 
 
Buildings and Equipment
31,086 
 
 
 
Costs Capitalized Subsequent to Acquisition
118 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
1,050 
 
 
 
Buildings and Equipment
31,204 
 
 
 
Total
32,254 
 
 
 
Accumulated Depreciation
(3,565)
 
 
 
One Montvale Avenue, Stoneham, MA
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
1,670 
 
 
 
Buildings and Equipment
11,035 
 
 
 
Costs Capitalized Subsequent to Acquisition
930 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
1,670 
 
 
 
Buildings and Equipment
11,965 
 
 
 
Total
13,635 
 
 
 
Accumulated Depreciation
(1,277)
 
 
 
20400 Century Boulevard, Germantown, MD
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
2,305 
 
 
 
Buildings and Equipment
9,890 
 
 
 
Costs Capitalized Subsequent to Acquisition
740 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
2,347 
 
 
 
Buildings and Equipment
10,588 
 
 
 
Total
12,935 
 
 
 
Accumulated Depreciation
(4,738)
 
 
 
2115 East Jefferson Street, North Bethesda, MD
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
3,349 
 
 
 
Buildings and Equipment
11,152 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
3,349 
 
 
 
Buildings and Equipment
11,152 
 
 
 
Total
14,501 
 
 
 
Accumulated Depreciation
(372)
 
 
 
3300 75th Avenue, Landover, MD
 
 
 
 
Real estate and accumulated depreciation
 
 
 
 
Encumbrances
23,833 
 
 
 
Initial Cost to Company
 
 
 
 
Land
4,110 
 
 
 
Buildings and Equipment
36,371 
 
 
 
Costs Capitalized Subsequent to Acquisition
402 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
4,110 
 
 
 
Buildings and Equipment
36,773 
 
 
 
Total
40,883 
 
 
 
Accumulated Depreciation
(4,423)
 
 
 
4201 Patterson Avenue, Baltimore, MD
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
900 
 
 
 
Buildings and Equipment
8,097 
 
 
 
Costs Capitalized Subsequent to Acquisition
2,240 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
901 
 
 
 
Buildings and Equipment
10,336 
 
 
 
Total
11,237 
 
 
 
Accumulated Depreciation
(3,421)
 
 
 
1401 Rockville Pike, Rockville, MD
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
3,251 
 
 
 
Buildings and Equipment
29,258 
 
 
 
Costs Capitalized Subsequent to Acquisition
5,460 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
3,248 
 
 
 
Buildings and Equipment
34,721 
 
 
 
Total
37,969 
 
 
 
Accumulated Depreciation
(13,286)
 
 
 
Meadows Business Park, Woodlawn, MD
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
3,735 
 
 
 
Buildings and Equipment
21,509 
 
 
 
Costs Capitalized Subsequent to Acquisition
213 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
3,735 
 
 
 
Buildings and Equipment
21,722 
 
 
 
Total
25,457 
 
 
 
Accumulated Depreciation
(2,117)
 
 
 
Rutherford Business Park, Windsor Mill, MD
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
1,598 
 
 
 
Buildings and Equipment
10,219 
 
 
 
Costs Capitalized Subsequent to Acquisition
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
1,598 
 
 
 
Buildings and Equipment
10,227 
 
 
 
Total
11,825 
 
 
 
Accumulated Depreciation
(533)
 
 
 
11411 E. Jefferson Avenue, Detroit, MI
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
630 
 
 
 
Buildings and Equipment
18,002 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
630 
 
 
 
Buildings and Equipment
18,002 
 
 
 
Total
18,632 
 
 
 
Accumulated Depreciation
(2,100)
 
 
 
330 South Second Avenue, Minneapolis, MN
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
3,990 
 
 
 
Buildings and Equipment
18,186 
 
 
 
Costs Capitalized Subsequent to Acquisition
7,640 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
3,990 
 
 
 
Buildings and Equipment
25,826 
 
 
 
Total
29,816 
 
 
 
Accumulated Depreciation
(2,407)
 
 
 
Rosedale Corporate Plaza, Roseville, MN
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
672 
 
 
 
Buildings and Equipment
6,045 
 
 
 
Costs Capitalized Subsequent to Acquisition
1,295 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
672 
 
 
 
Buildings and Equipment
7,340 
 
 
 
Total
8,012 
 
 
 
Accumulated Depreciation
(2,423)
 
 
 
1300 Summit Street, Kansas City, MO
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
2,776 
 
 
 
Buildings and Equipment
12,070 
 
 
 
Costs Capitalized Subsequent to Acquisition
197 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
2,776 
 
 
 
Buildings and Equipment
12,267 
 
 
 
Total
15,043 
 
 
 
Accumulated Depreciation
(684)
 
 
 
4241-4300 NE 34th Street, Kansas City, MO
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
1,443 
 
 
 
Buildings and Equipment
6,193 
 
 
 
Costs Capitalized Subsequent to Acquisition
3,769 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
1,780 
 
 
 
Buildings and Equipment
9,625 
 
 
 
Total
11,405 
 
 
 
Accumulated Depreciation
(4,249)
 
 
 
1220 Echelon Parkway, Jackson, MS
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
440 
 
 
 
Buildings and Equipment
25,458 
 
 
 
Costs Capitalized Subsequent to Acquisition
49 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
440 
 
 
 
Buildings and Equipment
25,507 
 
 
 
Total
25,947 
 
 
 
Accumulated Depreciation
(1,541)
 
 
 
10-12 Celina Avenue, Nashua, NH
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
3,000 
 
 
 
Buildings and Equipment
14,052 
 
 
 
Costs Capitalized Subsequent to Acquisition
154 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
3,000 
 
 
 
Buildings and Equipment
14,206 
 
 
 
Total
17,206 
 
 
 
Accumulated Depreciation
(1,900)
 
 
 
50 West State Street, Trenton, NJ
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
5,000 
 
 
 
Buildings and Equipment
38,203 
 
 
 
Costs Capitalized Subsequent to Acquisition
1,334 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
5,000 
 
 
 
Buildings and Equipment
39,537 
 
 
 
Total
44,537 
 
 
 
Accumulated Depreciation
(3,889)
 
 
 
435 Montano Boulevard, Albuquerque, NM
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
710 
 
 
 
Buildings and Equipment
1,651 
 
 
 
Costs Capitalized Subsequent to Acquisition
147 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
710 
 
 
 
Buildings and Equipment
1,798 
 
 
 
Total
2,508 
 
 
 
Accumulated Depreciation
(254)
 
 
 
138 Delaware Avenue, Buffalo, NY
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
4,405 
 
 
 
Buildings and Equipment
18,899 
 
 
 
Costs Capitalized Subsequent to Acquisition
5,016 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
4,485 
 
 
 
Buildings and Equipment
23,835 
 
 
 
Total
28,320 
 
 
 
Accumulated Depreciation
(8,837)
 
 
 
305 East 46th Street, New York, NY
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
36,800 
 
 
 
Buildings and Equipment
66,661 
 
 
 
Costs Capitalized Subsequent to Acquisition
1,217 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
36,800 
 
 
 
Buildings and Equipment
67,878 
 
 
 
Total
104,678 
 
 
 
Accumulated Depreciation
(5,991)
 
 
 
5000 Corporate Court, Holtsville, NY
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
6,530 
 
 
 
Buildings and Equipment
17,711 
 
 
 
Costs Capitalized Subsequent to Acquisition
1,106 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
6,530 
 
 
 
Buildings and Equipment
18,817 
 
 
 
Total
25,347 
 
 
 
Accumulated Depreciation
(1,551)
 
 
 
Airline Corporate Center, Colonie, NY
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
790 
 
 
 
Buildings and Equipment
6,400 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
790 
 
 
 
Buildings and Equipment
6,400 
 
 
 
Total
7,190 
 
 
 
Accumulated Depreciation
(400)
 
 
 
4600 25th Avenue, Salem, OR
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
6,510 
 
 
 
Buildings and Equipment
17,973 
 
 
 
Costs Capitalized Subsequent to Acquisition
3,920 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
6,510 
 
 
 
Buildings and Equipment
21,893 
 
 
 
Total
28,403 
 
 
 
Accumulated Depreciation
(1,672)
 
 
 
Synergy Business Park, Columbia, SC
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
1,439 
 
 
 
Buildings and Equipment
11,143 
 
 
 
Costs Capitalized Subsequent to Acquisition
2,488 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
1,439 
 
 
 
Buildings and Equipment
13,631 
 
 
 
Total
15,070 
 
 
 
Accumulated Depreciation
(2,039)
 
 
 
One Memphis Place, Memphis, TN
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
1,630 
 
 
 
Buildings and Equipment
5,645 
 
 
 
Costs Capitalized Subsequent to Acquisition
897 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
1,630 
 
 
 
Buildings and Equipment
6,542 
 
 
 
Total
8,172 
 
 
 
Accumulated Depreciation
(730)
 
 
 
701 Clay Road, Waco, TX
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
2,030 
 
 
 
Buildings and Equipment
8,708 
 
 
 
Costs Capitalized Subsequent to Acquisition
2,100 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
2,060 
 
 
 
Buildings and Equipment
10,778 
 
 
 
Total
12,838 
 
 
 
Accumulated Depreciation
(4,081)
 
 
 
Aquia Commerce Center, Stafford, VA
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
2,090 
 
 
 
Buildings and Equipment
7,465 
 
 
 
Costs Capitalized Subsequent to Acquisition
162 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
2,090 
 
 
 
Buildings and Equipment
7,627 
 
 
 
Total
9,717 
 
 
 
Accumulated Depreciation
(665)
 
 
 
Enterchange at Meadowville, Chester, VA
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
1,478 
 
 
 
Buildings and Equipment
9,594 
 
 
 
Costs Capitalized Subsequent to Acquisition
235 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
1,478 
 
 
 
Buildings and Equipment
9,829 
 
 
 
Total
11,307 
 
 
 
Accumulated Depreciation
(320)
 
 
 
Pender Business Park, Fairfax, VA
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
2,529 
 
 
 
Buildings and Equipment
21,386 
 
 
 
Costs Capitalized Subsequent to Acquisition
87 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
2,529 
 
 
 
Buildings and Equipment
21,473 
 
 
 
Total
24,002 
 
 
 
Accumulated Depreciation
(623)
 
 
 
3920 Pender Drive, Fairfax, VA
 
 
 
 
Real estate and accumulated depreciation
 
 
 
 
Encumbrances
14,374 
 
 
 
Initial Cost to Company
 
 
 
 
Land
2,964 
 
 
 
Buildings and Equipment
12,840 
 
 
 
Costs Capitalized Subsequent to Acquisition
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
2,964 
 
 
 
Buildings and Equipment
12,850 
 
 
 
Total
15,814 
 
 
 
Accumulated Depreciation
(241)
 
 
 
1759 & 1760 Business Park Drive Reston, VA
 
 
 
 
Real estate and accumulated depreciation
 
 
 
 
Encumbrances
85,167 
 
 
 
Initial Cost to Company
 
 
 
 
Land
9,066 
 
 
 
Buildings and Equipment
78,658 
 
 
 
Costs Capitalized Subsequent to Acquisition
51 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
9,066 
 
 
 
Buildings and Equipment
78,709 
 
 
 
Total
87,775 
 
 
 
Accumulated Depreciation
(1,147)
 
 
 
Perimeter Center, Richmond, VA
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
2,614 
 
 
 
Buildings and Equipment
15,930 
 
 
 
Costs Capitalized Subsequent to Acquisition
29 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
2,614 
 
 
 
Buildings and Equipment
15,959 
 
 
 
Total
18,573 
 
 
 
Accumulated Depreciation
(232)
 
 
 
65 Bowdoin Street, S. Burlington, VT
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
700 
 
 
 
Buildings and Equipment
8,416 
 
 
 
Costs Capitalized Subsequent to Acquisition
120 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
700 
 
 
 
Buildings and Equipment
8,536 
 
 
 
Total
9,236 
 
 
 
Accumulated Depreciation
(1,007)
 
 
 
840 North Broadway, Everett, WA
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
3,360 
 
 
 
Buildings and Equipment
15,376 
 
 
 
Costs Capitalized Subsequent to Acquisition
159 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
3,360 
 
 
 
Buildings and Equipment
15,535 
 
 
 
Total
18,895 
 
 
 
Accumulated Depreciation
(965)
 
 
 
Stevens Center, Richland, WA
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
3,970 
 
 
 
Buildings and Equipment
17,035 
 
 
 
Costs Capitalized Subsequent to Acquisition
769 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
4,042 
 
 
 
Buildings and Equipment
17,732 
 
 
 
Total
21,774 
 
 
 
Accumulated Depreciation
(7,732)
 
 
 
11050 West Liberty Drive, Milwaukee, WI
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
945 
 
 
 
Buildings and Equipment
4,539 
 
 
 
Costs Capitalized Subsequent to Acquisition
132 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
945 
 
 
 
Buildings and Equipment
4,671 
 
 
 
Total
5,616 
 
 
 
Accumulated Depreciation
(424)
 
 
 
2029 Stonewall Jackson Drive, Falling Waters, WV
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
906 
 
 
 
Buildings and Equipment
3,886 
 
 
 
Costs Capitalized Subsequent to Acquisition
263 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
921 
 
 
 
Buildings and Equipment
4,133 
 
 
 
Total
5,054 
 
 
 
Accumulated Depreciation
(1,795)
 
 
 
5353 Yellowstone Road, Cheyenne, WY
 
 
 
 
Initial Cost to Company
 
 
 
 
Land
1,915 
 
 
 
Buildings and Equipment
8,217 
 
 
 
Costs Capitalized Subsequent to Acquisition
1,193 
 
 
 
Cost Amount Carried at Close of Period
 
 
 
 
Land
1,950 
 
 
 
Buildings and Equipment
9,375 
 
 
 
Total
11,325 
 
 
 
Accumulated Depreciation
$ (4,405)
 
 
 
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION (Details 2) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Real Estate Properties
 
 
 
Balance at the beginning of the period
$ 1,568,562 
$ 1,467,863 
$ 1,288,453 
Additions
151,316 
103,413 
192,560 
Loss on asset impairment
(7,058)
 
 
Disposals
(444)
(2,714)
(13,150)
Reclassification of assets held for sale
(29,896)
 
 
Balance at the end of the period
1,682,480 
1,568,562 
1,467,863 
Accumulated Depreciation
 
 
 
Balance at the beginning of the period
187,635 
156,661 
139,210 
Additions
37,671 
33,688 
30,601 
Real Estate Accumulated Depreciation Impairment or Writedowns
(5,071)
 
 
Disposals
(444)
(2,714)
(13,150)
Balance at the end of the period
$ 219,791 
$ 187,635 
$ 156,661