COPT Defense Properties Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Prepaid Expenses and Other Assets, Net

Prepaid Expenses and Other Assets, Net

12 Months Ended

Dec. 31, 2016

Prepaid Expense and Other Assets [Abstract]

Prepaid expenses and other assets, net consisted of the following (in thousands):



	December 31,
	2016		2015
Prepaid expenses	$	24,432	$	23,009
Lease incentives, net	18,276		11,133
Construction contract costs incurred in excess of billings	10,350		3,261
Furniture, fixtures and equipment, net	5,204		6,004
Deferred financing costs, net (1)	3,128		5,867
Deferred tax asset, net	3,036		3,467
Non-real estate equity method investments	2,355		1,636
Other assets	5,983		5,647
Prepaid expenses and other assets, net	$	72,764	$	60,024

(1) Represents deferred costs, net of accumulated amortization, attributable to our Revolving Credit Facility and interest rate derivatives.

Deferred tax asset, net reported above includes the following tax effects of temporary differences and carry forwards of our TRS (in thousands):



	December 31,
	2016			2015
Operating loss carry forward	$	5,084		$	5,065
Share-based compensation	13			363
Accrued payroll	101			133
Property	(100		)	(32		)
Valuation allowance	(2,062		)	(2,062		)
Deferred tax asset, net	$	3,036		$	3,467

We recognize a valuation allowance on our deferred tax asset if we believe all or some portion of the asset may not be realized. An increase or decrease in the valuation allowance resulting from a change in circumstances that causes a change in our judgment about the realizability of our deferred tax asset is included in income. The deferred tax asset valuation allowance is due to a decrease in future projected operating income in our TRS resulting primarily from our dispositions of certain properties to which the TRS provided amenity services and our planned reduction in amenity services provided by the TRS at certain other properties. We believe it is more likely than not that the results of future operations in our TRS will generate sufficient taxable income to realize our December 31, 2016 net deferred tax asset.