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Investments in Real Estate | 12 Months Ended
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Dec. 31, 2020
Real Estate [Abstract] |
Investments in Real Estate | Investments in Real Estate We acquire land, buildings and improvements necessary for the successful operations of our commercial clients. A. Acquisitions during 2020 and 2019 Below is a summary of our acquisitions for the year ended December 31, 2020:
| Number of Properties |  | Leasable Square Feet |  | Investment ($ in thousands) |  | Weighted Average Lease Term (Years) |  | Initial Average Cash Lease Yield
Year Ended December 31, 2020 (1) |  |  |  |  |  |  |  |  |
Acquisitions - U.S. (in 30 states) | 202 |  |  | 5,476,009 |  |  | $ | 1,302,220 |  |  | 14.9 |  | 5.8 | %
Acquisitions - U.K. (2) | 24 |  |  | 2,120,256 |  |  | 920,934 |  |  | 10.8 |  | 6.1 | %
Total Acquisitions | 226 |  |  | 7,596,265 |  |  | $ | 2,223,154 |  |  | 13.2 |  | 5.9 | %
Properties under Development - U.S. | 18 |  |  | 1,601,095 |  |  | 84,127 |  |  | 15.3 |  | 5.6 | %
Total (3) | 244 |  |  | 9,197,360 |  |  | $ | 2,307,281 |  |  | 13.2 |  | 5.9 | %
(1)None of our investments during 2020 caused any one client to be 10% or more of our total assets at December 31, 2020. All of our investments in acquired properties during 2020 are 100% leased at the acquisition date. (2)Represents investments of £707.8 million Sterling during the year ended December 31, 2020 converted at the applicable exchange rate on the date of acquisition. (3)Our clients occupying the new properties operate in 26 industries and are 86.6% retail and 13.4% industrial, based on rental revenue. Approximately 61% of the rental revenue generated from acquisitions during 2020 is from our investment grade rated clients, their subsidiaries or affiliated companies. The acquisitions during the year ended December 31, 2020, which had no associated contingent consideration, were allocated as follows (dollars in millions):
| Acquisitions - U.S. | Acquisitions - U.K.
Year Ended December 31, 2020 | (USD) | (£ Sterling)
Land (1) | $ | 337.5 |  | £ | 247.1 |
Buildings and improvements | 768.4 |  | 258.7 |
Lease intangible assets (2) | 203.1 |  | 139.8 |
Other assets (3) | 52.4 |  | 62.9 |
Lease intangible liabilities (2) | (12.9) |  | (0.7) |
Other liabilities (4) | (0.9) |  | — |
| $ | 1,347.6 |  | £ | 707.8 |
(1) U.K. land includes £88.6 million of right of use assets under long-term ground leases. (2) The weighted average amortization period for acquired lease intangible assets and liabilities is 15.9 years. (3) U.S. other assets consists of $51.7 million of financing receivables with above-market terms and $689,000 of right of use assets under ground leases. U.K. other assets consists entirely of right of use assets under ground leases. (4) U.S. other liabilities consists entirely of lease liabilities under ground leases. The properties acquired during 2020 generated total revenues of $54.6 million and net income of $19.4 million during the year ended December 31, 2020. Below is a summary of our acquisitions for the year ended December 31, 2019:
| Number of Properties |  | Leasable Square Feet |  | Investment ($ in thousands) |  | Weighted Average Lease Term (Years) |  | Initial Average Cash Lease Yield
Year Ended December 31, 2019 (1) |  |  |  |  |  |  |  |  |
Acquisitions - U.S. (in 45 states) | 753 |  |  | 11,630,423 |  |  | $ | 2,860,806 |  |  | 13.0 |  | 6.8 | %
Acquisitions - U.K. (2) | 18 |  |  | 1,583,676 |  |  | 797,846 |  |  | 15.6 |  | 5.2 | %
Total Acquisitions | 771 |  |  | 13,214,099 |  |  | 3,658,652 |  |  | 13.4 |  | 6.4 | %
Properties under Development - U.S. | 18 |  |  | 522,173 |  |  | 56,585 |  |  | 15.1 |  | 7.3 | %
Total (3) | 789 |  |  | 13,736,272 |  |  | 3,715,237 |  |  | 13.5 |  | 6.4 | %
(1)None of our investments during 2019 caused any one client to be 10% or more of our total assets at December 31, 2019. All of our 2019 investments in acquired properties were 100% leased at the acquisition date. (2)Represents investments of £625.8 million Sterling during the year ended December 31, 2019 converted at the applicable exchange rate on the date of acquisition. (2) Our clients occupying the new properties operated in 31 industries, and are 94.6% retail and 5.4% industrial, based on rental revenue. Approximately 36% of the rental revenue generated from acquisitions during 2019 was from our investment grade rated clients, their subsidiaries or affiliated companies. The acquisitions during the year ended December 31, 2019, which had no associated contingent consideration, were allocated as follows (dollars in millions):
| Acquisitions - U.S. | Acquisitions - U.K.
Year Ended December 31, 2019 | (USD) | (£ Sterling)
Land (1) | $ | 780.0 |  | £ | 251.0 |
Buildings and improvements | 1,776.1 |  | 249.3 |
Lease intangible assets (2) | 290.1 |  | 129.9 |
Other assets (3) | 82.0 |  | — |
Lease intangible liabilities (4) | (41.9) |  | (4.4) |
Other liabilities (5) | (8.4) |  | — |
| $ | 2,877.9 |  | £ | 625.8 |
(1) U.K. land includes £24.9 million of right of use assets under long-term ground leases. (2) The weighted average amortization period for acquired lease intangible assets is 13.3 years. (3) U.S other assets consists entirely of financing receivables with above-market terms. (4) The weighted average amortization period for acquired lease intangible liabilities is 18.1 years. (5) U.S. other liabilities consists entirely of deferred rent on certain below-market leases. The properties acquired during 2019 generated total revenues of $92.0 million and net income of $36.9 million during the year ended December 31, 2019. The initial average cash lease yield for a property is generally computed as estimated contractual first year cash net operating income, which, in the case of a net leased property, is equal to the aggregate cash base rent for the first full year of each lease, divided by the total cost of the property. Since it is possible that a client could default on the payment of contractual rent, we cannot provide assurance that the actual return on the funds invested will remain at the percentages listed above. In the case of a property under development or expansion, the contractual lease rate is generally fixed such that rent varies based on the actual total investment in order to provide a fixed rate of return. When the lease does not provide for a fixed rate of return on a property under development or expansion, the initial average cash lease yield is computed as follows: estimated cash net operating income (determined by the lease) for the first full year of each lease, divided by our projected total investment in the property, including land, construction and capitalized interest costs. B. Investments in Existing Properties During 2020, we capitalized costs of $7.0 million on existing properties in our portfolio, consisting of $1.8 million for re-leasing costs, $198,000 for recurring capital expenditures and $5.0 million for non-recurring building improvements. In comparison, during 2019, we capitalized costs of $17.9 million on existing properties in our portfolio, consisting of $2.1 million for re-leasing costs, $801,000 for recurring capital expenditures and $15.0 million for non-recurring building improvements. C. Properties with Existing Leases Of the $2.3 billion we invested during 2020, approximately $1.86 billion was used to acquire 127 properties with existing leases. In comparison, of the $3.7 billion we invested during 2019, approximately $2.72 billion was used to acquire 575 properties with existing leases. The value of the in-place and above-market leases is recorded to lease intangible assets, net on our consolidated balance sheets, and the value of the below-market leases is recorded to lease intangible liabilities, net on our consolidated balance sheets. The values of the in-place leases are amortized as depreciation and amortization expense. The amounts amortized to expense for all of our in-place leases, for 2020, 2019, and 2018 were $134.6 million, $112.0 million, and $106.6 million, respectively. The values of the above-market and below-market leases are amortized over the term of the respective leases, including any bargain renewal options, as an adjustment to rental revenue on our consolidated statements of income and comprehensive income. The amounts amortized as a net decrease to rental revenue for capitalized above-market and below-market leases for 2020, 2019, and 2018 were $30.9 million, $22.1 million, and $16.9 million, respectively. If a lease was to be terminated prior to its stated expiration, all unamortized amounts relating to that lease would be recorded to revenue or expense, as appropriate. The following table presents the estimated impact during the next five years and thereafter related to the amortization of the above-market and below-market lease intangibles and the amortization of the in-place lease intangibles at December 31, 2020 (in thousands):
|  | Net decrease to rental revenue |  | Increase to amortization expense
2021 |  | $ | (31,717) |  |  | $ | 138,254 |
2022 |  | (30,283) |  |  | 126,762 |
2023 |  | (28,745) |  |  | 114,571 |
2024 |  | (27,164) |  |  | 105,775 |
2025 |  | (26,609) |  |  | 96,398 |
Thereafter |  | (148,610) |  |  | 514,569 |
Totals |  | $ | (293,128) |  |  | $ | 1,096,329 |

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