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REAL ESTATE AND RELATED LEASE INTANGIBLES, NET | 3 Months Ended
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Mar. 31, 2019
Real Estate [Abstract] |
REAL ESTATE AND RELATED LEASE INTANGIBLES, NET | 6. REAL ESTATE AND RELATED LEASE INTANGIBLES, NET The following tables present additional detail related to our real estate portfolio, net, including foreclosed properties ($ in thousands):
| March 31, 2019 |  | December 31, 2018
Land | $ | 198,926 |  |  | $ | 195,644 |
Building | 830,355 |  |  | 814,314 |
In-place leases and other intangibles | 162,413 |  |  | 162,002 |
Less: Accumulated depreciation and amortization | (184,347 | ) |  | (173,938 | )
Less: Impairment(1) | (1,350 | ) |  | — |
Real estate and related lease intangibles, net | $ | 1,005,997 |  |  | $ | 998,022 |
Below market lease intangibles, net (other liabilities) | $ | (39,922 | ) |  | $ | (40,367 | )
(1) | As more fully discussed in this Note below, the Company recorded a $1.4 million impairment of real estate during the three months ended March 31, 2019.
At March 31, 2019 and December 31, 2018, the Company held foreclosed properties included in real estate, net with a carrying value of $24.4 million and $6.3 million, respectively. The following table presents depreciation and amortization expense on real estate recorded by the Company ($ in thousands):
| Three Months Ended March 31,
| 2019 |  | 2018
Depreciation expense (1) | $ | 7,685 |  |  | $ | 7,786 |
Amortization expense | 2,517 |  |  | 3,018 |
Total real estate depreciation and amortization expense | $ | 10,202 |  |  | $ | 10,804 |
(1) | Depreciation expense on the consolidated statements of income also includes $25 thousand and $19 thousand of depreciation on corporate fixed assets for the three months ended March 31, 2019 and 2018, respectively.
The Company’s intangible assets are comprised of in-place leases, favorable leases compared to market leases and other intangibles. At March 31, 2019, gross intangible assets totaled $162.0 million with total accumulated amortization of $60.6 million, resulting in net intangible assets of $101.4 million, including $5.0 million of unamortized favorable lease intangibles which are included in real estate and related lease intangibles, net on the consolidated balance sheets. At December 31, 2018, gross intangible assets totaled $162.0 million with total accumulated amortization of $57.7 million, resulting in net intangible assets of $104.3 million, including $5.5 million of unamortized favorable lease intangibles which are included in real estate and related lease intangibles, net on the consolidated balance sheets. For the three months ended March 31, 2019 and 2018, the Company recorded a reduction in operating lease income of $0.4 million and $0.2 million, respectively, for amortization of above market leases intangibles acquired. For the three months ended March 31, 2019 and 2018, the Company recorded an increase in operating lease income of $0.6 million for amortization of below market lease intangibles acquired. The following table presents expected adjustment to operating lease income and expected amortization expense during the next five years and thereafter related to the above and below market leases and acquired in-place lease and other intangibles for property owned as of March 31, 2019 ($ in thousands):
Period Ending December 31, |  | Adjustment to Operating Lease Income |  | Amortization Expense
2019 (last 9 months) |  | $ | 743 |  |  | $ | 5,036 |
2020 |  | 746 |  |  | 6,556 |
2021 |  | 746 |  |  | 6,490 |
2022 |  | 751 |  |  | 6,427 |
2023 |  | 751 |  |  | 6,304 |
Thereafter |  | 31,136 |  |  | 65,633 |
Total |  | $ | 34,873 |  |  | $ | 96,446 |
Lease Prepayment by Lessor, Retirement of Related Mortgage Loan Financing and Impairment of Real Estate On January 10, 2019, the Company received $10.0 million prepayment of a lease on a single-tenant two-story office building in Wayne, NJ. As of March 31, 2019, this property had a book value of $5.6 million, which is net of accumulated depreciation and amortization of $2.7 million. The Company will recognize the $10.0 million of operating lease income on a straight-line basis over the revised lease term, which ends on May 31, 2019. On February 6, 2019, the Company paid off $6.6 million of mortgage loan financing related to the property, recognizing a loss on extinguishment of debt of $1.1 million. During the three months ended March 31, 2019, the Company recorded a $1.4 million impairment of real estate to reduce the carrying value of the real estate to the estimated fair value of the real estate. On May 1, 2019, the Company completed the sale of the property recognizing $3.9 million of operating lease income, $3.5 million realized loss on sale of real estate, net and $0.4 million of depreciation and amortization expense, resulting in a net loss of $20 thousand. See Note 9, Fair Value of Financial Instruments for further detail. There were $1.0 million and $0.8 million of rent receivables included in other assets on the consolidated balance sheets as of March 31, 2019 and December 31, 2018, respectively. There was unencumbered real estate of $80.3 million and $58.6 million as of March 31, 2019 and December 31, 2018, respectively. During the three months ended March 31, 2019, the Company recorded $0.2 million of real estate operating income, which is included in operating property income in the consolidated statements of income. The following is a schedule of non-cancellable, contractual, future minimum rent under leases (excluding property operating expenses paid directly by tenant under net leases) at March 31, 2019 ($ in thousands):
Period Ending December 31, |  | Amount
2019 (last 9 months) |  | $ | 62,728 |
2020 |  | 71,870 |
2021 |  | 68,303 |
2022 |  | 64,590 |
2023 |  | 62,421 |
Thereafter |  | 509,455 |
Total |  | $ | 839,367 |
Acquisitions During the three months ended March 31, 2019, the Company acquired the following properties ($ in thousands):
Acquisition Date |  | Type |  | Primary Location(s) |  | Purchase Price/Fair Value on the Date of Foreclosure |  | Ownership Interest (1)
Purchases of real estate |  |  |  |  |  |
February 2019 |  | Net Lease |  | Houghton Lake, MI |  | $ | 1,242 |  |  | 100.0%
February 2019 |  | Net Lease |  | Trenton, MO |  | 1,164 |  |  | 100.0%
Total purchases of real estate |  |  |  | $ | 2,406 |  |  |
Real estate acquired via foreclosure |  |  |  |
February 2019 |  | Diversified |  | Omaha, NE |  | 18,200 |  |  | 100.0%
Total real estate acquired via foreclosure |  | $ | 18,200 |  |  |
Total real estate acquisitions |  |  |  | $ | 20,606 |  |  |
(1) | Properties were consolidated as of acquisition date.
During the three months ended March 31, 2019, the Company acquired title to real estate in a foreclosure. The real estate had a fair value of $18.2 million and previously served as collateral for a mortgage loan receivable held for investment, which was previously on non-accrual status. This loan had an amortized cost of $17.8 million, accrued interest of $0.2 million and an unamortized discount of $0.1 million. The acquisition was accounted for in real estate, net, at fair value on the date of foreclosure. There was no gain or loss resulting from the disposition of the loan. On October 1, 2016, the Company early adopted ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”). As a result of this adoption, acquisitions of real estate may not meet the revised definition of a business and may be treated as asset acquisitions rather than business combinations. The measurement of assets and liabilities acquired will no longer be recorded at fair value and the Company will now allocate purchase consideration based on relative fair values. Real estate acquisition costs, which are no longer expensed as incurred, will be capitalized as a component of the cost of the assets acquired. During the three months ended March 31, 2019, all acquisitions were determined to be asset acquisitions. The purchase prices were allocated to the asset acquisitions during the three months ended March 31, 2019, as follows ($ in thousands):
|  | Purchase Price Allocation
Land |  | $ | 3,483 |
Building |  | 16,804 |
Intangibles |  | 442 |
Below Market Lease Intangibles |  | (123 | )
Total purchase price |  | $ | 20,606 |
The weighted average amortization period for intangible assets acquired during the three months ended March 31, 2019 was 36.7 months. The Company recorded $16 thousand in revenues from its 2019 acquisitions for the three months ended March 31, 2019, which is included in its consolidated statements of income. The Company recorded $0.2 million in earnings (losses) from its 2019 acquisitions for the three months ended March 31, 2019, which is included in its consolidated statements of income. During the three months ended March 31, 2018, the Company acquired the following properties ($ in thousands):
Acquisition Date |  | Type |  | Primary Location(s) |  | Purchase Price |  | Ownership Interest (1)
March 2018 |  | Diversified(2) |  | Lithia Springs, GA |  | $ | 24,466 |  |  | 70.6%
Total real estate acquisitions |  |  |  | $ | 24,466 |  |  |
(1) | Properties were consolidated as of acquisition date.
(2) | Joint venture partner contributed $2.9 million to the partnership.
The purchase prices were allocated to the asset acquisitions during the three months ended March 31, 2018, as follows ($ in thousands):
|  | Purchase Price Allocation
Land |  | $ | 2,939 |
Building |  | 21,527 |
Intangibles |  | — |
Below Market Lease Intangibles |  | — |
Total purchase price |  | $ | 24,466 |
The Company recorded no revenues from its 2018 acquisition for the three months ended March 31, 2018. The Company recorded $(0.2) million in earnings (losses) from its 2018 acquisition for the three months ended March 31, 2018, which is included in its consolidated statements of income. Sales The Company sold the following properties during the three months ended March 31, 2019 ($ in thousands):
Sales Date |  | Type |  | Primary Location(s) |  | Net Sales Proceeds |  | Net Book Value |  | Realized Gain/(Loss) |  | Properties |  | Units Sold |  | Units Remaining
Various |  | Condominium |  | Las Vegas, NV |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | — |  |  | — |  |  | 1 |
Various |  | Condominium |  | Miami, FL |  | 1,688 |  |  | 1,503 |  |  | 185 |  |  | — |  |  | 6 |  |  | 16 |
Totals |  |  |  |  |  | $ | 1,688 |  |  | $ | 1,503 |  |  | $ | 185 |  |  |  |  |  |  |
The Company sold the following properties during the three months ended March 31, 2018 ($ in thousands):
Sales Date |  | Type |  | Primary Location(s) |  | Net Sales Proceeds |  | Net Book Value |  | Realized Gain/(Loss) |  | Properties |  | Units Sold |  | Units Remaining
Various |  | Condominium |  | Las Vegas, NV |  | $ | 1,811 |  |  | $ | 732 |  |  | $ | 1,079 |  |  | — |  |  | 2 |  |  | 11 |
Various |  | Condominium |  | Miami, FL |  | 2,263 |  |  | 1,792 |  |  | 471 |  |  | — |  |  | 8 |  |  | 40 |
March 2018 |  | Diversified |  | El Monte, CA |  | 71,807 |  |  | 52,610 |  |  | 19,197 |  | (1) | 1 |  |  | — |  |  | — |
March 2018 |  | Diversified |  | Richmond, VA |  | 20,966 |  |  | 11,370 |  |  | 9,596 |  | (2) | 1 |  |  | — |  |  | — |
Totals |  |  |  |  |  | $ | 96,847 |  |  | $ | 66,504 |  |  | $ | 30,343 |  |  |  |  |  |  |
(1) | This property had a third party investor. The third party investor has been allocated $7.0 million of the realized gain, which is included in net (income) loss attributable to noncontrolling interest in consolidated joint ventures, for the three months ended March 31, 2018, on the consolidated statements of income.
(2) | This property had a third party investor. The third party investor has been allocated $0.4 million of the realized gain, which is included in net (income) loss attributable to noncontrolling interest in consolidated joint ventures, for the three months ended March 31, 2018, on the consolidated statements of income.

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- Definition The entire disclosure for real estate owned (as defined). Generally, the largest component of real estate owned by lenders is assets taken in settlement of troubled loans through surrender or foreclosure. Real estate investments, real estate loans that qualify as investments in real estate, and premises that are no longer used in operations may also be included in real estate owned. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -SubTopic 10 -Section 35 -Paragraph 43 -URI http://asc.fasb.org/extlink&oid=29634951&loc=d3e1739-110224 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 40 -Section 40 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=114775070&loc=d3e18511-111553 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -Section 45 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=82891408&loc=d3e4437-111522 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 210 -Section S99 -Paragraph 1 -Subparagraph (SX 210.9-03(8)) -URI http://asc.fasb.org/extlink&oid=6876686&loc=d3e534808-122878 Reference 5: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -SubTopic 10 -Section 35 -Paragraph 17 -URI http://asc.fasb.org/extlink&oid=29634951&loc=d3e1424-110224 Reference 6: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 210 -Section S99 -Paragraph 1 -Subparagraph (SX 210.9-03(10)(4)) -URI http://asc.fasb.org/extlink&oid=6876686&loc=d3e534808-122878 Reference 7: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 40 -Section 40 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=114775070&loc=d3e18551-111553 + Details
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