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Real Estate and Intangible Assets (Tables) | 12 Months Ended
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Dec. 31, 2018
Real Estate [Abstract] |
Components of Investments in Real Estate | The following table sets forth the components of our investments in real estate as of December 31, 2018 and 2017, respectively, excluding real estate held for sale as of December 31, 2018 and 2017, respectively (dollars in thousands):
|  | December 31, 2018 |  | December 31, 2017
Real estate: |  |  |  |
Land |  | $ | 125,905 |  |  | $ | 121,783 |
Building and improvements |  | 755,584 |  |  | 708,948 |
Tenant improvements |  | 65,160 |  |  | 63,122 |
Accumulated depreciation |  | (178,257 | ) |  | (149,417 | )
Real estate, net |  | $ | 768,392 |  |  | $ | 744,436 |
Summary of Properties Acquired | During the year ended December 31, 2018 and 2017 we acquired five and seven properties, respectively, which are summarized below (dollars in thousands):
Year Ended |  | Aggregate Square Footage |  | Weighted Average Lease Term |  | Aggregate Purchase Price |  | Acquisition Costs |  | Aggregate Annualized GAAP Rent |  | Aggregate Mortgage Debt Issued or Assumed |
December 31, 2018 | (1) | 591,037 |  |  | 11.1 Years |  | $ | 63,245 |  |  | $ | 905 |  | (3) | $ | 5,984 |  |  | $ | 11,663 |  | (4)
December 31, 2017 | (2) | 871,038 |  |  | 10.1 Years |  | $ | 132,157 |  |  | $ | 1,348 |  | (3) | $ | 15,507 |  |  | $ | 54,887 |  | (5)
(1) | On March 9, 2018, we acquired a 127,444 square foot property in Vance, Alabama for $14.3 million. The annualized GAAP rent on the 9.8 year lease is $1.1 million. On September 20, 2018, we acquired a 157,810 square foot property in Columbus, Ohio for $8.5 million. We entered into an interest rate swap in connection with our $4.7 million of issued debt on our Columbus, Ohio acquisition resulting in a fixed interest rate of 5.32% on such debt. The annualized GAAP rent on the 15.0 year lease is $0.8 million. On October 30, 2018, we acquired a 218,703 square foot, two property portfolio located in Detroit, Michigan for $21.7 million. We assumed $6.9 million of mortgage debt with a fixed interest rate of 4.63% and issued 742,937 OP Units in connection with this acquisition. This portfolio has a weighted average lease term of 10.5 years, and annualized GAAP rent of $1.7 million. On December 27, 2018, we acquired an 87,080 square foot property in Lake Mary, Florida for $18.7 million. The annualized GAAP rent on the 11.0 year lease is $2.4 million.
(2) | On June 22, 2017, we acquired a 60,016 square foot property in Conshohocken, Pennsylvania for $15.7 million. We assumed $11.2 million of mortgage debt in connection with this acquisition. The annualized GAAP rent on the 8.5 year lease is $1.7 million. On July 7, 2017, we acquired a 300,000 square foot property in Philadelphia, Pennsylvania for $27.1 million. We issued $14.9 million of mortgage debt with a fixed interest rate of 3.75% in connection with this acquisition. The annualized GAAP rent on the 15.4 year lease is $2.3 million. On July 31, 2017, we acquired a 306,435 square foot, three property portfolio located in Maitland, Florida for $51.6 million. We issued $28.8 million of mortgage debt with a fixed interest rate of 3.89% in connection with this acquisition. This portfolio has a weighted average lease term of 8.6 years, and annualized GAAP rent of $6.8 million. On December 1, 2017, we acquired a 102,559 square foot property in Columbus, Ohio for $17.3 million. The annualized GAAP rent on the 6.9 year lease is $1.7 million. On December 1, 2017, we acquired a 102,028 square foot property in Salt Lake City, Utah for $20.5 million. The annualized GAAP rent on the 10.1 year lease is $3.0 million.
(3) | We accounted for these transactions under ASU 2017-01. As a result, we treated our acquisitions during the years ended December 31, 2018 and 2017 as asset acquisitions rather than business combinations. As a result of this treatment, we capitalized $0.9 million and $1.3 million, respectively, of acquisition costs that would otherwise have been expensed under business combination treatment.
(4) | We entered into an interest rate swap in connection with $4.7 million of issued debt on our Columbus, Ohio acquisition, pursuant to which we will pay our counterparty a fixed interest rate of 3.22%, and receive a variable interest rate of one month LIBOR from our counterparty. Our total interest rate on this debt is fixed at 5.32%. We have elected to treat this interest rate swap as a cash flow hedge, and all changes in fair market value will be recorded to accumulated other comprehensive income on the consolidated balance sheets.
(5) | We assumed an interest rate swap in connection with $11.2 million of assumed debt on our Conshohocken, Pennsylvania acquisition, pursuant to which we will pay our counterparty a fixed interest rate of 1.80%, and receive a variable interest rate of one month LIBOR from our counterparty. Our total interest rate on this debt is fixed at 3.55%. The interest rate swap had a fair value of $0.04 million upon the date of assumption, and subsequently increased in value to $0.5 million at December 31, 2018. We have elected to treat this interest rate swap as a cash flow hedge, and all changes in fair market value will be recorded to accumulated other comprehensive income on the consolidated balance sheets.
Fair Value of Acquired Assets and Liabilities Assumed | We determined the fair value of assets acquired and liabilities assumed related to the properties acquired during the year ended December 31, 2018 and 2017, respectively, as follows (dollars in thousands):
|  | Year ended December 31, 2018 |  | Year ended December 31, 2017
Acquired assets and liabilities |  | Purchase price |  | Purchase price
Land |  | $ | 6,278 |  |  | $ | 21,509 |
Building |  | 44,754 |  |  | 68,617 |
Tenant Improvements |  | 2,400 |  |  | 9,977 |
In-place Leases |  | 4,418 |  |  | 12,018 |
Leasing Costs |  | 3,933 |  |  | 7,066 |
Customer Relationships |  | 2,698 |  |  | 10,806 |
Above Market Leases |  | 239 |  |  | 3,824 |
Below Market Leases |  | (1,475 | ) |  | (2,101 | )
Discount on Assumed Debt |  | — |  |  | 399 |
Fair Value of Interest Rate Swap Assumed |  | — |  |  | 42 |
Total Purchase Price |  | $ | 63,245 |  |  | $ | 132,157 |
Schedule of Revenue and Earnings Recognized on Properties Acquired | Below is a summary of the total revenue and earnings recognized on the two acquisitions treated as business combinations completed during the year ended December 31, 2016 (dollars in thousands):
|  | For the year ended December 31, 2016
Rental Revenue |  | $ | 1,462 |
Earnings |  | 162 |
Pro-Forma Condensed Consolidated Statements of Operations | The following table reflects pro-forma consolidated statements of operations as if the business combinations completed in 2016, were completed as of January 1, 2015. The pro-forma earnings for the year ended December 31, 2016 were adjusted to assume that the acquisition-related costs were incurred as of the beginning of the comparative period (dollars in thousands, except per share amounts):
|  | For the year ended December 31,
|  | (unaudited)
|  | 2016
Operating Data: |  |
Total operating revenue |  | $ | 88,304 |
Total operating expenses |  | (56,697 | )
Other expenses, net |  | (27,429 | )
Net income |  | 4,178 |
Dividends attributable to preferred and senior common stock |  | (7,656 | )
Net loss attributable to common stockholders |  | $ | (3,478 | )
Share and Per Share Data: |  |
Basic and diluted loss per share of common stock - pro forma |  | $ | (0.15 | )
Basic and diluted loss per share of common stock - actual |  | $ | (0.16 | )
Weighted average shares outstanding-basic and diluted |  | 23,193,962 |
Summary of Leased Properties | During the year ended December 31, 2018 and 2017, we executed three and nine leases, respectively, which are aggregated below (dollars in thousands):
Year Ended |  | Aggregate Square Footage |  | Weighted Average Lease Term |  | Aggregate Annualized GAAP Rent |  | Aggregate Tenant Improvement |  | Aggregate Leasing Commissions
December 31, 2018 |  | 97,178 |  |  | 5.3 Years | (1) | $ | 1,253 |  |  | $ | 433 |  |  | $ | 242 |
December 31, 2017 |  | 880,749 |  |  | 9.2 Years | (2) | $ | 6,976 |  |  | $ | 1,264 |  |  | $ | 742 |
(1) | Weighted average lease term is weighted according to the annualized GAAP rent earned by each lease. Our leases have terms ranging from 3.6 years to 7.0 years.
(2) | Weighted average lease term is weighted according to the annualized GAAP rent earned by each lease. Our leases have terms ranging from 1 year to 11.3 years.
During the year ended December 31, 2018 and 2017, we had two and zero lease contractions, respectively, which are aggregated below (dollars in thousands):
Year Ended |  | Aggregate Square Footage Reduced |  | Aggregate Square Footage Remaining |  | Aggregate Contraction Fee |  | Aggregate Deferred Rent Write Off
December 31, 2018 | (1) | 44,032 |  |  | 169,133 |  | $ | 559 |  |  | $ | 184 |
(1) | A tenant in our Salt Lake City, Utah property exercised a lease contraction to reduce their occupancy in our building by 23,632 square feet. They will continue to lease 81,271 square feet through their original lease term. In connection with this contraction, we will earn a contraction fee of $0.3 million, which is recognized through rental revenue on the consolidated statements of operations and comprehensive income through the contraction term, and we wrote off $0.1 million of deferred rent asset to property operating expenses on the consolidated statements of operations and comprehensive income. A tenant in our Champaign, Illinois property exercised a lease contraction to reduce its occupancy in our building by 20,400 square feet. They will continue to lease 87,862 square feet through their original lease term. In connection with this contraction, we will earn a contraction fee of $0.2 million, which is recognized through rental revenue on the consolidated statements of operations and comprehensive income through the contraction term, and we wrote off $0.1 million of deferred rent asset to property operating expenses on the consolidated statements of operations and comprehensive income. We recorded contraction fees of $0.2 million, in the aggregate, during the year ended December 31, 2018.
Future Operating Lease Payments from Tenants under Non-Cancelable Leases | Future operating lease payments from tenants under non-cancelable leases, excluding tenant reimbursement of expenses and excluding real estate held for sale as of December 31, 2018, for each of the five succeeding fiscal years and thereafter is as follows (dollars in thousands):
Year | Tenant Lease Payments
2019 | $ | 103,322 |
2020 | 97,302 |
2021 | 89,057 |
2022 | 82,336 |
2023 | 74,337 |
Thereafter | 279,424 |
| $ | 725,778 |
Carrying Value of Intangible Assets and Accumulated Amortization | The following table summarizes the carrying value of intangible assets, liabilities and the accumulated amortization for each intangible asset and liability class as of December 31, 2018 and 2017, excluding real estate held for sale as of December 31, 2018 and 2017, respectively (dollars in thousands):
|  | December 31, 2018 |  | December 31, 2017
|  | Lease Intangibles |  | Accumulated Amortization |  | Lease Intangibles |  | Accumulated Amortization
In-place leases |  | $ | 83,894 |  |  | $ | (40,445 | ) |  | $ | 80,355 |  |  | $ | (33,201 | )
Leasing costs |  | 59,671 |  |  | (28,092 | ) |  | 55,695 |  |  | (23,016 | )
Customer relationships |  | 60,455 |  |  | (24,035 | ) |  | 58,892 |  |  | (19,798 | )
|  | $ | 204,020 |  |  | $ | (92,572 | ) |  | $ | 194,942 |  |  | $ | (76,015 | )
|  | Deferred Rent Receivable/(Liability) |  | Accumulated (Amortization)/Accretion |  | Deferred Rent Receivable/(Liability) |  | Accumulated (Amortization)/Accretion
Above market leases |  | $ | 14,551 |  |  | $ | (8,981 | ) |  | $ | 14,425 |  |  | $ | (7,962 | )
Below market leases and deferred revenue |  | (29,807 | ) |  | 12,502 |  |  | (26,725 | ) |  | 10,475 |
|  | $ | (15,256 | ) |  | $ | 3,521 |  |  | $ | (12,300 | ) |  | $ | 2,513 |
Weighted Average Amortization Period for Intangible Assets Acquired and Liabilities Assumed | The weighted average amortization periods in years for the intangible assets acquired and liabilities assumed during the years ended December 31, 2018 and 2017, respectively, were as follows:
Intangible Assets & Liabilities |  | 2018 |  | 2017
In-place leases |  | 11.7 |  | 9.4
Leasing costs |  | 11.7 |  | 9.4
Customer relationships |  | 19.3 |  | 12.8
Above market leases |  | 10.4 |  | 10.0
Below market leases |  | 12.4 |  | 8.4
All intangible assets & liabilities |  | 13.6 |  | 10.2
Estimated Aggregate Amortization Expense | The estimated aggregate amortization expense to be recorded for in-place leases, leasing costs and customer relationships for each of the five succeeding fiscal years and thereafter is as follows, excluding real estate held for sale as of December 31, 2018 (dollars in thousands):
Year | Estimated Amortization Expense of In-Place Leases, Leasing Costs and Customer Relationships
2019 | $ | 19,887 |
2020 | 18,252 |
2021 | 16,049 |
2022 | 13,755 |
2023 | 11,203 |
Thereafter | 32,302 |
| $ | 111,448 |
Summary of Estimated Aggregate Rental Income | The estimated aggregate rental income to be recorded for the amortization of both above and below market leases for each of the five succeeding fiscal years and thereafter is as follows, excluding real estate held for sale as of December 31, 2018 (dollars in thousands):
Year | Net Increase to Rental Income Related to Above and Below Market Leases
2019 | $ | 1,763 |
2020 | 1,663 |
2021 | 1,394 |
2022 | 1,370 |
2023 | 1,144 |
Thereafter | 4,203 |
| $ | 11,537 |
(1) Does not include ground lease amortization of $198.

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