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Real Estate and Intangible Assets | 3 Months Ended
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Mar. 31, 2019
Real Estate [Abstract] |
Real Estate and Intangible Assets | Real Estate and Intangible Assets Real Estate The following table sets forth the components of our investments in real estate as of March 31, 2019 and December 31, 2018, excluding real estate held for sale as of December 31, 2018 (dollars in thousands):
|  | March 31, 2019 |  | December 31, 2018
Real estate: |  |  |  |
Land |  | $ | 126,698 |  |  | $ | 125,905 |
Building and improvements |  | 762,026 |  |  | 755,584 |
Tenant improvements |  | 65,254 |  |  | 65,160 |
Accumulated depreciation |  | (186,107 | ) |  | (178,257 | )
Real estate, net |  | $ | 767,871 |  |  | $ | 768,392 |
Real estate depreciation expense on building and tenant improvements was $8.0 million and $7.3 million for the three months ended March 31, 2019 and 2018, respectively. Acquisitions We acquired two properties during the three months ended March 31, 2019, and one property during the three months ended March 31, 2018. The acquisitions are summarized below (dollars in thousands):
Three Months Ended |  | Square Footage |  | Lease Term |  | Purchase Price |  | Acquisition Expenses |  | Annualized GAAP Rent
March 31, 2019 | (1) | 60,850 |  |  | 12.2 Years |  | $ | 6,315 |  |  | $ | 130 |  | (3) | $ | 516 |
March 31, 2018 | (2) | 127,444 |  |  | 9.8 Years |  | 14,341 |  |  | 91 |  | (3) | 1,087 |
(1) | On February 8, 2019, we acquired a 26,050 square foot property in a suburb of Philadelphia, Pennsylvania, for $2.7 million. The annualized GAAP rent on the 15.1 year lease is $0.2 million. On February 28, 2019, we acquired a 34,800 square foot property in Indianapolis, Indiana for $3.6 million. The annualized GAAP rent on the 10.0 year lease is $0.3 million.
(2) | 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.
(3) | We accounted for these transactions under ASU 2017-01, “Clarifying the Definition of a Business.” As a result, we treated our acquisitions during the three months ended March 31, 2019 and 2018 as asset acquisitions rather than business combinations. As a result of this treatment, we capitalized $0.1 million and $0.1 million, respectively, of acquisition costs that would otherwise have been expensed under business combination treatment.
We determined the fair value of assets acquired and liabilities assumed related to the properties acquired during the three months ended March 31, 2019 and 2018 as follows (dollars in thousands):
|  | Three months ended March 31, 2019 |  | Three months ended March 31, 2018
Acquired assets and liabilities |  | Purchase price |  | Purchase price
Land |  | $ | 723 |  |  | $ | 459 |
Building |  | 4,541 |  |  | 11,609 |
Tenant Improvements |  | 93 |  |  | 615 |
In-place Leases |  | 432 |  |  | 509 |
Leasing Costs |  | 307 |  |  | 534 |
Customer Relationships |  | 196 |  |  | 566 |
Above Market Leases |  | 23 |  |  | 49 |
Total Purchase Price |  | $ | 6,315 |  |  | $ | 14,341 |
Significant Real Estate Activity on Existing Assets During the three months ended March 31, 2019 and 2018, we executed two and one new leases, respectively, which are summarized below (dollars in thousands):
Three Months Ended |  | Aggregate Square Footage |  | Weighted Average Remaining Lease Term |  | Aggregate Annualized GAAP Rent |  | Aggregate Leasing Commissions
March 31, 2019 |  | 130,240 |  |  | 6.2 years |  | $ | 1,187 |  |  | $ | 71 |
March 31, 2018 |  | 34,441 |  |  | 3.6 years |  | 97 |  |  | 14 |
Future Lease Payments Future operating lease payments from tenants under non-cancelable leases, excluding tenant reimbursement of expenses, for the nine months ending December 31, 2019 and each of the five succeeding fiscal years and thereafter is as follows (dollars in thousands):
Year | Tenant Lease Payments
Nine Months Ending 2019 | $ | 77,289 |
2020 | 97,758 |
2021 | 90,374 |
2022 | 83,723 |
2023 | 75,744 |
2024 | 66,554 |
Thereafter | 217,638 |
| $ | 709,080 |
We account for all of our real estate leasing arrangements as operating leases. A majority of our leases are subject to fixed rental increases, but a small subset of our lease portfolio has variable lease payments that are driven by the consumer price index. Many of our tenants have renewal options in their respective leases, but we seldom include option periods in the determination of lease term as we generally will not enter into leasing arrangements with bargain renewal options. A small number of tenants have termination options. Future minimum 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 |
In accordance with the lease terms, substantially all operating expenses are required to be paid by the tenant; however, we would be required to pay operating expenses on the respective properties in the event the tenants fail to pay them. Intangible Assets The following table summarizes the carrying value of intangible assets, liabilities and the accumulated amortization for each intangible asset and liability class as of March 31, 2019 and December 31, 2018, excluding real estate held for sale as of December 31, 2018 (dollars in thousands):
|  | March 31, 2019 |  | December 31, 2018
|  | Lease Intangibles |  | Accumulated Amortization |  | Lease Intangibles |  | Accumulated Amortization
In-place leases |  | $ | 84,326 |  |  | $ | (42,388 | ) |  | $ | 83,894 |  |  | $ | (40,445 | )
Leasing costs |  | 60,049 |  |  | (29,436 | ) |  | 59,671 |  |  | (28,092 | )
Customer relationships |  | 60,650 |  |  | (25,154 | ) |  | 60,455 |  |  | (24,035 | )
|  | $ | 205,025 |  |  | $ | (96,978 | ) |  | $ | 204,020 |  |  | $ | (92,572 | )
|  | Deferred Rent Receivable/(Liability) |  | Accumulated (Amortization)/Accretion |  | Deferred Rent Receivable/(Liability) |  | Accumulated (Amortization)/Accretion
Above market leases |  | $ | 14,575 |  |  | $ | (9,208 | ) |  | $ | 14,551 |  |  | $ | (8,981 | )
Below market leases and deferred revenue |  | (30,822 | ) |  | 13,051 |  |  | (29,807 | ) |  | 12,502 |
|  | $ | (16,247 | ) |  | $ | 3,843 |  |  | $ | (15,256 | ) |  | $ | 3,521 |
Total amortization expense related to in-place leases, leasing costs and customer relationship lease intangible assets was $5.0 million and $4.2 million for the three months ended March 31, 2019 and 2018, respectively, and is included in depreciation and amortization expense in the condensed consolidated statements of operations and comprehensive income. Total amortization related to above-market lease values was $0.3 million and $0.2 million for the three months ended March 31, 2019 and 2018, respectively, and is included in lease revenue in the condensed consolidated statements of operations and comprehensive income. Total amortization related to below-market lease values was $0.6 million and $0.5 million for the three months ended March 31, 2019 and 2018, respectively, and is included in lease revenue in the condensed consolidated statements of operations and comprehensive income. The weighted average amortization periods in years for the intangible assets acquired during the three months ended March 31, 2019 and 2018 were as follows:
Intangible Assets & Liabilities |  | 2019 |  | 2018
In-place leases |  | 13.0 |  | 9.8
Leasing costs |  | 13.0 |  | 9.8
Customer relationships |  | 17.9 |  | 14.8
Above market leases |  | 10.0 |  | 9.8
All intangible assets & liabilities |  | 14.5 |  | 11.1

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