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Real Estate and Intangible Assets | 9 Months Ended
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Sep. 30, 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 September 30, 2019 and December 31, 2018, excluding real estate held for sale as of December 31, 2018 (dollars in thousands):
|  | September 30, 2019 |  | December 31, 2018
Real estate: |  |  |  |
Land |  | $ | 130,962 |  |  | $ | 125,905 |
Building and improvements |  | 810,774 |  |  | 755,584 |
Tenant improvements |  | 66,702 |  |  | 65,160 |
Accumulated depreciation |  | (202,480 | ) |  | (178,257 | )
Real estate, net |  | $ | 805,958 |  |  | $ | 768,392 |
Real estate depreciation expense on building and tenant improvements was $8.3 million and $24.4 million for the three and nine months ended September 30, 2019, respectively, and $7.5 million and $22.3 million for the three and nine months ended September 30, 2018, respectively. Acquisitions We acquired nine properties during the nine months ended September 30, 2019, and two properties during the nine months ended September 30, 2018. The acquisitions are summarized below (dollars in thousands):
Nine Months Ended |  | Aggregate Square Footage |  | Weighted Average Lease Term |  | Aggregate Purchase Price |  | Acquisition Expenses |  | Aggregate Annualized GAAP Rent |  | Aggregate Debt Issued or Assumed
September 30, 2019 | (1) | 1,463,763 |  |  | 14.8 Years |  | $ | 67,272 |  |  | $ | 621 |  | (3) | $ | 5,437 |  |  | $ | 8,900 |
September 30, 2018 | (2) | 285,254 |  |  | 11.7 Years |  | 22,800 |  |  | 225 |  | (3) | 1,851 |  |  | 4,745 |
(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. On April 5, 2019, we acquired a 207,000 square foot property in Ocala, Florida, for $11.9 million. The annualized GAAP rent on the 20.1 year lease is $0.8 million. On April 5, 2019, we acquired a 176,000 square foot property in Ocala, Florida, for $7.3 million. The annualized GAAP rent on the 20.1 year lease is $0.7 million. On April 30, 2019, we acquired a 54,430 square foot property in Columbus, Ohio, for $3.2 million. The annualized GAAP rent on the 7.0 year lease is $0.2 million. On June 18, 2019, we acquired a 676,031 square foot property in Tifton, Georgia, for $17.9 million. The annualized GAAP rent on the 8.5 year lease is $1.6 million. We issued $8.9 million of mortgage debt with a fixed interest rate of 4.35% in connection with this acquisition. On July 30, 2019, we acquired a 78,452 square foot property in Denton, Texas, for $6.6 million. The annualized GAAP rent on the 11.9 year lease is $0.5 million. On September 26, 2019, we acquired a 211,000 square foot two property portfolio in Temple, Texas, for $14.1 million. The annualized GAAP rent on the 20.0 year lease is $1.2 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. On September 20, 2018, we acquired a 157,810 square foot property in Columbus, Ohio for $8.5 million. We issued $4.7 million of mortgage debt in connection with this acquisition. The annualized GAAP rent on the 15.0 year lease is $0.8 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 nine months ended September 30, 2019 and 2018 as asset acquisitions rather than business combinations. As a result of this treatment, we capitalized $0.6 million and $0.2 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 nine months ended September 30, 2019 and 2018 as follows (dollars in thousands):
|  | Nine months ended September 30, 2019 |  | Nine months ended September 30, 2018
Acquired assets and liabilities |  | Purchase price |  | Purchase price
Land |  | $ | 5,046 |  |  | $ | 1,140 |
Building |  | 48,898 |  |  | 17,849 |
Tenant Improvements |  | 1,541 |  |  | 776 |
In-place Leases |  | 4,868 |  |  | 1,249 |
Leasing Costs |  | 4,481 |  |  | 1,245 |
Customer Relationships |  | 2,200 |  |  | 792 |
Above Market Leases |  | 1,865 |  |  | 49 |
Below Market Leases |  | (1,627 | ) |  | (300 | )
Total Purchase Price |  | $ | 67,272 |  |  | $ | 22,800 |
Significant Real Estate Activity on Existing Assets During the nine months ended September 30, 2019 and 2018, we executed five leases and two leases, respectively, which are summarized below (dollars in thousands):
Nine Months Ended |  | Aggregate Square Footage |  | Weighted Average Remaining Lease Term |  | Aggregate Annualized GAAP Rent |  | Aggregate Tenant Improvement |  | Aggregate Leasing Commissions
September 30, 2019 |  | 230,264 |  |  | 8.8 years |  | $ | 3,366 |  |  | $ | 785 |  |  | $ | 910 |
September 30, 2018 | (1) | 184,441 |  |  | 1.6 years |  | 391 |  |  | — |  |  | 14 |
(1) | One of the new leases we entered into was on our South Hadley, Massachusetts property, which was classified as held for sale on the condensed consolidated balance sheets as of September 30, 2018.
Future Lease Payments Future operating lease payments from tenants under non-cancelable leases, excluding tenant reimbursement of expenses, for the three 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
Three Months Ending 2019 | $ | 27,585 |
2020 | 102,850 |
2021 | 96,826 |
2022 | 89,192 |
2023 | 81,303 |
2024 | 72,155 |
Thereafter | 275,658 |
| $ | 745,569 |
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 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 September 30, 2019 and December 31, 2018, excluding real estate held for sale as of December 31, 2018 (dollars in thousands):
|  | September 30, 2019 |  | December 31, 2018
|  | Lease Intangibles |  | Accumulated Amortization |  | Lease Intangibles |  | Accumulated Amortization
In-place leases |  | $ | 88,762 |  |  | $ | (46,418 | ) |  | $ | 83,894 |  |  | $ | (40,445 | )
Leasing costs |  | 64,986 |  |  | (32,252 | ) |  | 59,671 |  |  | (28,092 | )
Customer relationships |  | 62,656 |  |  | (27,537 | ) |  | 60,455 |  |  | (24,035 | )
|  | $ | 216,404 |  |  | $ | (106,207 | ) |  | $ | 204,020 |  |  | $ | (92,572 | )
|  | Deferred Rent Receivable/(Liability) |  | Accumulated (Amortization)/Accretion |  | Deferred Rent Receivable/(Liability) |  | Accumulated (Amortization)/Accretion
Above market leases |  | $ | 16,417 |  |  | $ | (9,723 | ) |  | $ | 14,551 |  |  | $ | (8,981 | )
Below market leases and deferred revenue |  | (34,098 | ) |  | 14,344 |  |  | (29,807 | ) |  | 12,502 |
|  | $ | (17,681 | ) |  | $ | 4,621 |  |  | $ | (15,256 | ) |  | $ | 3,521 |
Total amortization expense related to in-place leases, leasing costs and customer relationship lease intangible assets was $4.7 million and $14.2 million for the three and nine months ended September 30, 2019, respectively, and $4.3 million and $12.9 million for the three and nine months ended September 30, 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 $0.8 million for the three and nine months ended September 30, 2019, respectively, and $0.2 million and $0.7 million for the three and nine months ended September 30, 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 $0.7 million and $1.8 million for the three and nine months ended September 30, 2019, respectively, and $0.5 million and $1.5 million for the three and nine months ended September 30, 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 nine months ended September 30, 2019 and 2018 were as follows:
Intangible Assets & Liabilities |  | 2019 |  | 2018
In-place leases |  | 15.9 |  | 13.0
Leasing costs |  | 15.9 |  | 13.0
Customer relationships |  | 20.6 |  | 21.2
Above market leases |  | 9.3 |  | 9.8
Below market leases |  | 9.6 |  | 15.0
All intangible assets & liabilities |  | 17.3 |  | 15.0

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