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Real Estate and Intangible Assets | 3 Months Ended
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Mar. 31, 2020
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, 2020 and December 31, 2019, excluding real estate held for sale as of December 31, 2019 (dollars in thousands):
|  | March 31, 2020 |  | December 31, 2019
Real estate: |  |  |  |
Land (1) |  | $ | 146,580 |  |  | $ | 137,532 |
Building and improvements |  | 907,577 |  |  | 851,245 |
Tenant improvements |  | 69,487 |  |  | 68,201 |
Accumulated depreciation |  | (216,547 | ) |  | (207,523 | )
Real estate, net |  | $ | 907,097 |  |  | $ | 849,455 |
(1) | This amount includes $4,436 of land value subject to land lease agreements which we may purchase at our option for a nominal fee.
Real estate depreciation expense on building and tenant improvements was $9.0 million and $8.0 million for the three months ended March 31, 2020 and 2019, respectively. Acquisitions We acquired five properties during the three months ended March 31, 2020, and two properties during the three months ended March 31, 2019. The acquisitions are summarized below (dollars in thousands):
Three Months Ended |  | Aggregate Square Footage |  | Weighted Average Lease Term |  | Aggregate Purchase Price |  | Acquisition Expenses |  | Aggregate Annualized GAAP Rent |  | Aggregate Debt Issued or Assumed
March 31, 2020 | (1) | 890,038 |  |  | 14.8 Years |  | $ | 71,965 |  |  | $ | 255 |  | (3) | $ | 5,303 |  |  | $ | 35,855 |
March 31, 2019 | (2) | 60,850 |  |  | 12.2 Years |  | 6,318 |  |  | 130 |  | (3) | 516 |  |  | — |
(1) | On January 8, 2020, we acquired a 64,800 square foot property in Indianapolis, Indiana for $5.3 million. The property is leased to three tenants with a weighted average lease term of 7.2 years with annualized GAAP rent of $0.5 million. On January 27, 2020, we acquired a 320,838 square foot, three-property portfolio in Houston, Texas, Charlotte, North Carolina, and St. Charles, Missouri for $34.7 million. The portfolio has a weighted average lease term of 20.0 years, and an annualized GAAP rent of $2.6 million. We issued $18.3 million of mortgage debt with a fixed interest rate of 3.625% in connection with the acquisition. On March 9, 2020, we acquired a 504,400 square foot property in Chatsworth, Georgia for $32.0 million. We entered into an interest rate swap in connection with our $17.5 million of issued debt, resulting in a fixed interest rate of 2.8%. The annualized GAAP rent on the 10.5 Years lease is $2.2 million.
(2) | 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.
(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, 2020 and 2019 as asset acquisitions rather than business combinations. As a result of this treatment, we capitalized $0.3 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, 2020 and 2019 as follows (dollars in thousands):
|  | Three months ended March 31, 2020 |  | Three months ended March 31, 2019
Acquired assets and liabilities |  | Purchase price |  | Purchase price
Land (1) |  | $ | 7,296 |  |  | $ | 726 |
Building and improvements |  | 54,000 |  |  | 4,541 |
Tenant Improvements |  | 1,285 |  |  | 93 |
In-place Leases |  | 4,442 |  |  | 432 |
Leasing Costs |  | 4,261 |  |  | 307 |
Customer Relationships |  | 2,223 |  |  | 196 |
Above Market Leases (2) |  | 210 |  |  | 23 |
Below Market Leases (3) |  | (1,752 | ) |  | — |
Total Purchase Price |  | $ | 71,965 |  |  | $ | 6,318 |
(1) | This amount includes $2,711 of land value subject to a land lease agreement.
(2) | This amount includes $53 of loan receivable included in Other assets on the condensed consolidated balance sheets.
(3) | This amount includes $62 of prepaid rent included in Other liabilities on the condensed consolidated balance sheets.
Significant Real Estate Activity on Existing Assets During the three months ended March 31, 2020 and 2019, we executed three and two 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 Tenant Improvement |  | Aggregate Leasing Commissions
March 31, 2020 |  | 232,648 |  |  | 6.8 years |  | $ | 3,185 |  |  | $ | 1,892 |  |  | $ | 715 |
March 31, 2019 |  | 130,240 |  |  | 6.2 years |  | 1,187 |  |  | — |  |  | 71 |
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, 2020 and each of the five succeeding fiscal years and thereafter is as follows (dollars in thousands):
Year | Tenant Lease Payments
Nine Months Ending 2020 | $ | 82,835 |
2021 | 107,411 |
2022 | 101,883 |
2023 | 94,182 |
2024 | 85,298 |
2025 | 76,287 |
Thereafter | 293,679 |
| $ | 841,575 |
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, 2019, for each of the five succeeding fiscal years and thereafter, is as follows (dollars in thousands):
Year | Tenant Lease Payments
2020 | $ | 107,159 |
2021 | 101,794 |
2022 | 94,252 |
2023 | 86,460 |
2024 | 77,414 |
Thereafter | 307,591 |
| $ | 774,670 |
Lease Revenue Reconciliation The table below sets forth the allocation of lease revenue between fixed contractual payments and variable lease payments for the three months ended March 31, 2020 and 2019, respectively (dollars in thousands):
|  | For the three months ended March 31,
|  | (Dollars in Thousands)
Lease revenue reconciliation |  | 2020 |  | 2019
Fixed rental payments |  | $ | 29,479 |  |  | $ | 27,162 |
Variable rental payments |  | 4,140 |  |  | 975 |
|  | $ | 33,619 |  |  | $ | 28,137 |
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, 2020 and December 31, 2019, excluding real estate held for sale as of December 31, 2019 (dollars in thousands):
|  | March 31, 2020 |  | December 31, 2019
|  | Lease Intangibles |  | Accumulated Amortization |  | Lease Intangibles |  | Accumulated Amortization
In-place leases |  | $ | 97,348 |  |  | $ | (50,602 | ) |  | $ | 92,906 |  |  | $ | (48,468 | )
Leasing costs |  | 73,231 |  |  | (35,240 | ) |  | 68,256 |  |  | (33,705 | )
Customer relationships |  | 67,587 |  |  | (30,288 | ) |  | 65,363 |  |  | (28,887 | )
|  | $ | 238,166 |  |  | $ | (116,130 | ) |  | $ | 226,525 |  |  | $ | (111,060 | )
|  | Deferred Rent Receivable/(Liability) |  | Accumulated (Amortization)/Accretion |  | Deferred Rent Receivable/(Liability) |  | Accumulated (Amortization)/Accretion
Above market leases |  | $ | 14,818 |  |  | $ | (10,112 | ) |  | $ | 16,502 |  |  | $ | (10,005 | )
Below market leases and deferred revenue |  | (36,365 | ) |  | 15,686 |  |  | (34,322 | ) |  | 15,000 |
|  | $ | (21,547 | ) |  | $ | 5,574 |  |  | $ | (17,820 | ) |  | $ | 4,995 |
Total amortization expense related to in-place leases, leasing costs and customer relationship lease intangible assets was $5.1 million and $5.0 million for the three months ended March 31, 2020 and 2019, 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 $0.2 million and $0.3 million for the three months ended March 31, 2020 and 2019, 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 $0.6 million for the three months ended March 31, 2020 and 2019, 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, 2020 and 2019 were as follows:
Intangible Assets & Liabilities |  | 2020 |  | 2019
In-place leases |  | 16.3 |  | 13.0
Leasing costs |  | 16.3 |  | 13.0
Customer relationships |  | 19.5 |  | 17.9
Above market leases |  | 18.0 |  | 10.0
Below market leases |  | 14.2 |  | 0.0
All intangible assets & liabilities |  | 16.9 |  | 14.5

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