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Real Estate and Intangible Assets | 6 Months Ended
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Jun. 30, 2022
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 June 30, 2022 and December 31, 2021, respectively, excluding real estate held for sale as of June 30, 2022 (dollars in thousands):
|  | June 30, 2022 |  | December 31, 2021
Real estate: |  |  |  |
Land (1) |  | $ | 149,755 |  |  | $ | 149,773 |
Building and improvements |  | 1,041,189 |  |  | 1,004,362 |
Tenant improvements |  | 69,478 |  |  | 71,123 |
Accumulated depreciation |  | (279,331) |  |  | (266,672) |
Real estate, net |  | $ | 981,091 |  |  | $ | 958,586 |
(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 $10.2 million and $20.1 million for the three and six months ended June 30, 2022, respectively. Real estate depreciation expense on building and tenant improvements was $9.4 million and $20.2 million for the three and six months ended June 30, 2021, respectively. Acquisitions We acquired seven industrial properties during the six months ended June 30, 2022, and two industrial properties during the six months ended June 30, 2021. The acquisitions are summarized below (dollars in thousands):
Six Months Ended |  | Aggregate Square Footage |  | Weighted Average Lease Term |  | Aggregate Purchase Price |  | Aggregate Capitalized Acquisition Costs |  |  |  |  |
June 30, 2022 | (1) | 742,303 |  |  | 11.7 years |  | $ | 51,919 |  |  | $ | 519 |  |  |  |  |  |
June 30, 2021 | (2) | 205,352 |  |  | 13.5 years |  | $ | 19,341 |  |  | $ | 216 |  |  |  |  |  |
(1)On February 24, 2022, we acquired an 80,000 square foot property in Wilkesboro, North Carolina for $7.5 million. The property is fully leased to one tenant and had 12.7 years of remaining lease term at the time we acquired the property. On March 11, 2022, we acquired a 56,000 square foot property in Oklahoma City, Oklahoma for $6.0 million. The property is fully leased to one tenant and had 7.0 years of remaining lease term at the time we acquired the property. On May 4, 2022, we acquired a two-property, 260,719 square foot portfolio in Cleveland, Ohio and Fort Payne, Alabama for $19.5 million. The properties are fully leased to one tenant and had 11.4 years of remaining lease term at the time we acquired the properties. On May 12, 2022, we acquired a three-property, 345,584 square foot portfolio in Wilmington, North Carolina for $18.9 million. The properties are fully leased to one tenant and had 13.1 years of remaining lease term at the time we acquired the properties. (2)On January 22, 2021, we acquired a 180,152 square foot property in Findlay, Ohio for $11.1 million. The property is fully leased to one tenant and had 14.2 years of remaining lease term at the time we acquired the property. On June 17, 2021, we acquired a 25,200 square foot property in Baytown, Texas for $8.2 million. The property is fully leased to one tenant and had 12.6 years of remaining lease term at the time we acquired the property. We determined the fair value of assets acquired and liabilities assumed related to the properties acquired during the six months ended June 30, 2022 and 2021, respectively, as follows (dollars in thousands):
|  | Six Months Ended June 30, 2022 |  | Six Months Ended June 30, 2021 |
Acquired assets and liabilities |  | Purchase price |  | Purchase price |
Land |  | $ | 3,380 |  |  | $ | 1,862 |  |
Building |  | 40,855 |  |  | 14,277 |  |
Tenant Improvements |  | 768 |  |  | 103 |  |
In-place Leases |  | 2,952 |  |  | 1,127 |  |
Leasing Costs |  | 2,296 |  |  | 1,153 |  |
Customer Relationships |  | 1,932 |  |  | 455 |  |
Above Market Leases |  | 319 |  |  | 364 |  |
Below Market Leases |  | (583) |  | (1) | — |  |
Total Purchase Price |  | $ | 51,919 |  |  | $ | 19,341 |  |
(1)This amount includes $17 of prepaid rent included in Other liabilities on the condensed consolidated balance sheets. Future Lease Payments Future operating lease payments from tenants under non-cancelable leases, excluding tenant reimbursement of expenses, for the six months ending December 31, 2022 and each of the five succeeding fiscal years and thereafter is as follows, excluding real estate held for sale as of June 30, 2022 (dollars in thousands):
Year | Tenant Lease Payments
Six Months Ending 2022 | $ | 60,600 |
2023 | 113,366 |
2024 | 107,440 |
2025 | 103,735 |
2026 | 95,250 |
2027 | 76,953 |
Thereafter | 301,073 |
In accordance with the lease terms, substantially all operating expenses are required to be paid by the tenant directly, or reimbursed to us from the tenant; however, we would be required to pay operating expenses on the respective properties in the event the tenants fail to pay them. Lease Revenue Reconciliation The table below sets forth the allocation of lease revenue between fixed contractual payments and variable lease payments for the three and six months ended June 30, 2022 and 2021, respectively (dollars in thousands):
|  | For the three months ended June 30,
|  | (Dollars in Thousands)
Lease revenue reconciliation |  | 2022 |  | 2021 |  | $ Change |  | % Change
Fixed lease payments |  | $ | 31,878 |  |  | $ | 29,345 |  |  | $ | 2,533 |  |  | 8.6 | %
Variable lease payments |  | 4,521 |  |  | 4,026 |  |  | 495 |  |  | 12.3 | %
|  | $ | 36,399 |  |  | $ | 33,371 |  |  | $ | 3,028 |  |  | 9.1 | %
|  | For the six months ended June 30,
|  | (Dollars in Thousands)
Lease revenue reconciliation |  | 2022 |  | 2021 |  | $ Change |  | % Change
Fixed lease payments |  | $ | 63,210 |  |  | $ | 60,101 |  |  | $ | 3,109 |  |  | 5.2 | %
Variable lease payments |  | 8,720 |  |  | 7,946 |  |  | 774 |  |  | 9.7 | %
|  | $ | 71,930 |  |  | $ | 68,047 |  |  | $ | 3,883 |  |  | 5.7 | %
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 June 30, 2022 and December 31, 2021, respectively, excluding real estate held for sale as of June 30, 2022 (dollars in thousands):
|  | June 30, 2022 |  | December 31, 2021
|  | Lease Intangibles |  | Accumulated Amortization |  | Lease Intangibles |  | Accumulated Amortization
In-place leases |  | $ | 105,797 |  |  | $ | (63,846) |  |  | $ | 105,891 |  |  | $ | (62,604) |
Leasing costs |  | 82,872 |  |  | (45,407) |  |  | 81,487 |  |  | (43,982) |
Customer relationships |  | 71,873 |  |  | (39,586) |  |  | 71,922 |  |  | (38,220) |
|  | $ | 260,542 |  |  | $ | (148,839) |  |  | $ | 259,300 |  |  | $ | (144,806) |
|  | Deferred Rent Receivable/(Liability) |  | Accumulated (Amortization)/Accretion |  | Deferred Rent Receivable/(Liability) |  | Accumulated (Amortization)/Accretion
Above market leases |  | $ | 15,706 |  |  | $ | (11,815) |  |  | $ | 15,538 |  |  | $ | (11,520) |
Below market leases and deferred revenue |  | (61,185) |  |  | 22,694 |  |  | (48,241) |  |  | 21,471 |
Total amortization expense related to in-place leases, leasing costs and customer relationship lease intangible assets was $5.0 million and $9.8 million for the three and six months ended June 30, 2022, respectively, and $4.7 million and $10.7 million for the three and six months ended June 30, 2021, 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 $0.4 million for the three and six months ended June 30, 2022, respectively, and $0.2 million and $0.4 million for the three and six months ended June 30, 2021, 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 $0.8 million and $1.6 million for the three and six months ended June 30, 2022, respectively, and $0.8 million and $2.4 million for the three and six months ended June 30, 2021, 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 and liabilities assumed during the six months ended June 30, 2022 and 2021, respectively, were as follows:
Intangible Assets & Liabilities |  | 2022 |  | 2021
In-place leases |  | 11.6 |  | 13.5
Leasing costs |  | 11.6 |  | 13.5
Customer relationships |  | 18.9 |  | 21.1
Above market leases |  | 12.1 |  | 13.5
Below market leases |  | 11.2 |  | 0.0
All intangible assets & liabilities |  | 13.3 |  | 15.3

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