Real Estate and Intangible Assets

9 Months Ended

Sep. 30, 2023

Real Estate

The following table sets forth the components of our investments in real estate as of September 30, 2023 and December 31, 2022, respectively, excluding real estate held for sale as of September 30, 2023 and December 31, 2022 (dollars in thousands):


	September 30, 2023		December 31, 2022
Real estate:
Land (1)	$	143,815	$	152,916
Building and improvements	1,025,384		1,069,407
Tenant improvements	57,262		64,974
Accumulated depreciation	(291,986)		(286,150)
Real estate, net	$	934,475	$	1,001,147

(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 $8.9 million and $31.2 million for the three and nine months ended September 30, 2023, respectively. Real estate depreciation expense on building and tenant improvements was $10.7 million and $30.7 million for the three and nine months ended September 30, 2022, respectively.

Acquisitions

We acquired three properties during the nine months ended September 30, 2023 and acquired 11 industrial properties during the nine months ended September 30, 2022. The acquisitions are summarized below (dollars in thousands):


Nine Months Ended		Aggregate Square Footage	Weighted Average Lease Term	Aggregate Purchase Price		Aggregate Capitalized Acquisition Costs
September 30, 2023	(1)	183,803	18.7 years	$	17,539	$	349
September 30, 2022	(2)	1,105,006	13.8 years	$	98,276	$	776

(1)On April 14, 2023, we acquired a 76,089 square foot property in Riverdale, Illinois for $5.4 million. The property is fully leased to one tenant and had 20.0 years of remaining lease term at the time we acquired the property. On July 10, 2023, we acquired a 7,714 square foot property in Dallas-Fort Worth, Texas for $3.0 million. The property is fully leased to one tenant and had 9.9 years of remaining lease term at the time we acquired the property. On July 28, 2023, we acquired a 100,000 square foot property in Dallas-Fort Worth, Texas for $9.2 million. The property is fully leased to one tenant and had 20.0 years of remaining lease term at the time we acquired the property.

(2)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. On August 5, 2022, we acquired a two-property, 246,000 square foot portfolio in Bridgeton, New Jersey and Vineland, New Jersey for $32.7 million. The properties are fully leased to one tenant and had 15.1 years of remaining lease term at the time we acquired the properties. On September 16, 2022, we acquired a 67,328 square foot property in Jacksonville, Florida for $8.1 million. The property is fully leased to one tenant and had 20.0 years of remaining lease term at the time we acquired the property. On September 20, 2022, we acquired a 49,375 square foot property in Fort Payne, Alabama for $5.6 million. The property is fully leased to one tenant and had 14.8 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 nine months ended September 30, 2023 and 2022 as follows (dollars in thousands):


	Nine Months Ended September 30, 2023		Nine Months Ended September 30, 2022
Acquired assets and liabilities	Purchase price		Purchase price
Land	$	2,714	$	5,949
Building	11,423		77,903
Tenant Improvements	692		1,468
In-place Leases	1,001		4,907
Leasing Costs	1,270		5,387
Customer Relationships	439		2,937
Above Market Leases	—		328		(1)
Below Market Leases	—		(603)		(2)


Total Purchase Price	$	17,539	$	98,276

(1)This amount includes $9 of loans receivable included in Other assets on the condensed balance sheets.

(2)This amount includes $32 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 three months ending December 31, 2023 and each of the five succeeding fiscal years and thereafter is as follows, excluding real estate held for sale as of September 30, 2023 (dollars in thousands):


Year	Tenant Lease Payments
Three Months Ending December 31, 2023	$	28,906
2024	112,878
2025	112,342
2026	106,748
2027	90,440
2028	75,223
Thereafter	357,055

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 nine months ended September 30, 2023 and 2022, respectively (dollars in thousands):


	For the three months ended September 30,
	(Dollars in Thousands)
Lease revenue reconciliation	2023		2022		$ Change		% Change
Fixed lease payments	$	31,945	$	35,752	$	(3,807)	(10.6)	%
Variable lease payments	4,519		4,082		437		10.7	%
	$	36,464	$	39,834	$	(3,370)	(8.5)	%


	For the nine months ended September 30,
	(Dollars in Thousands)
Lease revenue reconciliation	2023		2022		$ Change		% Change
Fixed lease payments	$	98,465	$	98,961	$	(496)	(0.5)	%
Variable lease payments	13,210		12,803		407		3.2	%
	$	111,675	$	111,764	$	(89)	(0.1)	%

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, 2023 and December 31, 2022, respectively, excluding real estate held for sale as of September 30, 2023 and December 31, 2022 (dollars in thousands):


	September 30, 2023				December 31, 2022
	Lease Intangibles		Accumulated Amortization		Lease Intangibles		Accumulated Amortization
In-place leases	$	98,904	$	(62,270)	$	104,394	$	(63,240)
Leasing costs	83,075		(45,170)		85,038		(45,501)
Customer relationships	63,614		(35,524)		69,586		(38,655)
	$	245,593	$	(142,964)	$	259,018	$	(147,396)

	Deferred Rent Receivable/(Liability)		Accumulated (Amortization)/Accretion		Deferred Rent Receivable/(Liability)		Accumulated (Amortization)/Accretion
Above market leases	$	13,431	$	(10,546)	$	15,371	$	(11,909)
Below market leases and deferred revenue	(60,927)		29,113		(66,138)		26,141

Total amortization expense related to in-place leases, leasing costs and customer relationship lease intangible assets was $3.6 million and $12.9 million for the three and nine months ended September 30, 2023, respectively, and $4.7 million and $14.5

million for the three and nine months ended September 30, 2022, 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 $0.1 million and $0.4 million for the three and nine months ended September 30, 2023, respectively, and $0.2 million and $0.6 million for the three and nine months ended September 30, 2022, 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 $1.8 million and $6.2 million for the three and nine months ended September 30, 2023, respectively, and $1.5 million and $3.1 million for the three and nine months ended September 30, 2022, 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 nine months ended September 30, 2023 and 2022, were as follows:


Intangible Assets & Liabilities	September 30, 2023	September 30, 2022
In-place leases	18.0	14.2
Leasing costs	18.0	14.2
Customer relationships	22.7	20.2
Above market leases	0.0	15.7
Below market leases	0.0	13.0
All intangible assets & liabilities	19.6	15.7