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Real Estate and Intangible Assets | 3 Months Ended
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Mar. 31, 2025
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, 2025 and December 31, 2024, respectively, excluding real estate held for sale (dollars in thousands):
|  | March 31, 2025 |  | December 31, 2024
Real estate: |  |  |  |
Land (1) |  | $ | 145,313 |  |  | $ | 139,743 |
Building and improvements |  | 1,079,127 |  |  | 1,017,534 |
Tenant improvements |  | 55,098 |  |  | 54,516 |
Accumulated depreciation |  | (329,448) |  |  | (319,646) |
Real estate, net |  | $ | 950,090 |  |  | $ | 892,147 |
(1)This amount includes $2,711 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 $9.8 million for the three months ended March 31, 2025. Real estate depreciation expense on building and tenant improvements was $9.8 million for the three months ended March 31, 2024. Acquisitions We acquired six industrial properties during the three months ended March 31, 2025, and did not acquire any properties during the three months ended March 31, 2024. The acquisitions are summarized below (dollars in thousands):
Three Months Ended |  | Aggregate Square Footage |  | Weighted Average Remaining Lease Term at Time of Acquisition |  | Aggregate Purchase Price |  | Aggregate Capitalized Acquisition Expenses |  |  |  |
March 31, 2025 | (1) | 355,778 |  |  | 10.8 years |  | $ | 73,725 |  |  | $ | 475 |  |  |  |  |
(1)On February 19, 2025, we acquired a five-property, 215,474 square foot portfolio in Houston, Texas for $29.5 million. The property is fully leased to one tenant and had 10.0 years of remaining lease term at the time we acquired the property. On March 28, 2025, we acquired a 140,304 square foot property in Dallas-Fort Worth, Texas for $44.3 million. The property is fully leased to one tenant and had 11.3 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 three months ended March 31, 2025 as follows (dollars in thousands):
|  | Three Months Ended March 31, 2025 |  |  |
Acquired assets and liabilities |  | Purchase price |  |  |
Land |  | $ | 5,570 |  | (1) |  |
Building |  | 58,778 |  |  |  |
Tenant Improvements |  | 582 |  |  |  |
In-place Leases |  | 4,358 |  |  |  |
Leasing Costs |  | 4,520 |  |  |  |
Customer Relationships |  | 2,032 |  |  |  |
Below Market Leases |  | (2,115) |  | (2) |  |
Total Purchase Price |  | $ | 73,725 |  |  |  |
(1)The Dallas-Fort Worth, Texas property acquired is subject to a ground lease, therefore there is no land asset included on the condensed consolidated balance sheets. (2)This amount includes $250 of loans receivable 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 nine months ending December 31, 2025 and each of the five succeeding fiscal years and thereafter is as follows (dollars in thousands):
Year | Tenant Lease Payments
Nine Months Ending December 31, 2025 | $ | 94,158 |
2026 | 123,282 |
2027 | 108,964 |
2028 | 96,402 |
2029 | 88,487 |
2030 | 76,278 |
Thereafter | 356,456 |
Future sales-types lease payments from tenants under non-cancelable leases and reasonably certain purchase options for the nine months ending December 31, 2025 and each of the five succeeding fiscal years and thereafter is as follows (dollars in thousands):
Year | Tenant Lease Payments
Nine Months Ending December 31, 2025 | $ | 19,199 |
2026 | — |
2027 | — |
2028 | — |
2029 | — |
Thereafter | — |
| $ | 19,199 |
Difference between undiscounted cash flow and present value | 677 |
Sales-type lease receivable | $ | 18,522 |
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 months ended March 31, 2025 and 2024, respectively (dollars in thousands):
|  | For the three months ended March 31,
Lease revenue reconciliation |  | 2025 |  | 2024 |  | $ Change |  | % Change
Fixed lease payments |  | $ | 32,448 |  |  | $ | 31,789 |  |  | $ | 659 |  |  | 2.1 | %
Variable lease payments |  | 5,053 |  |  | 3,932 |  |  | 1,121 |  |  | 28.5 | %
|  | $ | 37,501 |  |  | $ | 35,721 |  |  | $ | 1,780 |  |  | 5.0 | %
Sales-Type Leases For the three months ended March 31, 2025, we had one lease classified as a sales-type lease. We recorded a sales-type lease receivable of $18.5 million in the condensed consolidated balance sheets, net of $0.02 million in allowance for credit loss. For the three months ended March 31, 2025, the interest income earned from sales-type leases of $0.4 million was included in other income in the condensed consolidated statements of operations. There was no sales-type lease activity in the three months ended March 31, 2024. In developing the expected credit loss, we reviewed the tenant’s credit rating, which is AA- stable, performed a collectability analysis, and confirmed they were current on payments as of March 31, 2025. The sales-type lease receivable, net, approximates fair value as of March 31, 2025. 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, 2025 and December 31, 2024, respectively, excluding real estate held for sale (dollars in thousands):
|  | March 31, 2025 |  | December 31, 2024
|  | Lease Intangibles |  | Accumulated Amortization |  | Lease Intangibles |  | Accumulated Amortization
In-place leases |  | $ | 100,750 |  |  | $ | (66,142) |  |  | $ | 96,392 |  |  | $ | (64,830) |
Leasing costs |  | 93,706 |  |  | (50,417) |  |  | 89,093 |  |  | (48,963) |
Customer relationships |  | 62,409 |  |  | (37,638) |  |  | 60,377 |  |  | (36,962) |
|  | $ | 256,865 |  |  | $ | (154,197) |  |  | $ | 245,862 |  |  | $ | (150,755) |
|  | Deferred Rent Receivable/(Liability) |  | Accumulated (Amortization)/Accretion |  | Deferred Rent Receivable/(Liability) |  | Accumulated (Amortization)/Accretion
Above market leases |  | $ | 13,718 |  |  | $ | (11,705) |  |  | $ | 13,718 |  |  | $ | (11,582) |
Below market leases and deferred revenue |  | (58,481) |  |  | 36,224 |  |  | (56,616) |  |  | 34,620 |
Total amortization expense related to in-place leases, leasing costs and customer relationship lease intangible assets was $3.4 million for the three months ended March 31, 2025 and $3.5 million for the three months ended March 31, 2024, 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 for the three months ended March 31, 2025 and $0.1 million for the three months ended March 31, 2024, 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 $1.6 million for the three months ended March 31, 2025 and $1.7 million for the three months ended March 31, 2024, and is included in lease revenue in the condensed consolidated statements of operations and comprehensive income. We acquired six industrial properties during the three months ended March 31, 2025, and did not acquire any properties during the three months ended March 31, 2024. The weighted average amortization periods in years for the intangible assets acquired and liabilities assumed during the three months ended March 31, 2025, were as follows:
Intangible Assets & Liabilities |  | March 31, 2025 |  |
In-place leases |  | 10.7 |  |
Leasing costs |  | 10.7 |  |
Customer relationships |  | 15.7 |  |
Below market leases |  | 10.7 |  |
All intangible assets & liabilities |  | 12.0 |  |

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