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REAL ESTATE INVESTMENTS AND MINIMUM FUTURE RENTALS | 12 Months Ended
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Dec. 31, 2012
REAL ESTATE INVESTMENTS AND MINIMUM FUTURE RENTALS |
REAL ESTATE INVESTMENTS AND MINIMUM FUTURE RENTALS | NOTE 3—REAL ESTATE INVESTMENTS AND MINIMUM FUTURE RENTALS Real Estate Acquisitions The following chart details the Company's real estate acquisitions during 2012 and 2011 (amounts in thousands):
Description of Property |  | Date Acquired |  | Contract Purchase Price |  | Terms of Payment |  | Third Party Real Estate Acquisition Costs(a) |
--- | --- | --- | --- | --- | --- | --- | --- | --- | ---
Urban Outfitters retail store, Lawrence, Kansas |  | February 7, 2012 |  | $ | 1,230 |  | All cash |  | $ | 21 |
Three Applebee's restaurants, Carrollton, Kennesaw and Cartersville, Georgia |  | March 12, 2012 |  |  | 8,568 |  | All cash |  |  | 84 |
Avalon Carpet Tile and Flooring, retail store and warehouse, Deptford, New Jersey(b) |  | April 24, 2012 |  |  | 2,200 |  | Cash and $2,040 mortgage(c) |  |  | — | (b)
Applebee's restaurant, Lawrenceville, Georgia |  | May 17, 2012 |  |  | 2,340 |  | All cash |  |  | 19 |
FedEx Facility, Pinellas Park, Florida |  | October 11, 2012 |  |  | 2,810 |  | All cash |  |  | 28 | (d)
Walgreens Pharmacy, Cape Girardeau, Missouri(e) |  | October 25, 2012 |  |  | 2,268 |  | All cash |  |  | 92 |
Shopping Center, Houston, Texas(f) |  | November 13, 2012 |  |  | 7,150 |  | Cash and $5,100 mortgage(g) |  |  | 206 |
LA Fitness Health Club, Secaucus, New Jersey |  | December 12, 2012 |  |  | 16,400 |  | Cash and $10,000 mortgage(h) |  |  | 341 |
FedEx Facility, Miamisburg, Ohio |  | December 26, 2012 |  |  | 1,650 |  | All cash |  |  | 6 | (d)
Other(i) |  |  |  |  | — |  |  |  |  | 26 |
Totals for 2012 |  |  |  | $ | 44,616 |  |  |  | $ | 823 |
Big Lots retail store, Bolingbrook, Illinois |  | March 4, 2011 |  | $ | 2,325 |  | All cash |  | $ | 22 |
FedEx Facility, Durham, North Carolina |  | July 29, 2011 |  |  | 3,975 |  | All cash |  |  | 35 |
LA Fitness Health Club, Hamilton, Ohio |  | August 9, 2011 |  |  | 7,900 |  | All cash |  |  | 54 |
Two hhGregg retail stores, Niles and Crystal Lake, Illinois |  | September 14, 2011 |  |  | 8,000 |  | All cash |  |  | 76 |
Burlington Coat Factory retail property, Cherry Hill, New Jersey(j) |  | October 27, 2011 |  |  | 5,800 |  | All cash |  |  | — | (j)
Other(i) |  |  |  |  | — |  |  |  |  | 26 |
Totals for 2011 |  |  |  | $ | 28,000 |  |  |  | $ | 213 |
(a) Included as an expense in the accompanying consolidated statements of income. (b) Owned by a consolidated joint venture in which the Company has a 95% interest. Transaction costs of $90 incurred with this asset acquisition were capitalized. (c) The mortgage bears interest at 5% per annum through April 2017 and thereafter at a rate of not less than 5% and matures May 2022. (d) Assignment fees of $84 and $125, paid in connection with the purchase of the FedEx properties located in Florida and Ohio, respectively, were capitalized. (e) Owned by a consolidated joint venture in which the Company has a 95% interest. (f) Owned by a consolidated joint venture in which the Company has an 85% interest. (g) The mortgage bears interest at 3.75% per annum and matures December 2017. (h) The mortgage bears interest at 4.9% per annum and matures January 2025. (i) Costs incurred for potential acquisitions. (j) Owned by a consolidated joint venture in which the Company has a 90% interest. Transaction costs of $578 incurred with this asset acquisition were capitalized. With the exception of the Houston, Texas and Cherry Hill, New Jersey properties, all of the properties purchased by the Company in 2012 and 2011 are currently 100% occupied and are each leased by a single tenant pursuant to a long term net lease. The Houston, Texas property has 16 tenant spaces and is 94% leased. The Cherry Hill, New Jersey retail property is being redeveloped and is currently 61% leased by one major tenant pursuant to a long term net lease. As a result of the 2012 and 2011 purchases, the Company recorded intangible lease assets of $6,641,000 and $2,387,000, respectively, and intangible lease liabilities of $588,000 and $614,000, respectively, representing the value of the acquired leases and origination costs. As of December 31, 2012, the weighted average amortization period for the 2012 and 2011 acquisitions is 16.3 and 10.3 years for the intangible lease assets and 16.5 and 24.0 years for the intangible lease liabilities, respectively. The Company is currently in the process of finalizing the purchase price allocations for the six properties purchased since May 2012; therefore, these allocations are preliminary and subject to change. At December 31, 2012 and 2011, accumulated amortization of intangible lease assets was $4,974,000 and $3,873,000, respectively and accumulated amortization of intangible lease liabilities was $2,505,000 and $2,053,000, respectively. The Company recognized a net (decrease) increase in rental revenue of $(2,000), $(37,000) and $442,000 for the amortization of the above/below market leases for 2012, 2011 and 2010, respectively. For 2012, 2011 and 2010, the Company recognized amortization expense of $1,006,000, $844,000 and $620,000, respectively, relating to the amortization of the origination costs. The results for 2011 include an increase in rental revenue of $7,000 and additional amortization expense of $5,000 resulting from the accelerated expiration of certain leases. The unamortized balance of intangible lease assets as a result of acquired above market leases at December 31, 2012 will be deducted from rental income through 2027 as follows (amounts in thousands):
2013 |  | $ | 505 |
2014 |  |  | 497 |
2015 |  |  | 491 |
2016 |  |  | 481 |
2017 |  |  | 448 |
Thereafter |  |  | 2,789 |
Total |  | $ | 5,211 |
The unamortized balance of intangible lease liabilities as a result of acquired below market leases at December 31, 2012 will be added to rental income through 2041 as follows (amounts in thousands):
2013 |  | $ | 511 |
2014 |  |  | 495 |
2015 |  |  | 473 |
2016 |  |  | 456 |
2017 |  |  | 446 |
Thereafter |  |  | 2,919 |
Total |  | $ | 5,300 |
The unamortized balance of origination costs associated with in-place leases at December 31, 2012 will be charged to amortization expense through 2027 as follows (amounts in thousands):
2013 |  | $ | 1,249 |
2014 |  |  | 1,205 |
2015 |  |  | 1,172 |
2016 |  |  | 1,052 |
2017 |  |  | 966 |
Thereafter |  |  | 5,636 |
Total |  | $ | 11,280 |
Pro Forma Financial Information (unaudited) During the year ended December 31, 2010, the Company acquired 14 properties for a total purchase price of approximately $72,300,000 and sold two properties. If these transactions had been completed as of January 1, 2010, on an unaudited pro forma basis, the combined revenues, net income and net income per share (diluted and basic) of the Company for 2010 would have been $45,677,000, $10,007,000 and $.87, respectively. This unaudited pro forma information does not purport to represent what the actual results of operations of the Company would have been had the acquisitions and sales had occurred as of January 1, 2010, nor does it purport to predict the results of operations for future periods. Revenues and net income related to these properties already included in the 2010 results of operations amounted to $3,488,000 and $440,000, respectively. This pro forma information does not include 2012 and 2011 acquisitions as such acquisitions were determined not to be material in the aggregate. Minimum Future Rentals The minimum future contractual rentals (without taking into consideration straight-line rent or amortization of intangibles) to be received over the next five years and thereafter on the operating leases in effect at December 31, 2012 are as follows (amounts in thousands):
2013 |  | $ | 45,779 |
2014 |  |  | 43,324 |
2015 |  |  | 39,565 |
2016 |  |  | 37,627 |
2017 |  |  | 35,303 |
Thereafter |  |  | 201,284 |
Total |  | $ | 402,882 |
The rental properties owned at December 31, 2012 are leased under noncancellable operating leases with current expirations ranging from 2013 to 2031, with certain tenant renewal rights. Substantially all lease agreements are net lease arrangements which require the tenant to pay rent and substantially all the expenses of the leased property including maintenance, taxes, utilities and insurance. For certain properties, the tenants pay the Company, in addition to the base rent, their pro rata share of real estate taxes and operating expenses. Certain lease agreements provide for periodic rental increases and others provide for increases based on the consumer price index. Unbilled Rent Receivable At December 31, 2012 and 2011, the Company recorded an unbilled rent receivable aggregating $12,629,000 and $11,264,000, respectively, representing rent reported on a straight-line basis in excess of rental payments required under the term of the respective leases. The balance at December 31, 2011 excludes $84,000 classified as property transferred to joint venture and $263,000 classified as assets related to properties held for sale. The unbilled rent receivable is to be billed and received pursuant to the lease terms during the next 19 years. During 2012 and 2011, the Company wrote off $256,000 and $118,000, respectively, of unbilled "straight-line" rent receivable, relating to properties sold during such years. During 2010, the Company wrote off or recorded accelerated amortization of $1,152,000 of unbilled "straight-line" rent receivable, which includes $149,000 relating to a property sold and $1,003,000 relating to a former tenant which vacated the Company's property in June 2011 in the course of its liquidation after filing for bankruptcy protection in early 2011.

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