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Real Estate Acquisitions and Contingent Liability | 9 Months Ended
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Sep. 30, 2014
Real Estate Acquisitions and Contingent Liability |
Real Estate Acquisitions and Contingent Liability | Note 4 - Real Estate Acquisitions and Contingent Liability The following chart details the Company’s real estate acquisitions, all of which were acquired for cash, during the nine months ended September 30, 2014 (amounts in thousands):
Description of Property |  | Date Acquired |  | Contract Purchase Price |  | Third Party Real Estate Acquisition Costs (a) |
Total Wine and More retail store, Greensboro, North Carolina |  | January 21, 2014 |  | $ | 2,971 |  | $ | 20 |
Chuck E Cheese restaurant, Indianapolis, Indiana |  | January 23, 2014 |  | 2,138 |  | 9 |
Savers Thrift Superstore, Highlands Ranch, Colorado |  | May 7, 2014 |  | 4,825 |  | 44 |
Hobby Lobby retail store, Woodbury, Minnesota |  | May 21, 2014 |  | 4,770 |  | 34 |
Land - River Crossing Apartments, Sandy Springs, Georgia (b) |  | June 4, 2014 |  | 6,510 |  | — | (c)
Noxell Corporation industrial building, Joppa, Maryland (d) |  | June 26, 2014 |  | 11,650 |  | — | (c)
Other (e) |  |  |  | — |  | 104 |
Totals |  |  |  | $ | 32,864 |  | $ | 211 |
(a) Included as an expense in the accompanying consolidated statement of income. (b) The Company’s fee interest in the land is collateral for the tenant’s mortgage loan secured by the buildings located at this property. (c) Transaction costs aggregating $303 incurred with these asset acquisitions were capitalized. (d) Owned by a joint venture in which the Company has a 95% interest. The non-controlling interest contributed $306 for its 5% interest, which was equal to the fair value of such interest at the date of purchase. (e) Costs incurred for potential acquisitions and properties purchased in 2013. The following chart provides the allocation of the purchase price for the Company’s real estate acquisitions during the nine months ended September 30, 2014 (amounts in thousands):
|  |  |  |  |  | Building |  | Intangible Lease |  |  |
Description of Property |  | Land |  | Building |  | Improvements |  | Asset |  | Liability |  | Total |
Total Wine and More retail store, Greensboro, North Carolina |  | $ | 1,046 |  | $ | 1,468 |  | $ | 83 |  | $ | 374 |  | $ | — |  | $ | 2,971 |
Chuck E Cheese restaurant, Indianapolis, Indiana |  | 853 |  | 1,321 |  | 145 |  | 94 |  | (275 | ) | 2,138 |
Savers Thrift Superstore, Highlands Ranch, Colorado |  | 2,361 |  | 2,644 |  | 280 |  | 856 |  | (1,316 | ) | 4,825 |
Hobby Lobby retail store, Woodbury, Minnesota |  | 1,190 |  | 3,667 |  | 335 |  | 734 |  | (1,156 | ) | 4,770 |
Land - River Crossing Apartments, Sandy Springs, Georgia (a) |  | 6,516 |  | — |  | — |  | — |  | — |  | 6,516 |
Noxell Corporation industrial building, Joppa, Maryland (b) |  | 3,805 |  | 7,991 |  | 151 |  | — |  | — |  | 11,947 |
Subtotals |  | 15,771 |  | 17,091 |  | 994 |  | 2,058 |  | (2,747 | ) | 33,167 |
Other (c) |  | 74 |  | 70 |  | 18 |  | (59 | ) | (97 | ) | 6 |
Totals |  | $ | 15,845 |  | $ | 17,161 |  | $ | 1,012 |  | $ | 1,999 |  | $ | (2,844 | ) | $ | 33,173 |
(a) Includes capitalized transaction costs of $6 incurred with this asset acquisition. (b) Includes capitalized transaction costs of $297 incurred with this asset acquisition. (c) Adjustments to finalize intangibles relating to properties purchased in 2013. Each property purchased by the Company in 2014 is net leased by a single tenant pursuant to a lease that expires between 2015 through 2044. In June 2014, the Company purchased land in Sandy Springs, Georgia improved with a 196 unit apartment complex, for a land purchase price of $6,510,000 and simultaneously entered into a long-term triple net ground lease with the owner/operator of this complex. Pursuant to the terms of the ground lease, the owner/operator is obligated to make certain unit renovations as and when units become vacant. A cash reserve of $1,845,000 is held on behalf of the owner/operator to cover renovation work and other reserve requirements and is classified as Restricted cash on the consolidated balance sheet. At closing, the owner/operator obtained a $16,230,000 mortgage from a third party which, together with the Company’s purchase of the land, provided substantially all of the aggregate funds to acquire the complex. The Company provided its land as collateral for the owner/operator’s mortgage loan; accordingly the land position is subordinated to the mortgage. As a result of the 2014 acquisitions, the Company recorded intangible lease assets of $2,058,000 and intangible lease liabilities of $2,747,000, representing the value of the origination costs and acquired leases. As of September 30, 2014, the weighted average amortization period for these acquisitions is 7.4 years for the intangible lease assets and 8.2 years for the intangible lease liabilities. The Company assessed the fair value of the lease intangibles based on estimated cash flow projections that utilize appropriate discount rates and available market information. Such inputs are Level 3 (as defined in Note 14) in the fair value hierarchy. The Company has finalized the purchase price allocations for the properties acquired during the nine months ended September 30, 2014. Acquisitions Subsequent to September 30, 2014 On October 2, 2014, the Company purchased a stadium style theater located in Indianapolis, Indiana for $9,000,000, which was paid in cash. The property is net leased to Regal Cinemas, Inc. through 2027. On October 21, 2014, the Company purchased through a joint venture in which it has a 90% interest, a Pathmark supermarket property located in Philadelphia, Pennsylvania for $7,700,000, which was financed in part by mortgage financing of $4,635,000. The mortgage, which matures in 2021, bears interest at a rate of 3.885% per annum. The property is net leased through 2021. The aggregate annual base rent at acquisition for these two properties is approximately $1,280,000.

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