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REAL ESTATE INVESTMENTS AND MINIMUM FUTURE RENTALS | 12 Months Ended
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Dec. 31, 2014
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 2014 and 2013 (amounts in thousands):
Description of Property |  | Date Acquired |  | Contract Purchase Price |  | Terms of Payment(a) |  | Third Party Real Estate Acquisition Costs(b) |
Total Wine and More retail store, Greensboro, North Carolina |  | January 21, 2014 |  | $ | 2,971 |  | All cash |  | $ | 20 |
Chuck E Cheese restaurant, Indianapolis, Indiana |  | January 23, 2014 |  |  | 2,138 |  | All cash |  |  | 10 |
Savers Thrift Superstore, Highlands Ranch, Colorado |  | May 7, 2014 |  |  | 4,825 |  | All cash |  |  | 83 |
Hobby Lobby retail store, Woodbury, Minnesota |  | May 21, 2014 |  |  | 4,770 |  | All cash |  |  | 46 |
Land—River Crossing Apartments, Sandy Springs, Georgia(c) |  | June 4, 2014 |  |  | 6,510 |  | All cash |  |  | — | (d)
Noxell Corporation industrial building, Joppa, Maryland(e) |  | June 26, 2014 |  |  | 11,650 |  | All cash |  |  | — | (d)
Regal Cinemas theater, Indianapolis, Indiana |  | October 2, 2014 |  |  | 9,000 |  | All cash |  |  | 78 |
Pathmark supermarket, Philadelphia, Pennsylvania(f) |  | October 21, 2014 |  |  | 7,729 |  | Cash and $4,635 mortgage(g) |  |  | 162 |
Progressive Converting distribution facility, New Hope, Minnesota |  | November 21, 2014 |  |  | 7,200 |  | All cash |  |  | 38 |
Other(h) |  |  |  |  | — |  |  |  |  | 42 |
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Totals for 2014 |  |  |  | $ | 56,793 |  |  |  | $ | 479 |
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Description of Property |  | Date Acquired |  | Contract Purchase Price |  | Terms of Payment(a) |  | Third Party Real Estate Acquisition Costs(b) |
Kmart retail store, Clemmons, North Carolina(i) |  | March 22, 2013 |  | $ | 4,640 |  | All cash |  | $ | 119 |
Shutterfly flex facility, Fort Mill, South Carolina |  | July 1, 2013 |  |  | 15,500 |  | Cash and $9,300 mortgage(j) |  |  | 124 |
Texas Land & Cattle restaurant, Killeen, Texas |  | July 30, 2013 |  |  | 2,020 |  | All cash |  |  | — | (k)
Hooters restaurant, Concord, North Carolina |  | August 1, 2013 |  |  | 2,469 |  | All cash |  |  | 15 |
TRISUN Health Care—assisted living facility, Round Rock, Texas |  | August 6, 2013 |  |  | 22,800 |  | Cash and $15,275 mortgage(l) |  |  | 321 |
Hooters restaurant, Myrtle Beach, South Carolina |  | September 3, 2013 |  |  | 2,635 |  | All cash |  |  | 33 |
Joe's Crab Shack restaurant, Ann Arbor, Michigan |  | September 12, 2013 |  |  | 2,980 |  | All cash |  |  | 31 |
FedEx Express facility, Indianapolis, Indiana |  | September 13, 2013 |  |  | 9,270 |  | All cash |  |  | 39 |
Northern Tool & Equipment distribution facility, Fort Mill, South Carolina |  | September 18, 2013 |  |  | 39,195 |  | Cash and $27,300 mortgage(m) |  |  | 91 |
TGIF restaurant, Greensboro, North Carolina |  | December 3, 2013 |  |  | 3,003 |  | All cash |  |  | — | (k)
TGIF restaurant, Richmond, Virginia |  | December 3, 2013 |  |  | 3,017 |  | All cash |  |  | — | (k)
Other(n) |  |  |  |  | — |  |  |  |  | 148 |
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Totals for 2013 |  |  |  | $ | 107,529 |  |  |  | $ | 921 |
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(a) | All of the mortgages listed in this column were obtained from institutional lenders simultaneously with the acquisition of the respective properties.
(b) | Included as an expense in the accompanying consolidated statements of income.
(c) | The Company's fee interest in the land is collateral for the tenant's mortgage loan secured by the buildings located at this property.
(d) | Transaction costs aggregating $303 incurred were capitalized as these were asset acquisitions.
(e) | Represents 100% of the consolidated 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. The Company also contributed $5,825 to the venture as senior preferred equity.
(f) | Represents 100% of the consolidated joint venture in which the Company has a 90% interest. The non-controlling interest contributed $333 for its 10% interest, which was equal to the fair value of such interest at the date of purchase.
(g) | The mortgage bears interest at 3.885% per annum and matures November 2021.
(h) | Costs incurred for properties purchased in 2013 and transactions that were not consummated.
(i) | Represents 100% of the consolidated joint venture in which the Company has a 90% interest. The non-controlling interest contributed $470 for its 10% interest, which was equal to the fair value of such interest at the date of purchase.
(j) | The mortgage bears interest at 4.562% per annum and matures July 2023.
(k) | Transaction costs of $50 incurred were capitalized as these were asset acquisitions.
(l) | The mortgage bears interest at 5.375% per annum and matures August 2023.
(m) | The mortgage bears interest at 4.875% per annum and matures April 2029.
(n) | Costs incurred for potential acquisitions, properties purchased in 2012 and transactions that were not consummated.
The following chart provides the allocation of the purchase price for the Company's real estate acquisitions during 2014 and 2013 (amounts in thousands):
|  |  |  |  |  |  |  | Intangible Lease |  |  |
|  |  |  |  |  | Building Improvements |  |  |
Description of Property |  | Land |  | Building |  | 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 |
Regal Cinemas theater, Indianapolis, Indiana |  |  | 3,087 |  |  | 5,000 |  |  | 225 |  |  | 1,575 |  |  | (887 | ) |  | 9,000 |
Pathmark supermarket, Philadelphia, Pennsylvania |  |  | 1,793 |  |  | 5,396 |  |  | 244 |  |  | 440 |  |  | (144 | ) |  | 7,729 |
Progressive Converting distribution facility, New Hope, Minnesota |  |  | 881 |  |  | 6,033 |  |  | 30 |  |  | 757 |  |  | (501 | ) |  | 7,200 |
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Subtotals |  |  | 21,532 |  |  | 33,520 |  |  | 1,493 |  |  | 4,830 |  |  | (4,279 | ) |  | 57,096 |
Other(c) |  |  | 74 |  |  | 70 |  |  | 18 |  |  | (59 | ) |  | (97 | ) |  | 6 |
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Totals for 2014 |  | $ | 21,606 |  | $ | 33,590 |  | $ | 1,511 |  | $ | 4,771 |  | $ | (4,376 | ) | $ | 57,102 |
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|  |  |  |  |  |  |  | Intangible Lease |  |  |
|  |  |  |  |  | Building Improvements |  |  |
Description of Property |  | Land |  | Building |  | Asset |  | Liability |  | Total |
Kmart retail store, Clemmons, North Carolina |  | $ | 2,496 |  | $ | 2,553 |  | $ | 653 |  | $ | 425 |  | $ | (1,487 | ) | $ | 4,640 |
Shutterfly flex facility, Fort Mill, South Carolina |  |  | 1,841 |  |  | 12,353 |  |  | 335 |  |  | 1,546 |  |  | (575 | ) |  | 15,500 |
Texas Land & Cattle restaurant, Killeen, Texas |  |  | 1,263 |  |  | 739 |  |  | 64 |  |  | — |  |  | — |  |  | 2,066 | (d)
Hooters restaurant, Concord, North Carolina |  |  | 999 |  |  | 954 |  |  | 122 |  |  | 394 |  |  | — |  |  | 2,469 |
TRISUN Health Care -assisted living facility, Round Rock, Texas |  |  | 1,678 |  |  | 16,577 |  |  | 93 |  |  | 4,452 |  |  | — |  |  | 22,800 |
Hooters restaurant, Myrtle Beach, South Carolina |  |  | 1,102 |  |  | 1,090 |  |  | 71 |  |  | 372 |  |  | — |  |  | 2,635 |
Joe's Crab Shack restaurant, Ann Arbor, Michigan |  |  | 1,098 |  |  | 1,338 |  |  | 122 |  |  | 422 |  |  | — |  |  | 2,980 |
FedEx Express facility, Indianapolis, Indiana |  |  | 1,224 |  |  | 6,438 |  |  | 498 |  |  | 1,222 |  |  | (112 | ) |  | 9,270 |
Northern Tool & Equipment distribution facility, Fort Mill, South Carolina |  |  | 1,804 |  |  | 31,635 |  |  | 2,014 |  |  | 3,742 |  |  | — |  |  | 39,195 |
TGIF restaurant, Greensboro, North Carolina |  |  | 1,768 |  |  | 1,054 |  |  | 183 |  |  | — |  |  | — |  |  | 3,005 | (d)
TGIF restaurant, Richmond, Virginia |  |  | 1,678 |  |  | 1,184 |  |  | 157 |  |  | — |  |  | — |  |  | 3,019 | (d)
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Subtotals |  |  | 16,951 |  |  | 75,915 |  |  | 4,312 |  |  | 12,575 |  |  | (2,174 | ) |  | 107,579 |
Other(e) |  |  | — |  |  | — |  |  | — |  |  | (951 | ) |  | (36 | ) |  | (987 | )
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Totals for 2013 |  | $ | 16,951 |  | $ | 75,915 |  | $ | 4,312 |  | $ | 11,624 |  | $ | (2,210 | ) | $ | 106,592 |
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(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.
(d) | Includes capitalized transaction costs of $50 incurred with these asset acquisitions.
(e) | Adjustments to finalize intangibles relating to properties purchased in 2012.
All of the properties purchased in 2014 and 2013 are (i) currently 100% occupied and (ii) net leased by a single tenant pursuant to a lease that expires between 2015 through 2044, other than the Northern Tool property, which is jointly leased by two companies under common ownership. In June 2014, the Company purchased land in Sandy Springs, Georgia 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 $1,607,000 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 and 2013 purchases, the Company recorded intangible lease assets of $4,771,000 and $11,624,000, respectively, and intangible lease liabilities of $4,376,000 and $2,210,000, respectively, representing the value of the acquired leases and origination costs. As of December 31, 2014, the weighted average amortization period for the 2014 and 2013 acquisitions is 9.3 years and 13.2 years for the intangible lease assets and 9.1 years and 5.9 years for the intangible lease liabilities, respectively. The Company is currently in the process of finalizing the purchase price allocation for a property purchased in October 2014; therefore the allocation is preliminary and subject to change. At December 31, 2014 and 2013, accumulated amortization of intangible lease assets was $9,170,000 and $7,054,000, respectively, and accumulated amortization of intangible lease liabilities was $3,928,000 and $3,099,000, respectively. The Company recognized a net increase (decrease) in rental revenue of $267,000, $160,000 and $(2,000) for the amortization of the above/below market leases for the years ended December 31, 2014, 2013 and 2012, respectively. For the years ended December 31, 2014, 2013 and 2012, the Company recognized amortization expense of $2,430,000, $1,647,000 and $1,006,000, respectively, relating to the amortization of the origination costs. The unamortized balance of intangible lease assets as a result of acquired above market leases at December 31, 2014 will be deducted from rental income through 2032 as follows (amounts in thousands):
2015 |  | $ | 468 |
2016 |  |  | 453 |
2017 |  |  | 413 |
2018 |  |  | 348 |
2019 |  |  | 263 |
Thereafter |  |  | 1,634 |
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Total |  | $ | 3,579 |
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The unamortized balance of intangible lease liabilities as a result of acquired below market leases at December 31, 2014 will be added to rental income through 2055 as follows (amounts in thousands):
2015 |  | $ | 982 |
2016 |  |  | 967 |
2017 |  |  | 958 |
2018 |  |  | 835 |
2019 |  |  | 789 |
Thereafter |  |  | 5,932 |
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Total |  | $ | 10,463 |
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The unamortized balance of origination costs associated with in-place leases at December 31, 2014 will be charged to amortization expense through 2055 as follows (amounts in thousands):
2015 |  | $ | 2,594 |
2016 |  |  | 2,480 |
2017 |  |  | 2,387 |
2018 |  |  | 2,238 |
2019 |  |  | 2,073 |
Thereafter |  |  | 12,036 |
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Total |  | $ | 23,808 |
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Minimum Future Rents The minimum future contractual rents (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, 2014 are as follows (amounts in thousands):
2015 |  | $ | 53,345 |
2016 |  |  | 50,916 |
2017 |  |  | 48,176 |
2018 |  |  | 45,803 |
2019 |  |  | 41,338 |
Thereafter |  |  | 217,547 |
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Total |  | $ | 457,125 |
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The rental properties owned at December 31, 2014 are leased under non-cancellable operating leases with current expirations ranging from 2015 to 2044, 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 contractual 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, 2014 and 2013, the Company's unbilled rent receivables aggregating $12,815,000 and $13,743,000, respectively, represent rent reported on a straight-line basis in excess of rental payments required under the respective leases. The unbilled rent receivable is to be billed and received pursuant to the lease terms during the next 30 years. During the year ended December 31, 2014, the Company wrote off $2,417,000 of unbilled straight-line rent receivable relating to the New Jersey property sold during the year which reduced the gain on sale reported on the consolidated statements of income (see Note 4). Acquisition Subsequent to December 31, 2014 On February 25, 2015, the Company purchased through a joint venture in which it has a 90% interest, a shopping center located in Lakewood, Colorado for $17,485,000, which was financed in part by mortgage financing of $11,853,000. The mortgage, which matures in February 2025 bears interest at a rate of 4.12% per annum. The property has 29 tenant spaces and was 94.5% occupied at the time of acquisition.

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