NOTE 4—REAL ESTATE INVESTMENTS AND MINIMUM FUTURE RENTALS

Real Estate Acquisitions

The following charts detail the Company’s acquisitions of real estate during 2018 and 2017 (amounts in thousands):


					Capitalized
		Contract			Third Party
	Date	Purchase		Terms of	Real Estate
Description of Property	Acquired	Price		Payment	Acquisition Costs
Campania International/U.S. Tape industrial facility,
Pennsburg, Pennsylvania	March 28, 2018	$	12,675	All cash (a)	$	226
Plymouth Industries industrial facility,
Plymouth, Minnesota	June 7, 2018		5,500	All cash (b)		50
Applied Control industrial facility,
Englewood, Colorado	October 19, 2018		12,800	All cash		62
Xerimis industrial facility,
Moorestown, New Jersey	November 1, 2018		7,350	All cash (c)		147
Multi-tenant industrial facility,
Moorestown, New Jersey	November 28, 2018		13,498	All cash		110
Men’s Warehouse industrial facility,
Bakersfield, California	December 6, 2018		10,850	All cash		63
Dufresne Spencer Group industrial facility,
Green Park, Missouri	December 11, 2018		10,000	All cash		63
Transcendia industrial facility,
Greenville, South Carolina	December 21, 2018		6,830	All cash		66
Totals for 2018		$	79,503		$	787
Forbo industrial facility,
Huntersville, North Carolina	May 25, 2017	$	8,700	Cash and $5,190 mortgage(d)	$	72
Saddle Creek Logistics industrial facility,
Pittston, Pennsylvania	June 9, 2017		11,750	All cash (e)		199
Corporate Woods industrial facility,
Ankeny, Iowa	June 20, 2017		14,700	All cash (f)		29
Dufresne Spencer Group industrial facility,
Memphis, Tennessee	October 10, 2017		8,000	All cash		87
Totals for 2017		$	43,150		$	387

(a)

In July 2018, the Company obtained new mortgage debt of $8,238.

(b)

In September 2018, the Company obtained new mortgage debt of $3,325.

(c)

In November 2018, the Company obtained new mortgage debt of $4,000.

(d)

New mortgage debt was obtained simultaneously with the acquisition of the property.

(e)

In August 2017, the Company obtained new mortgage debt of $7,200.

(f)

In July 2017, the Company obtained new mortgage debt of $8,820.

The Company determined that with respect to each of these acquisitions, the gross assets acquired are concentrated in a single identifiable asset. Therefore, these transactions do not meet the definition of a business and are accounted for as asset acquisitions. As such, direct transaction costs associated with these asset acquisitions have been capitalized to real estate assets and depreciated over their respective useful lives.

The following charts detail the allocation of the purchase price for the Company’s acquisitions of real estate during 2018 and 2017 (amounts in thousands):


					Building		Intangible Lease
Description of Property	Land		Building		Improvements		Asset		Liability		Total
Campania International/U.S. Tape industrial facility,
Pennsburg, Pennsylvania	$	1,776	$	10,398	$	727	$	—	$	—	$	12,901
Plymouth Industries industrial facility,
Plymouth, Minnesota		1,121		4,306		123		—		—		5,550
Applied Control industrial facility,
Englewood, Colorado		1,562		11,027		273		—		—		12,862
Xerimis industrial facility,
Moorestown, New Jersey		1,822		4,899		157		707		(88)		7,497
Multi-tenant industrial facility,
Moorestown, New Jersey		1,443		10,670		228		1,469		(202)		13,608
Men’s Warehouse industrial facility,
Bakersfield, California		1,988		9,696		300		1,127		(2,198)		10,913
Dufresne Spencer Group industrial facility,
Green Park, Missouri		1,420		7,696		137		810		—		10,063
Transcendia industrial facility,
Greenville, South Carolina		186		6,337		70		322		(19)		6,896
Totals for 2018	$	11,318	$	65,029	$	2,015	$	4,435	$	(2,507)	$	80,290
Forbo industrial facility,
Huntersville, North Carolina	$	1,046	$	6,452	$	222	$	1,052	$	—	$	8,772
Saddle Creek Logistics industrial facility,
Pittston, Pennsylvania		999		9,675		247		1,028		—		11,949
Corporate Woods industrial facility,
Ankeny, Iowa		1,351		11,420		187		1,929		(158)		14,729
Dufresne Spencer Group industrial facility,
Memphis, Tennessee		135		7,750		202		—		—		8,087
Totals for 2017	$	3,531	$	35,297	$	858	$	4,009	$	(158)	$	43,537

As of December 31, 2018, the weighted average amortization period for the 2018 acquisitions is 6.8 years and 11.4 years for the intangible lease assets and intangible lease liabilities, respectively. As of December 31, 2017, the weighted average amortization period for the 2017 acquisitions is 6.8 years and 12.2 years for the intangible lease assets and intangible lease liabilities, respectively. 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 2) in the fair value hierarchy.

At December 31, 2018 and 2017, accumulated amortization of intangible lease assets was $16,503,000 and $17,542,000, respectively, and accumulated amortization of intangible lease liabilities was $7,378,000 and $7,849,000, respectively.

During 2018, 2017 and 2016, the Company recognized net rental income of $1,849,000, $897,000 and $712,000, respectively, for the amortization of the above/below market leases. During 2018, 2017 and 2016, the Company recognized amortization expense of $7,175,000, $4,984,000, and $3,612,000, respectively, relating to the amortization of the origination costs associated with in place leases, which is included in Depreciation and amortization expense. Included as an increase to Depreciation and amortization expense during 2018 and 2017 are write-offs of $2,743,000 and $884,000, respectively, related to four properties at which the tenant filed Chapter 11 bankruptcy in 2018 and 2017.

The unamortized balance of intangible lease assets as a result of acquired above market leases at December 31, 2018 will be deducted from rental income through 2032 as follows (amounts in thousands):


2019	$	677
2020		651
2021		645
2022		479
2023		286
Thereafter		956
Total	$	3,694

The unamortized balance of intangible lease liabilities as a result of acquired below market leases at December 31, 2018 will be added to rental income through 2055 as follows (amounts in thousands):


2019	$	1,668
2020		1,531
2021		1,492
2022		1,380
2023		984
Thereafter		6,958
Total	$	14,013

The unamortized balance of origination costs associated with in‑place leases at December 31, 2018 will be charged to amortization expense through 2055 as follows (amounts in thousands):


2019	$	3,733
2020		3,498
2021		3,376
2022		2,919
2022		2,414
Thereafter		6,907
Total	$	22,847

Minimum Future Rents

The rental properties owned at December 31, 2018 are leased under operating leases with current expirations ranging from 2019 to 2055, with certain tenant renewal rights.

The minimum future contractual rents do not include (i) straight-line rent or amortization of intangibles and (ii) rental income which can be deferred under the Company’s ground leases on the basis of the respective property’s operating performance (see Note 7).

The minimum future contractual rents to be received over the next five years and thereafter on non-cancellable operating leases in effect at December 31, 2018 are as follows (amounts in thousands):


2019	$	66,959
2020		66,691
2021		65,130
2022		56,444
2023		47,644
Thereafter		208,923
Total	$	511,791

Unbilled Rent Receivable

At December 31, 2018 and 2017, the Company’s unbilled rent receivables aggregating $13,722,000 and $14,125,000, 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 23 years.

During 2018 and 2017, the Company wrote off $45,000 and $105,000, respectively, of unbilled straight‑line rent receivable related to the properties sold during such years, which reduced the gain on sale reported on the consolidated statements of income.

At September 30, 2018, due to the uncertainty with respect to the collection of the unbilled rent receivable related to a property located in Texas, the Company recorded an allowance of $1,440,000, as a reduction to rental income, representing the entire balance of such receivable. At December 31, 2018, a direct write-down of the entire unbilled straight-line rent receivable was charged against the allowance due to the bankruptcy of the tenant. During 2017 and 2016, the Company wrote off, as a reduction to rent income, $362,000 and $7,000, respectively, of unbilled straight-line rent receivable related to five properties at which the tenant filed for Chapter 11 bankruptcy.

During 2018, the Company wrote off the $74,000 balance of the unbilled straight-line rent receivable related to a lease termination effected prior to lease expiration (see below).

Lease Termination Fee

In July 2018, the Company received a $372,000 lease termination fee from a retail tenant in a lease buy-out transaction. In connection therewith, the Company recorded $804,000 as rental income, representing the write-off of the $878,000 balance of the unamortized intangible lease liability, offset in part by the write-off of the $74,000 balance of the unbilled rent receivable. The Company re-leased this property simultaneously with the termination of the lease.