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Real Estate, Net
 12 Months Ended
Dec. 31, 2023
Real Estate [Abstract]  
Real Estate, Net

Note 5 – Real Estate, Net

 

Acquisitions of Real Estate During 2023

 

On June 28, 2022, through an indirect majority-owned subsidiary of our Operating Company, we acquired a 70.2% controlling interest (the “CMC Interest”) in CMC Storrs SPV, LLC (“CMC”), a holding company for an approximately 60-acre site located in Mansfield, Connecticut. As part of the transaction, two unaffiliated joint venture partners (the “CMC JV Partners”) were deemed to have made initial capital contributions to CMC. Following our acquisition of the CMC Interest, we discovered that one of the CMC JV Partners had misappropriated cash from the other’s cash account. Accordingly, the CMC JV Partner forfeited $1.0 million, or 29.8%, of their noncontrolling interest in CMC on March 24, 2023 (a non-cash financing activity during the year ended December 31, 2023). As a result of the forfeiture, we indirectly own a 100% controlling interest in CMC.

 

On August 24, 2023, through an indirect majority-owned subsidiary of our Operating Company, we acquired land located in Sarasota, Florida, that was previously subject to a ground lease (See Note 3 – Leases for additional information) for a purchase price of $4.9 million, inclusive of transaction costs of $0.1 million. We accounted for the transaction as an asset acquisition. As the acquired land is being held for development, the total purchase price was allocated to Real estate under construction on the consolidated balance sheets as of December 31, 2023.

 

Acquisitions of Real Estate During 2022

 

On January 7, 2022, through an indirect majority-owned subsidiary of our Operating Company, we completed the acquisition of a 1.1-acre site, located in Mansfield, Connecticut, for a purchase price of $0.3 million, inclusive of transaction costs of less than $0.1 million. Upon closing, the building was leased back to the seller for a term of 12 months. This acquisition was deemed to be an asset acquisition and all direct transaction costs were capitalized. The purchase price was allocated to land and building of $0.1 million and $0.2 million, respectively. All related assets and liabilities, including identifiable intangibles, were recorded at their relative fair values based on the purchase price and acquisition costs incurred.

 

On May 9, 2022, through an indirect majority-owned subsidiary of our Operating Company, we completed the acquisition of a 0.265-acre site, located in Sarasota, Florida, for a purchase price of $1.5 million, inclusive of transaction costs of $0.1 million. This acquisition was deemed to be an asset acquisition and all direct transaction costs were capitalized. The purchase price was allocated to land, building, and an in-place lease intangible asset of $1.3 million, $0.1 million and less than $0.1 million, respectively. All related assets and liabilities, including identifiable intangibles, were recorded at their relative fair values based on the purchase price and acquisition costs incurred.

 

 

On June 28, 2022, through an indirect majority-owned subsidiary of our Operating Company, we acquired a 70.2% controlling interest (the “CMC Interest”) in CMC Storrs SPV, LLC (“CMC”), a holding company for an approximately 60-acre site located in Mansfield, Connecticut, for an initial capital contribution of $3.8 million. As part of the transaction two unaffiliated joint venture partners (the “CMC JV Partners”) were deemed to have made a combined initial capital contribution of $3.1 million (a non-cash financing activity during the year ended December 31, 2022). Following our acquisition of the CMC Interest, we discovered that one of the CMC JV Partners had misappropriated cash from the other CMC JV Partner’s cash account resulting in the loss of $0.4 million included in Other expense in the accompanying consolidated statement of operations for the year ended December 31, 2022. The CMC JV Partner agreed to forfeit its interest in CMC as of March 24, 2023. Our acquisition of the CMC Interest was deemed to be an asset acquisition and all direct transaction costs were capitalized. All related assets and liabilities, including identifiable intangibles, were recorded at their relative fair values based on the purchase price and acquisition costs incurred. As a result of our controlling financial interest, we consolidate this development project. The purchase price was allocated as follows (amounts in thousands):

 

   As of June 28, 2022 
Assets     
Real estate     
Intangible asset  $424 
Real estate under construction   4,633 
Total real estate   5,057 
Accumulated depreciation and amortization   — 
Real estate, net   5,057 
Cash and cash equivalents   87 
Other assets (1)   2,105 
Total assets  $7,249 
      
Liabilities     
Accounts payable  $363 
Accrued expenses and other liabilities   16 
Total liabilities  $379 
      
Amounts attributable to noncontrolling interests (2)  $3,100 
      
Total net assets  $3,770 

 

 

(1) Includes restricted cash of $1.4 million.
   
(2) Represents a non-cash financing activity during the year ended December 31, 2022.

 

On October 13, 2022, through an indirect majority-owned subsidiary of our Operating Company, we completed the acquisition of an approximately 19-acre site, located in Mansfield, Connecticut, for a purchase price of $5.5 million, inclusive of transaction costs of $0.1 million. This acquisition was deemed to be an asset acquisition and all direct transaction costs were capitalized. The purchase price was solely allocated to land, and was recorded at the relative fair value based on the purchase price and acquisition costs incurred.

 

On December 2, 2022, an indirect majority-owned subsidiary of our Operating Company acquired a 99% controlling interest in a jointly-owned investment with an unaffiliated third party to acquire an approximately 5.9-acre site, located in Nashville, Tennessee (“Nashville No. 4”) for a purchase price of $16.4 million, inclusive of transaction costs $0.2 million. This acquisition was deemed to be an asset acquisition and all direct transaction costs were capitalized. The purchase price was allocated to land, building, intangible assets and below-market lease liability of $15.2 million, $0.8 million, $0.6 million and $0.4 million, respectively. All related assets and liabilities, including identifiable intangibles, were recorded at their relative fair values based on the purchase price and acquisition costs incurred.

 

Real Estate Under Construction

 

The following table provides the activity of our Real estate under construction (amounts in thousands):

   2023   2022 
   December 31, 
   2023   2022 
Beginning balance  $133,898   $76,882 
Capitalized costs (1) (2)    155,969    45,907 
Land held for development (3)   4,936    10,958 
Impairment charges (4)   (4,060)   — 
Capitalized interest   387    151 
Ending balance  $291,130   $133,898 

 

 

(1) Includes development fees and employee reimbursement expenditures. See “Note 4 – Related Party Agreements” for additional details regarding our transactions with related parties.

 

(2) Includes direct and indirect project costs to the construction and development of real estate projects, including but not limited to loan fees, property taxes and insurance, incurred of $3.4 million and $2.2 million for the years ended December 31, 2023 and 2022, respectively.

 

(3) Includes the acquisition of land located in Sarasota, Florida during the year ended December 31, 2023 as discussed above. Additionally, includes ground lease payments and straight-line rent adjustments incurred of $0.1 million and $0.8 million for the years ended December 31, 2023 and 2022, respectively.

 

(4) During the year ended December 31, 2023, we recorded impairment charges of $4.1 million in relation to one of our real estate assets located in Nashville, Tennessee, based on our conclusion that the estimated fair market value of the real estate asset was lower than the carrying value, and as a result, we reduced the carrying value to the estimated fair market value.

 

Real estate under construction includes non-cash investing activity of $27.6 million for year ended December 31, 2023 (inclusive of unpaid development fees of $6.1 million and unpaid employee cost sharing and reimbursements of $1.3 million) and $13.9 million for the year ended December 31, 2022 (inclusive of land contributed by one of the CMC JV partners, unpaid development fees of $4.3 million and unpaid employee cost sharing and reimbursements of $0.3 million).

 

Depreciation expense was $0.8 million, and $0.7 million for the years ended December 31, 2023, and 2022, respectively, and is included in Depreciation and amortization in our consolidated statements of operations.