Quarterly report pursuant to Section 13 or 15(d)

Real Estate and Intangible Assets

v3.8.0.1
Real Estate and Intangible Assets
 3 Months Ended
Mar. 31, 2018
Real Estate [Abstract]  
Real Estate and Intangible Assets
Real Estate and Intangible Assets

Real Estate

The following table sets forth the components of our investments in real estate as of March 31, 2018 and December 31, 2017, excluding real estate held for sale as of March 31, 2018 and December 31, 2017 (dollars in thousands):
 
 
 
March 31, 2018

December 31, 2017
Real estate:
 
 
 
 
Land
 
$
122,000

 
$
121,783

Building and improvements
 
718,948

 
708,948

Tenant improvements
 
63,736

 
63,122

Accumulated depreciation
 
(155,899
)
 
(149,417
)
Real estate, net
 
$
748,785

 
$
744,436


Real estate depreciation expense on building and tenant improvements was $7.3 million and $6.4 million for the three months ended March 31, 2018 and 2017, respectively.
Acquisitions

We acquired one property during the three months ended March 31, 2018, and zero properties during the three months ended March 31, 2017, which is summarized below (dollars in thousands):

Three Months Ended
 
Square Footage
 
Lease Term
 
Purchase Price
 
Acquisition Expenses
 
Annualized GAAP Rent
March 31, 2018
(1)
127,444

 
9.8 Years
 
$
14,341

 
$
91

 
$
1,087


(1)
On March 9, 2018, we acquired a 127,444 square foot property in Vance, Alabama for $14.3 million. The annualized GAAP rent on the 9.8 year lease is $1.1 million.
(2)
We accounted for this transaction under ASU 2017-01, "Clarifying the Definition of a Business." As a result, we treated our acquisition during the three months ended March 31, 2018 as an asset acquisition rather than a business combination. As a result of this treatment, we capitalized $0.1 million of acquisition costs that would otherwise have been expensed under business combination treatment.

We determined the fair value of assets acquired and liabilities assumed related to the property acquired during the three months ended March 31, 2018 as follows (dollars in thousands):

 
 
Three months ended March 31, 2018
Acquired assets and liabilities
 
Purchase price
Land
 
$
459

Building
 
11,609

Tenant Improvements
 
615

In-place Leases
 
509

Leasing Costs
 
534

Customer Relationships
 
566

Above Market Leases
 
49

Total Purchase Price
 
$
14,341



Significant Real Estate Activity on Existing Assets

During the three months ended March 31, 2018 and 2017, we executed one and zero new leases, respectively, which is summarized below (dollars in thousands):

Three Months Ended
 
Aggregate Square Footage
 
Weighted Average Lease Term
 
Aggregate Annualized GAAP Rent
 
Aggregate Leasing Commissions
March 31, 2018
 
34,441

 
3.6 years
 
$
97

 
$
14



Intangible Assets

The following table summarizes the carrying value of intangible assets, liabilities and the accumulated amortization for each intangible asset and liability class as of March 31, 2018 and December 31, 2017, excluding real estate held for sale as of March 31, 2018 and December 31, 2017 (dollars in thousands):

 
 
March 31, 2018

December 31, 2017
 
 
Lease Intangibles
 
Accumulated Amortization
 
Lease Intangibles
 
Accumulated Amortization
In-place leases
 
$
80,638

 
$
(34,902
)
 
$
80,355

 
$
(33,201
)
Leasing costs
 
56,147

 
(24,186
)
 
55,695

 
(23,016
)
Customer relationships
 
59,276

 
(20,672
)
 
58,892

 
(19,798
)
 
 
$
196,061

 
$
(79,760
)
 
$
194,942

 
$
(76,015
)
 
 
 
 
 
 
 
 
 
 
 
Deferred Rent Receivable/(Liability)
 
Accumulated (Amortization)/Accretion
 
Deferred Rent Receivable/(Liability)
 
Accumulated (Amortization)/Accretion
Above market leases
 
$
14,474

 
$
(8,200
)
 
$
14,425

 
$
(7,962
)
Below market leases and deferred revenue
 
(26,752
)
 
10,974

 
(26,725
)
 
10,475

 
 
$
(12,278
)
 
$
2,774

 
$
(12,300
)
 
$
2,513


Total amortization expense related to in-place leases, leasing costs and customer relationship lease intangible assets was $4.2 million and $3.5 million for the three months ended March 31, 2018 and 2017, respectively, and is included in depreciation and amortization expense in the condensed consolidated statements of operations and comprehensive income.

Total amortization related to above-market lease values was $0.2 million and $0.1 million for the three months ended March 31, 2018 and 2017, respectively, and is included in rental revenue in the condensed consolidated statements of operations and comprehensive income. Total amortization related to below-market lease values was $0.5 million and $0.3 million for the three months ended March 31, 2018 and 2017, respectively, and is included in rental revenue in the condensed consolidated statements of operations and comprehensive income.

The weighted average amortization periods in years for the intangible assets acquired during the three months ended March 31, 2018 were as follows:
 
Intangible Assets & Liabilities
 
2018
In-place leases
 
9.8
Leasing costs
 
9.8
Customer relationships
 
14.8
Above market leases
 
9.8
All intangible assets & liabilities
 
11.1