Real Estate and Intangible Assets (Tables)
|
9 Months Ended |
Sep. 30, 2018 |
|---|
| Real Estate [Abstract] |
|
| Components of Investments in Real Estate |
The following table sets forth the components of our investments in real estate as of September 30, 2018 and December 31, 2017, excluding real estate held for sale as of September 30, 2018 and December 31, 2017 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2018 |
|
December 31, 2017 |
Real estate: |
|
|
|
|
Land |
|
$ |
122,890 |
|
|
$ |
121,783 |
|
Building and improvements |
|
726,690 |
|
|
708,948 |
|
Tenant improvements |
|
63,897 |
|
|
63,122 |
|
Accumulated depreciation |
|
(170,824 |
) |
|
(149,417 |
) |
Real estate, net |
|
$ |
742,653 |
|
|
$ |
744,436 |
|
|
| Acquisitions |
We acquired two properties during the nine months ended September 30, 2018, and five properties during the nine months ended September 30, 2017. The acquisitions are summarized below (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
Square Footage |
|
Lease Term |
|
Purchase Price |
|
Acquisition Expenses |
|
Annualized GAAP Rent |
|
Debt Issued or Assumed |
|
September 30, 2018 |
(1) |
285,254 |
|
|
11.7 Years |
|
$ |
22,800 |
|
|
$ |
225 |
|
(3) |
$ |
1,851 |
|
|
$ |
4,745 |
|
(4) |
September 30, 2017 |
(2) |
666,451 |
|
|
10.7 Years |
|
94,421 |
|
|
1,171 |
|
(3) |
10,776 |
|
|
54,887 |
|
(5) |
|
|
(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. On September 20, 2018, we acquired a 157,810 square foot property in Columbus, Ohio for $8.5 million. We issued $4.7 million of mortgage debt in connection with this acquisition. The annualized GAAP rent on the 15.0 year lease is $0.8 million.
|
|
|
(2) |
On June 22, 2017, we acquired a 60,016 square foot property in Conshohocken, Pennsylvania for $15.7 million. We assumed $11.2 million of mortgage debt. The annualized GAAP rent on the 8.5 year lease is $1.7 million. On July 7, 2017, we acquired a 300,000 square foot property in Philadelphia, Pennsylvania for $27.1 million. We issued $14.9 million of mortgage debt with a fixed interest rate of 3.75% in connection with this acquisition. The annualized GAAP rent on the 15.4 year lease is $2.3 million. On July 31, 2017, we acquired a 306,435 square foot, three property portfolio, located in Maitland, Florida for $51.6 million. We issued $28.8 million of mortgage debt with a fixed interest rate of 3.89% in connection with this acquisition. The portfolio has a weighted average lease term of 8.6 years and annualized GAAP rent of $6.8 million.
|
|
|
(3) |
We accounted for these transactions under ASU 2017-01, “Clarifying the Definition of a Business.” As a result, we treated our acquisitions during the nine months ended September 30, 2018 and 2017 as asset acquisitions rather than business combinations. As a result of this treatment, we capitalized $0.2 million and $1.2 million, respectively, of acquisition costs that would otherwise have been expensed under business combination treatment.
|
|
|
(4) |
We entered into an interest rate swap in connection with $4.7 million of issued debt on our Columbus, Ohio acquisition, pursuant to which we will pay our counterparty a fixed interest rate of 3.22%, and receive a variable interest rate of one month LIBOR from our counterparty. Our total interest rate on this debt is fixed at 5.32%. We have elected to treat this interest rate swap as a cash flow hedge, and all changes in fair market value will be recorded to accumulated other comprehensive income on the consolidated balance sheets.
|
|
|
(5) |
We assumed an interest rate swap in connection with $11.2 million of assumed debt on our Conshohocken, Pennsylvania acquisition, pursuant to which we will pay our counterparty a fixed interest rate of 1.80%, and receive a variable interest rate of one month LIBOR from our counterparty. Our total interest rate on this debt is fixed at 3.55%. The interest rate swap had a fair value of $0.04 million upon the date of assumption, and subsequently increased in value to $0.7 million at September 30, 2018. We have elected to treat this interest rate swap as a cash flow hedge, and all changes in fair market value will be recorded to accumulated other comprehensive income on the consolidated balance sheets.
|
|
| Fair Value of Assets Acquired and Liabilities Assumed |
We determined the fair value of assets acquired and liabilities assumed related to the properties acquired during the nine months ended September 30, 2018 and 2017 as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2018 |
|
Nine months ended September 30, 2017 |
Acquired assets and liabilities |
|
Purchase price |
|
Purchase price |
Land |
|
$ |
1,140 |
|
|
$ |
15,137 |
|
Building |
|
17,849 |
|
|
51,186 |
|
Tenant Improvements |
|
776 |
|
|
6,060 |
|
In-place Leases |
|
1,249 |
|
|
9,516 |
|
Leasing Costs |
|
1,245 |
|
|
5,083 |
|
Customer Relationships |
|
792 |
|
|
6,851 |
|
Above Market Leases |
|
49 |
|
|
1,916 |
|
Below Market Leases |
|
(300 |
) |
|
(1,769 |
) |
Discount on Assumed Debt |
|
— |
|
|
399 |
|
Fair Value of Interest Rate Swap Assumed |
|
— |
|
|
42 |
|
Total Purchase Price |
|
$ |
22,800 |
|
|
$ |
94,421 |
|
|
| Summary of Lease on Property |
During the nine months ended September 30, 2018 and 2017, we executed two and six new leases, respectively, which are summarized below (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
Aggregate Square Footage |
|
Weighted Average Lease Term |
|
Aggregate Annualized GAAP Rent |
|
Aggregate Tenant Improvement |
|
Aggregate Leasing Commissions |
September 30, 2018 |
(1) |
184,441 |
|
|
1.6 years |
|
$ |
391 |
|
|
$ |
— |
|
|
$ |
14 |
|
September 30, 2017 |
|
577,471 |
|
|
8.9 years |
|
4,062 |
|
|
1,181 |
|
|
475 |
|
|
|
(1) |
One of the new leases we entered into is on our South Hadley, Massachusetts property which is classified as held for sale on the condensed consolidated balance sheets as of September 30, 2018.
|
|
| Carrying Value of Intangible Assets and Accumulated Amortization |
The following table summarizes the carrying value of intangible assets, liabilities and the accumulated amortization for each intangible asset and liability class as of September 30, 2018 and December 31, 2017, excluding real estate held for sale, as of September 30, 2018 and December 31, 2017 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2018 |
|
December 31, 2017 |
|
|
Lease Intangibles |
|
Accumulated Amortization |
|
Lease Intangibles |
|
Accumulated Amortization |
In-place leases |
|
$ |
81,377 |
|
|
$ |
(38,767 |
) |
|
$ |
80,355 |
|
|
$ |
(33,201 |
) |
Leasing costs |
|
56,878 |
|
|
(26,738 |
) |
|
55,695 |
|
|
(23,016 |
) |
Customer relationships |
|
59,502 |
|
|
(22,909 |
) |
|
58,892 |
|
|
(19,798 |
) |
|
|
$ |
197,757 |
|
|
$ |
(88,414 |
) |
|
$ |
194,942 |
|
|
$ |
(76,015 |
) |
|
|
|
|
|
|
|
|
|
|
|
Deferred Rent Receivable/(Liability) |
|
Accumulated (Amortization)/Accretion |
|
Deferred Rent Receivable/(Liability) |
|
Accumulated (Amortization)/Accretion |
Above market leases |
|
$ |
14,511 |
|
|
$ |
(8,679 |
) |
|
$ |
14,425 |
|
|
$ |
(7,962 |
) |
Below market leases and deferred revenue |
|
(27,338 |
) |
|
11,988 |
|
|
(26,725 |
) |
|
10,475 |
|
|
|
$ |
(12,827 |
) |
|
$ |
3,309 |
|
|
$ |
(12,300 |
) |
|
$ |
2,513 |
|
|
| Weighted Average Amortization Periods |
The weighted average amortization periods in years for the intangible assets acquired during the nine months ended September 30, 2018 and 2017 were as follows:
|
|
|
|
|
|
Intangible Assets & Liabilities |
|
2018 |
|
2017 |
In-place leases |
|
13.0 |
|
9.7 |
Leasing costs |
|
13.0 |
|
9.7 |
Customer relationships |
|
21.2 |
|
12.7 |
Above market leases |
|
9.8 |
|
10.2 |
Below market leases |
|
15.0 |
|
9.4 |
All intangible assets & liabilities |
|
15.0 |
|
10.4 |
|