Quarterly report pursuant to Section 13 or 15(d)

Real Estate and Intangible Assets

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Real Estate and Intangible Assets
 9 Months Ended
Sep. 30, 2020
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 September 30, 2020 and December 31, 2019, excluding real estate held for sale as of September 30, 2020 and December 31, 2019, respectively (dollars in thousands):
 
September 30, 2020 December 31, 2019
Real estate:
Land (1) $ 140,465  $ 137,532 
Building and improvements 886,138  851,245 
Tenant improvements 68,251  68,201 
Accumulated depreciation (221,849) (207,523)
Real estate, net $ 873,005  $ 849,455 

(1)This amount includes $4,436 of land value subject to land lease agreements which we may purchase at our option for a nominal fee.

Real estate depreciation expense on building and tenant improvements was $9.0 million and $27.2 million for the three and nine months ended September 30, 2020, respectively. Real estate depreciation expense on building and tenant improvements was $8.3 million and $24.4 million for the three and nine months ended September 30, 2019, respectively.
Acquisitions

We acquired six properties during the nine months ended September 30, 2020, and nine properties during the nine months ended September 30, 2019. The acquisitions are summarized below (dollars in thousands):
Nine Months Ended Aggregate Square Footage Weighted Average Lease Term Aggregate Purchase Price Capitalized Acquisition Expenses Aggregate Annualized GAAP Fixed Lease Payments Aggregate Debt Issued or Assumed
September 30, 2020 (1) 1,043,638  14.2 years $ 82,599  $ 339  (3) $ 6,146  $ 35,855 
September 30, 2019 (2) 1,463,763  14.8 years 67,272  621  (3) 5,437  8,900 

(1)On January 8, 2020, we acquired a 64,800 square foot property in Indianapolis, Indiana for $5.3 million. The property is leased to three tenants with a weighted average lease term of 7.2 years with annualized GAAP rent of $0.5 million. On January 27, 2020, we acquired a 320,838 square foot, three-property portfolio in Houston, Texas, Charlotte, North Carolina, and St. Charles, Missouri for $34.7 million. The portfolio has a weighted average lease term of 20.0 years, and an annualized GAAP rent of $2.6 million. We issued $18.3 million of mortgage debt with a fixed interest rate of 3.625% in connection with the acquisition. On March 9, 2020, we acquired a 504,400 square foot property in Chatsworth, Georgia for $32.0 million. We entered into an interest rate swap in connection with our $17.5 million of issued debt, resulting in a fixed interest rate of 2.8%. The annualized GAAP rent on the 10.5 year lease is $2.2 million. On September 1, 2020, we acquired a 153,600 square foot property in Indianapolis, Indiana for $10.6 million. The annualized GAAP rent on the 9.7 year lease is $0.8 million.
(2)On February 8, 2019, we acquired a 26,050 square foot property in a suburb of Philadelphia, Pennsylvania, for $2.7 million. The annualized GAAP rent on the 15.1 year lease is $0.2 million. On February 28, 2019, we acquired a 34,800 square foot property in Indianapolis, Indiana for $3.6 million. The annualized GAAP rent on the 10.0 year lease is $0.3 million. On April 5, 2019, we acquired a 207,000 square foot property in Ocala, Florida, for $11.9 million. The annualized GAAP rent on the 20.1 year lease is $0.8 million. On April 5, 2019, we acquired a 176,000 square foot property in Ocala, Florida, for $7.3 million. The annualized GAAP rent on the 20.1 year lease is $0.7 million. On April 30, 2019, we acquired a 54,430 square foot property in Columbus, Ohio, for $3.2 million. The annualized GAAP rent on the 7.0 year lease is $0.2 million. On June 18, 2019, we acquired a 676,031 square foot property in Tifton, Georgia, for $17.9 million. The annualized GAAP rent on the 8.5 year lease is $1.6 million. We issued $8.9 million of mortgage debt with a fixed interest rate of 4.35% in connection with this acquisition. On July 30, 2019, we acquired a 78,452 square foot property in Denton, Texas, for $6.6 million. The annualized GAAP rent on the 11.9 year lease is $0.5 million. On September 26, 2019, we acquired a 211,000 square foot two property portfolio in Temple, Texas, for $14.1 million. The annualized GAAP rent on the 20.0 year lease is $1.2 million.
(3)We treated our acquisitions during the nine months ended September 30, 2020 and 2019 as asset acquisitions rather than business combinations. As a result of this treatment, we capitalized $0.3 million and $0.6 million, respectively, 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 properties acquired during the nine months ended September 30, 2020 and 2019 as follows (dollars in thousands):
Nine Months Ended September 30, 2020 Nine Months Ended September 30, 2019
Acquired assets and liabilities Purchase price Purchase price
Land (1) $ 7,798  $ 5,046 
Building and improvements 61,930  48,898 
Tenant Improvements 1,431  1,541 
In-place Leases 5,411  4,868 
Leasing Costs 4,664  4,481 
Customer Relationships 2,808  2,200 
Above Market Leases (2) 309  1,865 
Below Market Leases (3) (1,752) (1,627)
Total Purchase Price $ 82,599  $ 67,272 
(1)This amount includes $2,711 of land value subject to a land lease agreement, which we may purchase for a nominal fee.
(2)This amount includes $53 of loans receivable included in Other assets on the condensed consolidated balance sheets.
(3)This amount includes $62 of prepaid rent included in Other liabilities on the condensed consolidated balance sheets.

Significant Real Estate Activity on Existing Assets

During the nine months ended September 30, 2020 and 2019, we executed 13 and five leases, respectively, which are summarized below (dollars in thousands):
Nine Months Ended Aggregate Square Footage Weighted Average Remaining Lease Term Aggregate Annualized GAAP Fixed Lease Payments Aggregate Tenant Improvement Aggregate Leasing Commissions
September 30, 2020 987,902  7.9 years $ 8,340  $ 2,903  $ 1,285 
September 30, 2019 230,264  8.8 years 3,366  785  910 

During the nine months ended September 30, 2020 and 2019, we had one lease termination each, which are summarized below (dollars in thousands):

Nine Months Ended Aggregate Square Footage Reduced Aggregate Termination Fee Aggregate Deferred Rent Write Off
September 30, 2020 61,358  $ 1,119  $ 225 
September 30, 2019 16,566  61  — 

Future Lease Payments

Future operating lease payments from tenants under non-cancelable leases, excluding tenant reimbursement of expenses, for the three months ending December 31, 2020 and each of the five succeeding fiscal years and thereafter is as follows (dollars in thousands):
Year Tenant Lease Payments
Three Months Ending 2020 $ 27,401 
2021 109,326 
2022 103,896 
2023 96,136 
2024 87,999 
2025 79,061 
Thereafter 305,402 
$ 809,221 

We account for all of our real estate leasing arrangements as operating leases. A majority of our leases are subject to fixed rental increases, but a small subset of our lease portfolio has variable lease payments that are driven by the consumer price index. Many of our tenants have renewal options in their respective leases, but we seldom include option periods in the determination of lease term, as we generally will not enter into leasing arrangements with bargain renewal options. A small number of tenants have termination options.

Lease Revenue Reconciliation

The table below sets forth the allocation of lease revenue between fixed contractual payments and variable lease payments for the nine months ended September 30, 2020 and 2019, respectively (dollars in thousands):
For the three months ended September 30, For the nine months ended September 30,
Lease revenue reconciliation 2020 2019 2020 2019
Fixed lease payments $ 29,116  $ 27,660  $ 88,286  $ 82,076 
Variable lease payments 4,026  1,007  12,001  2,925 
$ 33,142  $ 28,667  $ 100,287  $ 85,001 

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 September 30, 2020 and December 31, 2019, excluding real estate held for sale as of September 30, 2020 and December 31, 2019, respectively (dollars in thousands):
September 30, 2020 December 31, 2019
Lease Intangibles Accumulated Amortization Lease Intangibles Accumulated Amortization
In-place leases $ 96,058  $ (52,589) $ 92,906  $ (48,468)
Leasing costs 72,604  (36,920) 68,256  (33,705)
Customer relationships 66,276  (31,187) 65,363  (28,887)
$ 234,938  $ (120,696) $ 226,525  $ (111,060)
Deferred Rent Receivable/(Liability) Accumulated (Amortization)/Accretion Deferred Rent Receivable/(Liability) Accumulated (Amortization)/Accretion
Above market leases $ 14,857  $ (10,462) $ 16,502  $ (10,005)
Below market leases and deferred revenue (36,793) 17,020  (34,322) 15,000 
$ (21,936) $ 6,558  $ (17,820) $ 4,995 

Total amortization expense related to in-place leases, leasing costs and customer relationship lease intangible assets was $4.8 million and $14.9 million for the three and nine months ended September 30, 2020, respectively, and $4.7 million and $14.2 million for the three and nine months ended September 30, 2019, 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 $0.6 million for the three and nine months ended September 30, 2020, respectively, and $0.3 million and $0.8 million for the three and nine months ended September 30, 2019, respectively, and is included in lease revenue in the condensed consolidated statements of operations and comprehensive income. Total amortization related to below-market lease values was $0.7 million and $2.1 million for the three and nine months ended September 30, 2020, respectively, and $0.7 million and $1.8 million for the three and nine months ended September 30, 2019, respectively, and is included in lease 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 nine months ended September 30, 2020 and 2019 were as follows:
 
Intangible Assets & Liabilities 2020 2019
In-place leases 15.7 15.9
Leasing costs 15.7 15.9
Customer relationships 18.9 20.6
Above market leases 16.6 9.3
Below market leases 14.2 9.6
All intangible assets & liabilities 16.3 17.3