Annual report pursuant to Section 13 and 15(d)

Real Estate and Intangible Assets

v3.20.4
Real Estate and Intangible Assets
 12 Months Ended
Dec. 31, 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 December 31, 2020 and 2019, respectively, excluding real estate held for sale as of December 31, 2020 and 2019, respectively (dollars in thousands):

December 31, 2020 December 31, 2019
Real estate:
Land (1) $ 142,853  $ 137,532 
Building and improvements 916,601  851,245 
Tenant improvements 69,229  68,201 
Accumulated depreciation (228,468) (207,523)
Real estate, net $ 900,215  $ 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 $36.0 million, $32.8 million, and $29.9 million for the years ended December 31, 2020, 2019, and 2018, respectively.

Acquisitions

During the year ended December 31, 2020 and 2019 we acquired nine and 18 properties, respectively, which are summarized below (dollars in thousands):

Year Ended Aggregate Square Footage Weighted Average Lease Term Aggregate Purchase Price Capitalized Acquisition Costs
December 31, 2020 (1) 1,717,502  12.2 years $ 129,974  $ 814  (3)
December 31, 2019 (2) 2,562,483  12.8 years $ 130,313  $ 1,231  (3)
(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. 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. On March 9, 2020, we acquired a 504,400 square foot property in Crandall, Georgia for $32.0 million. This property is fully leased to one tenant for 10.5 years. On September 1, 2020, we acquired a 153,600 square foot property in Terre Haute, Indiana for $10.6 million. This property is fully leased to one tenant for 9.7 years. On October 14, 2020, we acquired a 240,714 square foot property in Montgomery, Alabama for $14.3 million. This property is fully leased to one tenant for 7.2 years. On December 18, 2020, we acquired a 277,883 square foot property in Huntsville, Alabama for $20.0 million. This property is fully leased to one tenant for 9.2 years. On December 21, 2020, we acquired a 155,267 square foot property in Pittsburgh, Pennsylvania for $13.0 million. This property is fully leased to one tenant for 10.0 years.
(2)On February 8, 2019, we acquired a 26,050 square foot property in Moorestown, New Jersey for $2.7 million. This property is fully leased to one tenant for 15.1 years. On February 28, 2019, we acquired a 34,800 square foot property in Indianapolis, Indiana for $3.6 million. This property is fully leased to one tenant for 10.0 years. On April 5, 2019, we acquired a 383,000 square foot, two property portfolio located in Ocala, Florida for $19.2 million. This portfolio is leased to one tenant, and has a weighted average lease term of 20.1 years. On April 30, 2019, we acquired a 54,430 square foot property in Columbus, Ohio for $3.2 million. This property is fully leased to one tenant for 7.0 years. On June 18, 2019, we acquired a 676,031 square foot property in Tifton, Georgia, for $17.9 million. This property is fully leased to one tenant for 8.5 years. On July 30, 2019, we acquired a 78,452 square foot property in Denton, Texas, for $6.6 million. This property is fully leased to one tenant for 11.9 years. On September 26, 2019, we acquired a 211,000 square foot two property portfolio in Temple, Texas, for $14.1 million. This portfolio is leased to one tenant, and has a weighted average lease term of 20.0 years. On November 14, 2019, we acquired a 231,509 square foot property in Indianapolis, Indiana, for $8.2 million. This property is fully leased to one tenant for 13.5 years. On December 16, 2019, we acquired a 241,000 square foot property in Jackson, Tennessee, for $9.1 million. This property is fully leased to one tenant for 9.7 years. On December 17, 2019, we acquired a 117,000 square foot property in Carrollton, Georgia, for $8.1 million. This property is fully leased to one tenant for 12.0 years. On December 17, 2019, we acquired a 509,211 square foot six property portfolio, for $37.6 million. The portfolio is fully leased to one tenant, and has a weighted average lease term of 10.0 years.
(3)During the years ended December 31, 2020 and 2019, we capitalized $0.8 million and $1.2 million, respectively, of acquisition costs.

We determined the fair value of assets acquired and liabilities assumed related to the properties acquired during the year ended December 31, 2020 and 2019, respectively, as follows (dollars in thousands):

Year ended December 31, 2020 Year ended December 31, 2019
Acquired assets and liabilities Purchase price Purchase price
Land $ 11,264  (1) $ 12,351 
Building 97,101  93,502 
Tenant Improvements 2,684  3,119 
In-place Leases 9,076  9,013 
Leasing Costs 6,352  7,274 
Customer Relationships 5,239  5,019 
Above Market Leases 529  (2) 1,950 
Below Market Leases (2,271) (3) (1,915) (4)
Total Purchase Price $ 129,974  $ 130,313 
(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 consolidated balance sheets.
(3)This amount includes $62 of prepaid rent included in Other liabilities on the consolidated balance sheets.
(4)This amount includes $187 of prepaid rent included in Other liabilities on the consolidated balance sheets.

Future Lease Payments

Future operating lease payments from tenants under non-cancelable leases, excluding tenant reimbursement of expenses, for each of the five succeeding fiscal years and thereafter is as follows (dollars in thousands):
Year Tenant Lease Payments
2021 $ 110,417 
2022 106,438 
2023 99,170 
2024 91,083 
2025 83,418 
Thereafter 323,814 
$ 814,340 

In accordance with the lease terms, substantially all operating expenses are required to be paid by the tenant; however, we would be required to pay operating expenses on the respective properties in the event the tenants fail to pay them.

Lease Revenue Reconciliation

The table below sets forth the allocation of lease revenue between fixed contractual payments and variable lease payments for the years ended December 31, 2020 and 2019, respectively (dollars in thousands):

For the twelve months ended December 31,
(Dollars in Thousands)
Lease revenue reconciliation 2020 2019 $ Change % Change
Fixed lease payments $ 117,248  $ 110,273  $ 6,975  6.3  %
Variable lease payments 15,904  4,114  11,790  286.6  %
$ 133,152  $ 114,387  $ 18,765  16.4  %

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 December 31, 2020 and 2019, excluding real estate held for sale as of December 31, 2020 and 2019, respectively (dollars in thousands):

December 31, 2020 December 31, 2019
Lease Intangibles Accumulated Amortization Lease Intangibles Accumulated Amortization
In-place leases $ 99,254  $ (54,168) $ 92,906  $ (48,468)
Leasing costs 73,707  (37,801) 68,256  (33,705)
Customer relationships 68,268  (31,881) 65,363  (28,887)
$ 241,229  $ (123,850) $ 226,525  $ (111,060)
Deferred Rent Receivable/(Liability) Accumulated (Amortization)/Accretion Deferred Rent Receivable/(Liability) Accumulated (Amortization)/Accretion
Above market leases $ 15,076  $ (10,670) $ 16,502  $ (10,005)
Below market leases and deferred revenue (38,319) 17,686  (34,322) 15,000 
$ (23,243) $ 7,016  $ (17,820) $ 4,995 

Total amortization expense related to in-place leases, leasing costs and customer relationship lease intangible assets was $19.4 million, $19.2 million, and $17.7 million for the years ended December 31, 2020, 2019, and 2018, respectively, and is included in depreciation and amortization expense in the consolidated statement of operations and comprehensive income.

Total amortization related to above-market lease values was $0.8 million, $1.1 million, and $1.1 million for the years ended December 31, 2020, 2019, and 2018, respectively, and is included in lease revenue in the consolidated statement of operations and comprehensive income.

Total amortization related to below-market lease values was $2.8 million, $2.5 million, and $2.0 million for the years ended December 31, 2020, 2019, and 2018, respectively, and is included in lease revenue in the consolidated statement of operations and comprehensive income.
The weighted average amortization periods in years for the intangible assets acquired and liabilities assumed during the years ended December 31, 2020 and 2019, respectively, were as follows:

Intangible Assets & Liabilities 2020 2019
In-place leases 14.2 13.6
Leasing costs 14.2 13.6
Customer relationships 17.8 19.0
Above market leases 14.8 10.7
Below market leases 13.3 10.3
All intangible assets & liabilities 15.0 15.0

The estimated aggregate amortization expense to be recorded for in-place leases, leasing costs and customer relationships for each of the five succeeding fiscal years and thereafter is as follows, excluding real estate held for sale as of December 31, 2020 (dollars in thousands):

Year Estimated Amortization Expense
of In-Place Leases, Leasing
Costs and Customer
Relationships
2021 $ 19,828 
2022 17,890 
2023 15,435 
2024 13,211 
2025 11,467 
Thereafter 39,548 
$ 117,379 

The estimated aggregate rental income to be recorded for the amortization of both above and below market leases for each of the five succeeding fiscal years and thereafter is as follows, excluding real estate held for sale as of December 31, 2020 (dollars in thousands):

Year Net Increase to Rental Income
Related to Above and Below
Market Leases (1)
2021 $ 3,527 
2022 2,575 
2023 2,154 
2024 2,009 
2025 1,626 
Thereafter 4,160 
$ 16,051 
(1)Does not include ground lease amortization of $176.