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, 2021
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, 2021 and December 31, 2020, excluding real estate held for sale as of September 30, 2021 and December 31, 2020, respectively (dollars in thousands):
September 30, 2021 December 31, 2020
Real estate:
Land (1) $ 146,684  $ 142,853 
Building and improvements 955,233  916,601 
Tenant improvements 70,631  69,229 
Accumulated depreciation (257,050) (228,468)
Real estate, net $ 915,498  $ 900,215 
(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 $9.8 million and $30.0 million for the three and nine months ended September 30, 2021, respectively. 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.
Acquisitions

We acquired eight properties during the nine months ended September 30, 2021, and six properties during the nine months ended September 30, 2020. The acquisitions are summarized below (dollars in thousands):

Nine Months Ended Aggregate Square Footage Weighted Average Lease Term Aggregate Purchase Price Aggregate Capitalized Acquisition Costs
September 30, 2021 (1) 367,716  15.5 years $ 46,225  $ 370 
September 30, 2020 (2) 1,043,638  14.2 years $ 82,599  $ 339 
(1)On January 22, 2021, we acquired a 180,152 square foot property in Findlay, Ohio for $11.1 million. The property is fully leased to one tenant for 14.2 years at time we acquired the property. On June 17, 2021, we acquired a 25,200 square foot property in Baytown, Texas for $8.2 million. The property is fully leased to one tenant for 12.6 years at time we acquired the property. On July 21, 2021, we acquired an 80,604 square foot, four-property portfolio in Pacific, Missouri for $22.1 million. These properties are fully leased to one tenant for 17.4 years at time we acquired the portfolio. On August 20, 2021, we acquired an 81,760 square foot, two-property portfolio in Peru, Illinois for $4.8 million. These properties are fully leased to one tenant for 15.0 years at time we acquired the portfolio.
(2)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 at time we acquired the property. 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 at time we acquired the portfolio. On March 9, 2020, we acquired a 504,400 square foot property in Crandall, Georgia, for $32.0 million. The property is fully leased to one tenant for 10.5 years at time we acquired the property. On September 1, 2020, we acquired a 153,600 square foot property in Indianapolis, Indiana for $10.6 million. The property is fully leased to one tenant for 9.7 years at time we acquired the property.

We determined the fair value of assets acquired and liabilities assumed related to the properties acquired during the nine months ended September 30, 2021 and 2020, respectively, as follows (dollars in thousands):
Nine Months Ended September 30, 2021 Nine Months Ended September 30, 2020
Acquired assets and liabilities Purchase price Purchase price
Land $ 4,116  $ 7,798  (1)
Building 33,113  61,930 
Tenant Improvements 860  1,431 
In-place Leases 3,336  5,411 
Leasing Costs 3,198  4,664 
Customer Relationships 1,458  2,808 
Above Market Leases 410  309  (2)
Below Market Leases (266) (1,752) (3)
Total Purchase Price $ 46,225  $ 82,599 
(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 $46 and $53 of loans receivable included in Other assets on the condensed consolidated balance sheets, respectively.
(3)This amount includes $62 of prepaid rent included in Other liabilities on the condensed consolidated balance sheets.

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, 2021 and each of the five succeeding fiscal years and thereafter is as follows (dollars in thousands):

Year Tenant Lease Payments
Three Months Ending 2021 $ 28,699 
2022 115,625 
2023 108,691 
2024 102,252 
2025 95,813 
2026 86,921 
Thereafter 309,507 
$ 847,508 

In accordance with the lease terms, substantially all operating expenses are required to be paid by the tenant directly, or reimbursed to us from 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 three and nine months ended September 30, 2021 and 2020, respectively (dollars in thousands):

For the three months ended September 30,
(Dollars in Thousands)
Lease revenue reconciliation 2021 2020 $ Change % Change
Fixed lease payments $ 30,230  $ 29,116  $ 1,114  3.8  %
Variable lease payments 4,104  4,026  78  1.9  %
$ 34,334  $ 33,142  $ 1,192  3.6  %

For the nine months ended September 30,
(Dollars in Thousands)
Lease revenue reconciliation 2021 2020 $ Change % Change
Fixed lease payments $ 90,331  $ 88,286  $ 2,045  2.3  %
Variable lease payments 12,050  12,001  49  0.4  %
$ 102,381  $ 100,287  $ 2,094  2.1  %

Legal Settlements

In August 2021, we reached separate legal settlements through which we recognized $2.4 million, net, recorded in other income on the condensed consolidated statement of operations and comprehensive income.

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, 2021 and December 31, 2020, excluding real estate held for sale as of September 30, 2021 and December 31, 2020, respectively (dollars in thousands):

September 30, 2021 December 31, 2020
Lease Intangibles Accumulated Amortization Lease Intangibles Accumulated Amortization
In-place leases $ 102,796  $ (60,713) $ 99,254  $ (54,168)
Leasing costs 78,755  (42,536) 73,707  (37,801)
Customer relationships 70,016  (36,536) 68,268  (31,881)
$ 251,567  $ (139,785) $ 241,229  $ (123,850)
Deferred Rent Receivable/(Liability) Accumulated (Amortization)/Accretion Deferred Rent Receivable/(Liability) Accumulated (Amortization)/Accretion
Above market leases $ 15,460  $ (11,312) $ 15,076  $ (10,670)
Below market leases and deferred revenue (43,152) 20,693  (38,319) 17,686 

Total amortization expense related to in-place leases, leasing costs and customer relationship lease intangible assets was $5.0 million and $15.7 million for the three and nine months ended September 30, 2021, respectively, and $4.8 million and $14.9 million for the three and nine months ended September 30, 2020, 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, 2021, respectively, and $0.2 million and $0.6 million for the three and nine months ended September 30, 2020, 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 $0.9 million and $3.3 million for the three and nine months ended September 30, 2021, respectively, and $0.7 million and $2.1 million for the three and nine months ended September 30, 2020, 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 and liabilities assumed during the nine months ended September 30, 2021 and 2020, respectively, were as follows:

Intangible Assets & Liabilities 2021 2020
In-place leases 15.0 15.7
Leasing costs 15.0 15.7
Customer relationships 21.2 18.9
Above market leases 14.0 16.6
Below market leases 17.4 14.2
All intangible assets & liabilities 16.5 16.3