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, 2023
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, 2023 and December 31, 2022, respectively, excluding real estate held for sale as of September 30, 2023 and December 31, 2022 (dollars in thousands):
September 30, 2023 December 31, 2022
Real estate:
Land (1) $ 143,815  $ 152,916 
Building and improvements 1,025,384  1,069,407 
Tenant improvements 57,262  64,974 
Accumulated depreciation (291,986) (286,150)
Real estate, net $ 934,475  $ 1,001,147 
(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 $8.9 million and $31.2 million for the three and nine months ended September 30, 2023, respectively. Real estate depreciation expense on building and tenant improvements was $10.7 million and $30.7 million for the three and nine months ended September 30, 2022, respectively.
Acquisitions

We acquired three properties during the nine months ended September 30, 2023 and acquired 11 industrial properties during the nine months ended September 30, 2022. 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, 2023 (1) 183,803  18.7 years $ 17,539  $ 349 
September 30, 2022 (2) 1,105,006  13.8 years $ 98,276  $ 776 
(1)On April 14, 2023, we acquired a 76,089 square foot property in Riverdale, Illinois for $5.4 million. The property is fully leased to one tenant and had 20.0 years of remaining lease term at the time we acquired the property. On July 10, 2023, we acquired a 7,714 square foot property in Dallas-Fort Worth, Texas for $3.0 million. The property is fully leased to one tenant and had 9.9 years of remaining lease term at the time we acquired the property. On July 28, 2023, we acquired a 100,000 square foot property in Dallas-Fort Worth, Texas for $9.2 million. The property is fully leased to one tenant and had 20.0 years of remaining lease term at the time we acquired the property.
(2)On February 24, 2022, we acquired an 80,000 square foot property in Wilkesboro, North Carolina for $7.5 million. The property is fully leased to one tenant and had 12.7 years of remaining lease term at the time we acquired the property. On March 11, 2022, we acquired a 56,000 square foot property in Oklahoma City, Oklahoma for $6.0 million. The property is fully leased to one tenant and had 7.0 years of remaining lease term at the time we acquired the property. On May 4, 2022, we acquired a two-property, 260,719 square foot portfolio in Cleveland, Ohio and Fort Payne, Alabama for $19.5 million. The properties are fully leased to one tenant and had 11.4 years of remaining lease term at the time we acquired the properties. On May 12, 2022, we acquired a three-property, 345,584 square foot portfolio in Wilmington, North Carolina for $18.9 million. The properties are fully leased to one tenant and had 13.1 years of remaining lease term at the time we acquired the properties. On August 5, 2022, we acquired a two-property, 246,000 square foot portfolio in Bridgeton, New Jersey and Vineland, New Jersey for $32.7 million. The properties are fully leased to one tenant and had 15.1 years of remaining lease term at the time we acquired the properties. On September 16, 2022, we acquired a 67,328 square foot property in Jacksonville, Florida for $8.1 million. The property is fully leased to one tenant and had 20.0 years of remaining lease term at the time we acquired the property. On September 20, 2022, we acquired a 49,375 square foot property in Fort Payne, Alabama for $5.6 million. The property is fully leased to one tenant and had 14.8 years of remaining lease term at the 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, 2023 and 2022 as follows (dollars in thousands):

Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022
Acquired assets and liabilities Purchase price Purchase price
Land $ 2,714  $ 5,949 
Building 11,423  77,903 
Tenant Improvements 692  1,468 
In-place Leases 1,001  4,907 
Leasing Costs 1,270  5,387 
Customer Relationships 439  2,937 
Above Market Leases —  328  (1)
Below Market Leases —  (603) (2)
Total Purchase Price $ 17,539  $ 98,276 
(1)This amount includes $9 of loans receivable included in Other assets on the condensed balance sheets.
(2)This amount includes $32 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, 2023 and each of the five succeeding fiscal years and thereafter is as follows, excluding real estate held for sale as of September 30, 2023 (dollars in thousands):
Year Tenant Lease Payments
Three Months Ending December 31, 2023 $ 28,906 
2024 112,878 
2025 112,342 
2026 106,748 
2027 90,440 
2028 75,223 
Thereafter 357,055 

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, 2023 and 2022, respectively (dollars in thousands):

For the three months ended September 30,
(Dollars in Thousands)
Lease revenue reconciliation 2023 2022 $ Change % Change
Fixed lease payments $ 31,945  $ 35,752  $ (3,807) (10.6) %
Variable lease payments 4,519  4,082  437  10.7  %
$ 36,464  $ 39,834  $ (3,370) (8.5) %

For the nine months ended September 30,
(Dollars in Thousands)
Lease revenue reconciliation 2023 2022 $ Change % Change
Fixed lease payments $ 98,465  $ 98,961  $ (496) (0.5) %
Variable lease payments 13,210  12,803  407  3.2  %
$ 111,675  $ 111,764  $ (89) (0.1) %

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, 2023 and December 31, 2022, respectively, excluding real estate held for sale as of September 30, 2023 and December 31, 2022 (dollars in thousands):

September 30, 2023 December 31, 2022
Lease Intangibles Accumulated Amortization Lease Intangibles Accumulated Amortization
In-place leases $ 98,904  $ (62,270) $ 104,394  $ (63,240)
Leasing costs 83,075  (45,170) 85,038  (45,501)
Customer relationships 63,614  (35,524) 69,586  (38,655)
$ 245,593  $ (142,964) $ 259,018  $ (147,396)
Deferred Rent Receivable/(Liability) Accumulated (Amortization)/Accretion Deferred Rent Receivable/(Liability) Accumulated (Amortization)/Accretion
Above market leases $ 13,431  $ (10,546) $ 15,371  $ (11,909)
Below market leases and deferred revenue (60,927) 29,113  (66,138) 26,141 

Total amortization expense related to in-place leases, leasing costs and customer relationship lease intangible assets was $3.6 million and $12.9 million for the three and nine months ended September 30, 2023, respectively, and $4.7 million and $14.5
million for the three and nine months ended September 30, 2022, 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 $0.1 million and $0.4 million for the three and nine months ended September 30, 2023, respectively, and $0.2 million and $0.6 million for the three and nine months ended September 30, 2022, 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 $1.8 million and $6.2 million for the three and nine months ended September 30, 2023, respectively, and $1.5 million and $3.1 million for the three and nine months ended September 30, 2022, 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, 2023 and 2022, were as follows:

Intangible Assets & Liabilities September 30, 2023 September 30, 2022
In-place leases 18.0 14.2
Leasing costs 18.0 14.2
Customer relationships 22.7 20.2
Above market leases 0.0 15.7
Below market leases 0.0 13.0
All intangible assets & liabilities 19.6 15.7