Annual report pursuant to Section 13 and 15(d)

Real Estate and Intangible Assets

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Real Estate and Intangible Assets
 12 Months Ended
Dec. 31, 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 December 31, 2023 and 2022, respectively, excluding real estate held for sale as of December 31, 2023 (dollars in thousands):

December 31, 2023 December 31, 2022
Real estate:
Land (1) $ 143,442  $ 152,916 
Building and improvements 1,020,661  1,069,407 
Tenant improvements 57,261  64,974 
Accumulated depreciation (299,662) (286,150)
Real estate, net $ 921,702  $ 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 $41.2 million, $41.1 million, and $38.4 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Acquisitions

During the years ended December 31, 2023 and 2022, we acquired five and 13 properties, respectively, which are summarized below (dollars in thousands):

Year Ended Aggregate Square Footage Weighted Average Lease Term Aggregate Purchase Price Aggregate Capitalized Acquisition Costs
December 31, 2023 (1) 321,432  19.3 years $ 30,018  $ 528 
December 31, 2022 (2) 1,238,680  14.5 years $ 115,364  $ 1,014 
(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. On October 12, 2023, we acquired a 69,920 square foot property in Allentown, Pennsylvania for $7.9 million. The property is fully leased to one tenant and had 20.1 years of remaining lease term at the time we acquired the property. On November 3, 2023, we acquired a 67,709 square
foot property in Indianapolis, Indiana for $4.6 million. The property is fully leased to one tenant and had 20.1 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 portfolio 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 portfolio. On May 4, 2022, we acquired a 260,719 square foot, two-property portfolio in Cleveland, Ohio and Fort Payne, Alabama for $19.5 million. On May 12, 2022, we acquired a 345,584 square foot, three-property portfolio in Wilmington, North Carolina, for $18.9 million. These properties are fully leased to one tenant and had 13.1 years of remaining lease term at the time we acquired the portfolio. On August 5, 2022, we acquired a 246,000 square foot, two-property portfolio in Bridgeton, New Jersey and Vineland, New Jersey for $32.7 million. These properties are fully leased to one tenant and had 15.1 years of remaining lease term at the time we acquired the property. On September 16, 2022, we acquired a 67,328 square foot property in Jacksonville, Florida for $8.1 million. This 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. This property is fully leased to one tenant and had 14.8 years of remaining lease term at the time we acquired the property. On October 26, 2022, we acquired a 68,674 square foot property in Denver, Colorado for $12.1 million. This property is fully leased to one tenant and had 20.0 years of remaining lease term at the time we acquired the property. On December 21, 2022, we acquired a 65,000 square foot property in Greenville, South Carolina for $5.0 million. The property is fully leased to one tenant and had 12.0 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 years ended December 31, 2023 and 2022, respectively, as follows (dollars in thousands):

Year ended December 31, 2023
Year ended December 31, 2022
Acquired assets and liabilities Purchase price Purchase price
Land $ 4,629  $ 11,587 
Building 19,726  85,774 
Tenant Improvements 997  1,939 
In-place Leases 1,642  5,927 
Leasing Costs 2,733  6,888 
Customer Relationships 684  3,352 
Above Market Leases —  500  (1)
Below Market Leases (393) (2) (603) (2)
Total Purchase Price $ 30,018  $ 115,364 
(1)This amount includes $181 of loans receivable included in Other assets on the consolidated balance sheets.
(2)This amount includes $393 and $32 of prepaid rent included in Other liabilities on the consolidated balance sheets, respectively.

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
2024 $ 113,627 
2025 111,796 
2026 106,207 
2027 90,925 
2028 77,945 
Thereafter 389,670 
$ 890,170 

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 lease payments and variable lease payments for the years ended December 31, 2023, 2022, and 2021, respectively (dollars in thousands):

For the year ended December 31,
(Dollars in Thousands)
Lease revenue reconciliation 2023 2022 2021
Fixed lease payments $ 130,551  $ 132,032  $ 121,303 
Variable lease payments 17,033  16,949  16,385 
$ 147,584  $ 148,981  $ 137,688 

At December 31, 2023 and 2022, accounts receivable from tenants totaled $1.5 million and $1.1 million, respectively, included in other assets on the consolidated balance sheets.

Legal Settlements

In August 2021, we reached separate legal settlements through which we recognized $2.4 million, net, recorded in other income on the 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 December 31, 2023 and 2022, excluding real estate held for sale as of December 31, 2023 (dollars in thousands):

December 31, 2023 December 31, 2022
Lease Intangibles Accumulated Amortization Lease Intangibles Accumulated Amortization
In-place leases $ 98,615  $ (63,269) $ 104,394  $ (63,240)
Leasing costs 84,844  (46,096) 85,038  (45,501)
Customer relationships 63,185  (36,231) 69,586  (38,655)
$ 246,644  $ (145,596) $ 259,018  $ (147,396)
Deferred Rent Receivable/(Liability) Accumulated (Amortization)/Accretion Deferred Rent Receivable/(Liability) Accumulated (Amortization)/Accretion
Above market leases $ 13,431  $ (10,675) $ 15,371  $ (11,909)
Below market leases and deferred revenue (59,411) 30,087  (66,138) 26,141 

Total amortization expense related to in-place leases, leasing costs and customer relationship lease intangible assets was $16.7 million, $19.1 million, and $20.7 million for the years ended December 31, 2023, 2022, and 2021, 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 $0.6 million, $0.8 million, and $0.8 million for the years ended December 31, 2023, 2022, and 2021, 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 $8.0 million, $5.1 million, and $4.1 million for the years ended December 31, 2023, 2022, and 2021, 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, 2023 and 2022, respectively, were as follows:
Intangible Assets & Liabilities 2023 2022
In-place leases 18.9 14.8
Leasing costs 18.9 14.8
Customer relationships 26.3 20.5
Above market leases 0.0 16.3
Below market leases 20.1 13.0
All intangible assets & liabilities 21.1 16.2

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, 2023 (dollars in thousands):

Year Estimated Amortization Expense
of In-Place Leases, Leasing
Costs and Customer
Relationships
2024 $ 16,225 
2025 14,201 
2026 12,490 
2027 10,853 
2028 8,818 
Thereafter 38,461 
$ 101,048 

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, 2023 (dollars in thousands):

Year Net Increase to Rental Income
Related to Above and Below
Market Leases (1)
2024 $ 6,188 
2025 6,006 
2026 3,814 
2027 2,522 
2028 2,525 
Thereafter 5,372 
$ 26,427 
(1)Does not include ground lease amortization of $141.