4. Real Estate and Intangible Assets

Real Estate

The following table sets forth the components of our investments in real estate as of March 31, 2014 and December 31, 2013 (dollars in thousands):

 

		March 31, 2014 (1)				December 31, 2013
Real estate:
Land		$	78,570			$	79,153
Building and improvements			526,117				527,230
Tenant improvements			36,212				35,970
Accumulated depreciation			(96,914	)			(81,241	)
Real estate, net		$	543,985			$	561,112

 

(1)	Does not include real estate held for sale as of March 31, 2014.

2014 Real Estate Activity

During the three months ended March 31, 2014, we acquired two properties, which are summarized in the table below (dollars in thousands):

 

Location		Acquisition Date				Square Footage				Lease Term				Renewal Options		Total Purchase Price				Acquistion Expenses				Annualized Straight Line Rent				Debt Assumed
Allen, TX			3/27/2014				21,154				12 Years			4 (5 years each)		$	5,525			$	26			$	570			$	3,481
Colleyville, TX			3/27/2014				20,355				12 Years			4 (5 years each)			4,523				26				467				2,849
Total							41,509									$	10,048			$	52			$	1,037			$	6,330

In accordance with ASC 805, we determined the fair value of the acquired assets related to the two properties acquired during the three months ended March 31, 2014 as follows (in thousands):

 

		Land				Building				Tenant Improvements				In-place Leases				Leasing Costs				Customer Relationships				Below Market Leases				Discount on Assumed Debt				Total Purchase Price
Allen, TX		$	874			$	3,509			$	125			$	598			$	273			$	218			$	—			$	72			$	5,525
Colleyville, TX			1,277				2,307				117				486				220				181				6				59			$	4,523
		$	2,151			$	5,816			$	242			$	1,084			$	493			$	399			$	6			$	131			$	10,048

 

Below is a summary of the total revenue and earnings recognized on the two properties acquired during the three months ended March 31, 2014 (dollars in thousands):

 

						For the three months ended March 31,
						2014
Location		Acquisition Date				Rental Revenue				Earnings (1)
Allen, TX			3/27/2014			$	8			$	5
Colleyville, TX			3/27/2014				6				4
						$	14			$	9

 

(1)	Earnings is calculated as net income exclusive of both interest expense and acquisition related costs that are required to be expensed under ASC 805.

Pro Forma

The following table reflects pro-forma consolidated statements of operations as if the two properties acquired during the three months ended March 31, 2014 were acquired as of the beginning of the previous period. The pro-forma earnings for the three months ended March 31, 2014 and 2013 were adjusted to assume that acquisition-related costs were incurred as of the beginning of the previous period (dollars in thousands, except per share amounts):

 

		For the three months ended March 31,
		2014				2013
		(unaudited)
Operating Data:
Total operating revenue		$	17,436			$	17,297
Total operating expenses			(23,831	)(1)			(9,586	)
Other expenses			(7,000	)			(7,327	)
Net (loss) income			(13,395	)			384
Dividends attributable to preferred and senior common stock			(1,123	)			(1,076	)
Net loss attributable to common stockholders		$	(14,518	)		$	(692	)
Share and Per Share Data:
Basic & diluted loss per share of common stock		$	(0.92	)		$	(0.06	)
Weighted average shares outstanding-basic & diluted			15,746,714				11,230,647

 

(1)	$14.0 million relates to the impairment charge recorded in operating expenses during the three months ended March 31, 2014.

2013 Real Estate Activity

During the three months ended March 31, 2013, we acquired one property, which is summarized below (dollars in thousands):

 

Location		Acquisition Date				Square Footage				Lease Term				Renewal Options		Total Purchase Price				Acquistion Expenses				Annualized Straight Line Rent				Debt Issued
Egg Harbor Township, NJ			3/28/2013				29,257				10 years			1 (5 years)		$	5,650			$	149			$	490			$	3,700

In accordance with ASC 805, we determined the fair value of acquired assets related to the one property acquired during the three months ended March 31, 2013 as follows (in thousands):

 

		Land				Building				Tenant Improvements				In-place Leases				Leasing Costs				Customer Relationships				Total Purchase Price
Egg Harbor Township, NJ		$	1,627			$	2,735			$	282			$	558			$	189			$	259			$	5,650

 

Below is a summary of the total revenue and earnings recognized on the one property acquired during the three months ended March 31, 2013 (dollars in thousands):

 

						For the three months ended March 31, 2013
Location		Acquisition Date				Rental Revenue				Earnings (1)
Egg Harbor Township, NJ			3/28/2013			$	5			$	3
						$	5			$	3

 

(1)	Earnings is calculated as net income less interest expense and acquisition related costs that are required to be expensed under ASC 805.

Future Lease Payments

Future operating lease payments from tenants under non-cancelable leases, excluding tenant reimbursement of expenses, for the remainder of 2014 and each of the five succeeding fiscal years and thereafter is as follows (dollars in thousands):

 

Year				Tenant Lease Payments (1)
Nine Months ending December 31, 2014				$	46,572
2015					59,564
2016					55,853
2017					55,356
2018					53,551
2019					53,776
Thereafter					240,010

 

(1)	Does not include real estate held for sale as of March 31, 2014.

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 property taxes on the respective properties in the event the tenants fail to pay them. The total annual property taxes for all properties owned by us as of March 31, 2014, were $11.0 million.

Intangible Assets

The following table summarizes the carrying value of intangible assets and the accumulated amortization for each intangible asset class (dollars in thousands):

 

		March 31, 2014								December 31, 2013
		Lease Intangibles (1)				Accumulated Amortization (1)				Lease Intangibles				Accumulated Amortization
In-place leases		$	48,526			$	(16,352	)		$	47,442			$	(15,158	)
Leasing costs			31,864				(10,460	)			31,339				(9,323	)
Customer relationships			36,138				(11,432	)			35,739				(10,407	)
		$	116,528			$	(38,244	)		$	114,520			$	(34,888	)

 

(1)	Does not include real estate held for sale as of March 31, 2014.

 

The weighted average amortization periods in years for the intangible assets acquired and liabilities assumed during the three months ended March 31, 2014 and 2013, respectively, were as follows

 

Intangible Assets & Liabilities		2014				2013
In-place leases			11.9				10.2
Leasing costs			11.9				10.2
Customer relationships			16.9				15.2
Below market leases			11.9				—
All intangible assets & liabilities			13.3				11.9

The estimated aggregate amortization expense for the remainder of 2014 and for each of the five succeeding fiscal years and thereafter is as follows (dollars in thousands):

 

Year				Estimated Amortization Expense
Nine Months ending December 31, 2014				$	7,880
2015					9,892
2016					8,995
2017					8,811
2018					8,523
2019					8,515
Thereafter					25,668