Quarterly report pursuant to Section 13 or 15(d)

Real Estate and Intangible Assets

v3.22.1
Real Estate and Intangible Assets
 3 Months Ended
Mar. 31, 2022
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 March 31, 2022 and December 31, 2021, respectively (dollars in thousands):
March 31, 2022 December 31, 2021
Real estate:
Land (1) $ 150,589  $ 149,773 
Building and improvements 1,019,020  1,004,362 
Tenant improvements 71,319  71,123 
Accumulated depreciation (276,612) (266,672)
Real estate, net $ 964,316  $ 958,586 
(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 $9.9 million and $10.7 million for the three months ended March 31, 2022 and 2021, respectively.
Acquisitions

We acquired two properties during the three months ended March 31, 2022, and one property during the three months ended March 31, 2021. The acquisitions are summarized below (dollars in thousands):

Three Months Ended Aggregate Square Footage Weighted Average Lease Term Aggregate Purchase Price Aggregate Capitalized Acquisition Costs
March 31, 2022 (1) 136,000  10.2 years $ 13,463  $ 163 
March 31, 2021 (2) 180,152  14.2 years $ 11,146  $ 146 
(1)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.
(2)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 and had 14.2 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 three months ended March 31, 2022 and 2021, respectively, as follows (dollars in thousands):

Three Months Ended March 31, 2022 Three Months Ended March 31, 2021
Acquired assets and liabilities Purchase price Purchase price
Land $ 816  $ 258 
Building 10,250  8,759 
Tenant Improvements 196  88 
In-place Leases 847  817 
Leasing Costs 525  803 
Customer Relationships 567  294 
Above Market Leases 279  127 
Below Market Leases (17) (1) — 
Total Purchase Price $ 13,463  $ 11,146 
(1)This amount includes $17 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 nine months ending December 31, 2022 and each of the five succeeding fiscal years and thereafter is as follows (dollars in thousands):

Year Tenant Lease Payments
Nine Months Ending 2022 $ 88,866 
2023 110,944 
2024 104,954 
2025 101,197 
2026 92,659 
2027 74,431 
Thereafter 284,547 
$ 857,598 

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 months ended March 31, 2022 and 2021, respectively (dollars in thousands):

For the three months ended March 31,
(Dollars in Thousands)
Lease revenue reconciliation 2022 2021 $ Change % Change
Fixed lease payments $ 31,332  $ 30,757  $ 575  1.9  %
Variable lease payments 4,199  3,920  279  7.1  %
$ 35,531  $ 34,677  $ 854  2.5  %

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 March 31, 2022 and December 31, 2021, respectively (dollars in thousands):

March 31, 2022 December 31, 2021
Lease Intangibles Accumulated Amortization Lease Intangibles Accumulated Amortization
In-place leases $ 106,738  $ (64,497) $ 105,891  $ (62,604)
Leasing costs 82,974  (45,477) 81,487  (43,982)
Customer relationships 72,489  (39,572) 71,922  (38,220)
$ 262,201  $ (149,546) $ 259,300  $ (144,806)
Deferred Rent Receivable/(Liability) Accumulated (Amortization)/Accretion Deferred Rent Receivable/(Liability) Accumulated (Amortization)/Accretion
Above market leases $ 15,817  $ (11,718) $ 15,538  $ (11,520)
Below market leases and deferred revenue (51,581) 22,284  (48,241) 21,471 

Total amortization expense related to in-place leases, leasing costs and customer relationship lease intangible assets was $4.7 million and $6.0 million for the three months ended March 31, 2022 and 2021, 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 $0.2 million for the three months ended March 31, 2022 and 2021, 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 $0.8 million and $1.6 million for the three months ended March 31, 2022 and 2021, 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 three months ended March 31, 2022 and 2021, respectively, were as follows:

Intangible Assets & Liabilities 2022 2021
In-place leases 10.7 14.2
Leasing costs 10.7 14.2
Customer relationships 16.1 19.2
Above market leases 12.7 14.2
Below market leases 7.1 0.0
All intangible assets & liabilities 11.9 15.4