Quarterly report pursuant to Section 13 or 15(d)

Real Estate and Intangible Assets

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Real Estate and Intangible Assets
 3 Months Ended
Mar. 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 March 31, 2023 and December 31, 2022, respectively, excluding real estate held for sale as of March 31, 2023 and December 31, 2022 (dollars in thousands):
March 31, 2023 December 31, 2022
Real estate:
Land (1) $ 152,695  $ 152,916 
Building and improvements 1,067,950  1,069,407 
Tenant improvements 64,894  64,974 
Accumulated depreciation (294,773) (286,994)
Real estate, net $ 990,766  $ 1,000,303 
(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 $11.3 million and $9.9 million for the three months ended March 31, 2023 and 2022, respectively.
Acquisitions

We did not acquire any properties during the three months ended March 31, 2023, and acquired two industrial properties during the three months ended March 31, 2022. 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 
(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.

We determined the fair value of assets acquired and liabilities assumed related to the properties acquired during the three months ended March 31, 2022 as follows (dollars in thousands):

Three Months Ended March 31, 2022
Acquired assets and liabilities Purchase price
Land $ 816 
Building 10,250 
Tenant Improvements 196 
In-place Leases 847 
Leasing Costs 525 
Customer Relationships 567 
Above Market Leases 279 
Below Market Leases (17) (1)
Total Purchase Price $ 13,463 
(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, 2023 and each of the five succeeding fiscal years and thereafter is as follows, excluding real estate held for sale as of March 31, 2023 (dollars in thousands):

Year Tenant Lease Payments
Nine Months Ending December 31, 2023 $ 87,845 
2024 112,991 
2025 109,942 
2026 102,756 
2027 85,936 
2028 70,416 
Thereafter 299,003 

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

For the three months ended March 31,
(Dollars in Thousands)
Lease revenue reconciliation 2023 2022 $ Change % Change
Fixed lease payments $ 32,141  $ 31,332  $ 809  2.6  %
Variable lease payments 4,413  4,199  214  5.1  %
$ 36,554  $ 35,531  $ 1,023  2.9  %

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

March 31, 2023 December 31, 2022
Lease Intangibles Accumulated Amortization Lease Intangibles Accumulated Amortization
In-place leases $ 104,394  $ (64,967) $ 104,394  $ (63,240)
Leasing costs 85,162  (46,807) 85,038  (45,501)
Customer relationships 69,485  (39,489) 69,586  (38,655)
$ 259,041  $ (151,263) $ 259,018  $ (147,396)
Deferred Rent Receivable/(Liability) Accumulated (Amortization)/Accretion Deferred Rent Receivable/(Liability) Accumulated (Amortization)/Accretion
Above market leases $ 14,637  $ (11,334) $ 15,371  $ (11,909)
Below market leases and deferred revenue (64,346) 25,547  (66,138) 26,141 

Total amortization expense related to in-place leases, leasing costs and customer relationship lease intangible assets was $4.1 million and $4.7 million for the three months ended March 31, 2023 and 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 $0.2 million and $0.2 million for the three months ended March 31, 2023 and 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 $1.9 million and $0.8 million for the three months ended March 31, 2023 and 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 three months ended March 31, 2022, were as follows:

Intangible Assets & Liabilities March 31, 2022
In-place leases 10.7
Leasing costs 10.7
Customer relationships 16.1
Above market leases 12.7
Below market leases 7.1
All intangible assets & liabilities 11.9