Quarterly report pursuant to Section 13 or 15(d)

Real Estate and Intangible Assets (Tables)

v3.10.0.1
Real Estate and Intangible Assets (Tables)
6 Months Ended
Jun. 30, 2018
Real Estate [Abstract]  
Components of Investments in Real Estate
The following table sets forth the components of our investments in real estate as of June 30, 2018 and December 31, 2017, excluding real estate held for sale as of June 30, 2018 and December 31, 2017 (dollars in thousands):
 
 
 
June 30, 2018

December 31, 2017
Real estate:
 
 
 
 
Land
 
$
122,010

 
$
121,783

Building and improvements
 
719,603

 
708,948

Tenant improvements
 
63,736

 
63,122

Accumulated depreciation
 
(163,349
)
 
(149,417
)
Real estate, net
 
$
742,000

 
$
744,436


Acquisitions
We acquired one property during the six months ended June 30, 2018, and one property during the six months ended June 30, 2017. Both acquisitions are summarized below (dollars in thousands):

Six Months Ended
 
Square Footage
 
Lease Term
 
Purchase Price
 
Acquisition Expenses
 
Annualized GAAP Rent
 
Debt Issued or Assumed
 
June 30, 2018
(1)
127,444

 
9.8 Years
 
$
14,341

 
$
91

(3)
$
1,087

 
$

 
June 30, 2017
(2)
60,016


8.5 Years
 
15,697

 
247

(3)
1,680

 
11,179

(4)

(1)
On March 9, 2018, we acquired a 127,444 square foot property in Vance, Alabama for $14.3 million. The annualized GAAP rent on the 9.8 year lease is $1.1 million.
(2)
On June 22, 2017, we acquired a 60,016 square foot property in Conshohocken, Pennsylvania for $15.7 million. We assumed $11.2 million of mortgage debt. The annualized GAAP rent on the 8.5 year lease is $1.7 million.
(3)
We accounted for this transaction under ASU 2017-01, “Clarifying the Definition of a Business.” As a result, we treated our acquisitions during the six months ended June 30, 2018 and 2017 as asset acquisitions rather than business combinations. As a result of this treatment, we capitalized $0.1 million and $0.2 million, respectively, of acquisition costs that would otherwise have been expensed under business combination treatment.
(4)
We assumed an interest rate swap in connection with $11.2 million of assumed debt on our Conshohocken, Pennsylvania acquisition, pursuant to which we will pay our counterparty a fixed interest rate of 1.80%, and receive a variable interest rate of one month LIBOR from our counterparty. Our total interest rate on this debt is fixed at 3.55%. The interest rate swap had a fair value of $0.04 million upon the date of assumption, and subsequently increased in value to $0.7 million at June 30, 2018. We have elected to treat this interest rate swap as a cash flow hedge, and all changes in fair market value will be recorded to accumulated other comprehensive income on the consolidated balance sheets.
Fair Value of Assets Acquired and Liabilities Assumed
We determined the fair value of assets acquired and liabilities assumed related to the properties acquired during the six months ended June 30, 2018 and 2017 as follows (dollars in thousands):

 
 
Six months ended June 30, 2018
 
Six months ended June 30, 2017
Acquired assets and liabilities
 
Purchase price
 
Purchase price
Land
 
$
459

 
$
1,996

Building
 
11,609

 
9,975

Tenant Improvements
 
615

 
905

In-place Leases
 
509

 
1,690

Leasing Costs
 
534

 
464

Customer Relationships
 
566

 
1,256

Above Market Leases
 
49

 

Below Market Leases
 

 
(1,030
)
Discount on Assumed Debt
 

 
399

Fair Value of Interest Rate Swap Assumed
 

 
42

Total Purchase Price
 
$
14,341

 
$
15,697

Summary of Lease on Property
During the six months ended June 30, 2018 and 2017, we executed one and one new lease, respectively, which are summarized below (dollars in thousands):

Six Months Ended
 
Aggregate Square Footage
 
Weighted Average Lease Term
 
Aggregate Annualized GAAP Rent
 
Aggregate Tenant Improvement
 
Aggregate Leasing Commissions
June 30, 2018
 
34,441

 
3.6 years
 
$
97

 
$

 
$
14

June 30, 2017
 
83,662


11.3 years

1,683


1,020


445



Carrying Value of Intangible Assets and Accumulated Amortization
The following table summarizes the carrying value of intangible assets, liabilities and the accumulated amortization for each intangible asset and liability class as of June 30, 2018 and December 31, 2017, excluding real estate held for sale, as of June 30, 2018 and December 31, 2017 (dollars in thousands):

 
 
June 30, 2018

December 31, 2017
 
 
Lease Intangibles
 
Accumulated Amortization
 
Lease Intangibles
 
Accumulated Amortization
In-place leases
 
$
80,638

 
$
(36,834
)
 
$
80,355

 
$
(33,201
)
Leasing costs
 
56,147

 
(25,458
)
 
55,695

 
(23,016
)
Customer relationships
 
59,276

 
(21,791
)
 
58,892

 
(19,798
)
 
 
$
196,061

 
$
(84,083
)
 
$
194,942

 
$
(76,015
)
 
 
 
 
 
 
 
 
 
 
 
Deferred Rent Receivable/(Liability)
 
Accumulated (Amortization)/Accretion
 
Deferred Rent Receivable/(Liability)
 
Accumulated (Amortization)/Accretion
Above market leases
 
$
14,511

 
$
(8,439
)
 
$
14,425

 
$
(7,962
)
Below market leases and deferred revenue
 
(26,752
)
 
11,474

 
(26,725
)
 
10,475

 
 
$
(12,241
)
 
$
3,035

 
$
(12,300
)
 
$
2,513


Weighted Average Amortization Periods
The weighted average amortization periods in years for the intangible assets acquired during the six months ended June 30, 2018 and 2017 were as follows:
 
Intangible Assets & Liabilities
 
2018
 
2017
In-place leases
 
9.8
 
8.5
Leasing costs
 
9.8
 
8.5
Customer relationships
 
14.8
 
13.5
Above market leases
 
9.8
 
0.0
Below market leases
 
0.0
 
8.5
All intangible assets & liabilities
 
11.1
 
9.8