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)
9 Months Ended
Sep. 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 September 30, 2018 and December 31, 2017, excluding real estate held for sale as of September 30, 2018 and December 31, 2017 (dollars in thousands):
 
 
 
September 30, 2018

December 31, 2017
Real estate:
 
 
 
 
Land
 
$
122,890

 
$
121,783

Building and improvements
 
726,690

 
708,948

Tenant improvements
 
63,897

 
63,122

Accumulated depreciation
 
(170,824
)
 
(149,417
)
Real estate, net
 
$
742,653

 
$
744,436


Acquisitions
We acquired two properties during the nine months ended September 30, 2018, and five properties during the nine months ended September 30, 2017. The acquisitions are summarized below (dollars in thousands):

Nine Months Ended
 
Square Footage
 
Lease Term
 
Purchase Price
 
Acquisition Expenses
 
Annualized GAAP Rent
 
Debt Issued or Assumed
 
September 30, 2018
(1)
285,254

 
11.7 Years
 
$
22,800

 
$
225

(3)
$
1,851

 
$
4,745

(4)
September 30, 2017
(2)
666,451


10.7 Years
 
94,421

 
1,171

(3)
10,776

 
54,887

(5)

(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. On September 20, 2018, we acquired a 157,810 square foot property in Columbus, Ohio for $8.5 million. We issued $4.7 million of mortgage debt in connection with this acquisition. The annualized GAAP rent on the 15.0 year lease is $0.8 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. On July 7, 2017, we acquired a 300,000 square foot property in Philadelphia, Pennsylvania for $27.1 million. We issued $14.9 million of mortgage debt with a fixed interest rate of 3.75% in connection with this acquisition. The annualized GAAP rent on the 15.4 year lease is $2.3 million. On July 31, 2017, we acquired a 306,435 square foot, three property portfolio, located in Maitland, Florida for $51.6 million. We issued $28.8 million of mortgage debt with a fixed interest rate of 3.89% in connection with this acquisition. The portfolio has a weighted average lease term of 8.6 years and annualized GAAP rent of $6.8 million.
(3)
We accounted for these transactions under ASU 2017-01, “Clarifying the Definition of a Business.” As a result, we treated our acquisitions during the nine months ended September 30, 2018 and 2017 as asset acquisitions rather than business combinations. As a result of this treatment, we capitalized $0.2 million and $1.2 million, respectively, of acquisition costs that would otherwise have been expensed under business combination treatment.
(4)
We entered into an interest rate swap in connection with $4.7 million of issued debt on our Columbus, Ohio acquisition, pursuant to which we will pay our counterparty a fixed interest rate of 3.22%, and receive a variable interest rate of one month LIBOR from our counterparty. Our total interest rate on this debt is fixed at 5.32%. 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.
(5)
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 September 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 nine months ended September 30, 2018 and 2017 as follows (dollars in thousands):

 
 
Nine months ended September 30, 2018
 
Nine months ended September 30, 2017
Acquired assets and liabilities
 
Purchase price
 
Purchase price
Land
 
$
1,140

 
$
15,137

Building
 
17,849

 
51,186

Tenant Improvements
 
776

 
6,060

In-place Leases
 
1,249

 
9,516

Leasing Costs
 
1,245

 
5,083

Customer Relationships
 
792

 
6,851

Above Market Leases
 
49

 
1,916

Below Market Leases
 
(300
)
 
(1,769
)
Discount on Assumed Debt
 

 
399

Fair Value of Interest Rate Swap Assumed
 

 
42

Total Purchase Price
 
$
22,800

 
$
94,421

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

Nine Months Ended
 
Aggregate Square Footage
 
Weighted Average Lease Term
 
Aggregate Annualized GAAP Rent
 
Aggregate Tenant Improvement
 
Aggregate Leasing Commissions
September 30, 2018
(1)
184,441

 
1.6 years
 
$
391

 
$

 
$
14

September 30, 2017
 
577,471


8.9 years

4,062


1,181


475



(1)
One of the new leases we entered into is on our South Hadley, Massachusetts property which is classified as held for sale on the condensed consolidated balance sheets as of September 30, 2018.
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 September 30, 2018 and December 31, 2017, excluding real estate held for sale, as of September 30, 2018 and December 31, 2017 (dollars in thousands):

 
 
September 30, 2018

December 31, 2017
 
 
Lease Intangibles
 
Accumulated Amortization
 
Lease Intangibles
 
Accumulated Amortization
In-place leases
 
$
81,377

 
$
(38,767
)
 
$
80,355

 
$
(33,201
)
Leasing costs
 
56,878

 
(26,738
)
 
55,695

 
(23,016
)
Customer relationships
 
59,502

 
(22,909
)
 
58,892

 
(19,798
)
 
 
$
197,757

 
$
(88,414
)
 
$
194,942

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

 
$
(8,679
)
 
$
14,425

 
$
(7,962
)
Below market leases and deferred revenue
 
(27,338
)
 
11,988

 
(26,725
)
 
10,475

 
 
$
(12,827
)
 
$
3,309

 
$
(12,300
)
 
$
2,513

Weighted Average Amortization Periods
The weighted average amortization periods in years for the intangible assets acquired during the nine months ended September 30, 2018 and 2017 were as follows:
 
Intangible Assets & Liabilities
 
2018
 
2017
In-place leases
 
13.0
 
9.7
Leasing costs
 
13.0
 
9.7
Customer relationships
 
21.2
 
12.7
Above market leases
 
9.8
 
10.2
Below market leases
 
15.0
 
9.4
All intangible assets & liabilities
 
15.0
 
10.4