REAL ESTATE AND RELATED LEASE INTANGIBLES, NET

3 Months Ended

Mar. 31, 2017

Real Estate [Abstract]

REAL ESTATE AND RELATED LEASE INTANGIBLES, NET

5. REAL ESTATE AND RELATED LEASE INTANGIBLES, NET

The following tables present additional detail related to our real estate portfolio ($ in thousands):

	March 31, 2017			December 31, 2016
Land	$	144,085		$	143,286
Building	645,535			646,372
In-place leases and other intangibles	155,160			154,687
Less: Accumulated depreciation and amortization	(130,427		)	(122,007		)
Real estate and related lease intangibles, net	$	814,353		$	822,338
Below market lease intangibles, net (other liabilities)	$	(16,428	)	$	(16,506	)

The following table presents depreciation and amortization expense on real estate recorded by the Company ($ in thousands):

	Three Months Ended March 31,
	2017		2016
Depreciation expense (1)	$	5,720	$	6,104
Amortization expense	2,849		3,693
Total real estate depreciation and amortization expense	$	8,569	$	9,797

(1) Depreciation expense on the consolidated statements of income also includes $23 thousand and $5 thousand of depreciation on corporate fixed assets for the three months ended March 31, 2017 and 2016, respectively.

The Company’s intangible assets are comprised of in-place leases, favorable leases compared to market leases and other intangibles. At March 31, 2017, gross intangible assets totaled $155.2 million with total accumulated amortization of $51.2 million, resulting in net intangible assets of $104.0 million, including $6.8 million of unamortized favorable lease intangibles which are included in real estate and related lease intangibles, net on the consolidated balance sheets. At December 31, 2016, gross intangible assets totaled $154.7 million with total accumulated amortization of $48.1 million, resulting in net intangible assets of $106.6 million, including $7.0 million of unamortized favorable lease intangibles which are included in real estate and related lease intangibles, net on the consolidated balance sheets. For the three months ended March 31, 2017 and 2016, the Company recorded a net increase (reduction) in operating lease income of $(0.3) million and $0.4 million, respectively, for amortization of above market lease intangibles acquired. For the three months ended March 31, 2017 and 2016, the Company recorded a net increase (reduction) in operating lease income of $0.3 million and $(0.4) million, respectively, for amortization of below market lease intangibles acquired.

The following table presents expected amortization expense during the next five years and thereafter related to the acquired in-place lease intangibles for property owned as of March 31, 2017 ($ in thousands):

Period Ending December 31,	Amount
2017 (last 9 months)	$	8,964
2018	7,650
2019	7,650
2020	7,650
2021	6,824
Thereafter	65,270
Total	$	104,008

There were $0.6 million and $0.7 million of unbilled rent receivables included in other assets on the consolidated balance sheets as of March 31, 2017 and December 31, 2016, respectively.

There was unencumbered real estate of $63.1 million and $70.3 million as of March 31, 2017 and December 31, 2016, respectively.

The following is a schedule of non-cancellable, contractual, future minimum rent under leases (excluding property operating expenses paid directly by tenant under net leases or rent escalations under other leases from tenants) at March 31, 2017 ($ in thousands):

Period Ending December 31,	Amount
2017 (last 9 months)	$	55,786
2018	70,931
2019	65,911
2020	62,574
2021	59,407
Thereafter	505,373
Total	$	819,982

Acquisitions

During the three months ended March 31, 2017, the Company acquired the following properties ($ in thousands):

Acquisition Date	Type	Primary Location(s)	Purchase Price		Ownership Interest (1)
February 2017	Net Lease	Carmi, IL	$	1,411	100.0%
February 2017	Net Lease	Peoria, IL	1,183		100.0%
March 2017	Net Lease	Ridgedale, MO	1,298		100.0%
Total			$	3,892

(1) Properties were consolidated as of acquisition date.

On October 1, 2016, the Company early adopted Accounting Standards Update (“ASU”) 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”). As a result of this adoption, acquisitions of real estate do not meet the revised definition of a business and are treated as asset acquisitions rather than business combinations. The measurement of assets and liabilities acquired will no longer be recorded at fair value and the Company will now allocate purchase consideration based on relative fair values. Real estate acquisition costs are no longer expensed as incurred and will now be capitalized as a component of the cost of the assets acquired.

The purchase prices were allocated to the net assets acquired, which also include asset acquisitions occurring on or after October 1, 2016, during the three months ended March 31, 2017, as follows ($ in thousands):

	Purchase Price Allocation
Land	$	744
Building	2,777
Intangibles	559
Below Market Lease Intangibles	(188		)
Total purchase price	$	3,892

The weighted average amortization period for intangible assets acquired during the three months ended March 31, 2017 was 34.2 years. The Company recorded $35,946 in revenues and $35,946 in earnings (losses) from its 2017 acquisitions for the three months ended March 31, 2017, which are included in our consolidated statements of income.

No properties were acquired during the three months ended March 31, 2016.

Sales

The Company sold the following properties during the three months ended March 31, 2017 ($ in thousands):

Sales Date	Type	Primary Location(s)	Net Sales Proceeds		Net Book Value		Realized Gain/(Loss)		Properties	Units Sold	Units Remaining
Various	Condominium	Las Vegas, NV	$	4,200	$	2,320	$	1,880	—	12	47
Various	Condominium	Miami, FL	2,125		1,674		451		—	6	82
Totals			$	6,325	$	3,994	$	2,331

The Company sold the following properties during the three months ended March 31, 2016 ($ in thousands):

Sales Date	Type	Primary Location(s)	Net Sales Proceeds		Net Book Value		Realized Gain/(Loss)		Properties	Units Sold	Units Remaining
Mar 2016	Net Lease	Rockland, MA	$	7,922	$	7,211	$	711	1	—	—
Various	Condominium	Las Vegas, NV	8,404		4,417		3,987		—	17	115
Various	Condominium	Miami, FL	5,963		4,566		1,397		—	21	132
Totals			$	22,289	$	16,194	$	6,095

 

Real Estate Sold or Classified as Held for Sale

On January 1, 2014, the Company early adopted ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, and as the properties sold or classified as real estate held for sale in the three months ended March 31, 2017 and 2016 did not represent a strategic shift (as the Company is not entirely exiting markets or property types), they have not been reflected as part of discontinued operations.