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Investments (Tables)

3 Months Ended

Mar. 31, 2019

Schedule of Information about Acquisition Activity

The following table presents information about the Company’s acquisition activity during the three months ended March 31, 2019:

(Dollar amounts in thousands)	Total Investments
Ownership type	Fee Interest
Number of properties acquired	51

Allocation of Purchase Price:
Land and improvements	$	36,375
Building and improvements		79,291
Construction in progress ⁽¹⁾		1,135
Intangible lease assets		3,818
Assets acquired		120,620

Intangible lease liabilities		(117	)
Liabilities assumed		(117	)
Purchase price (including acquisition costs)	$	120,503

(1)	Represents amounts incurred at and subsequent to acquisition and includes approximately $25,000 of capitalized interest expense.

The following table presents information about the Company’s acquisition activity during the three months ended March 31, 2018:

(Dollar amounts in thousands)	Total Investments
Ownership type	Fee Interest
Number of properties acquired	28

Allocation of Purchase Price:
Land and improvements	$	18,754
Building and improvements		38,105
Construction in progress ⁽¹⁾		4,533
Leasehold improvement		28
Intangible lease assets		2,679
Assets acquired		64,099

Intangible lease liabilities		(495	)
Liabilities assumed		(495	)
Purchase price (including acquisition costs)	$	63,604

(1)	Represents amounts incurred at and subsequent to acquisition and includes $0.1 million of capitalized interest expense.

Schedule of Gross Investment Activity

During the three months ended March 31, 2019 and 2018, the Company had the following gross investment activity:

(Dollar amounts in thousands)	Number of Investment Locations	Dollar Amount of Investments
Gross investments, January 1, 2018	508	$	939,072
Acquisitions of and additions to real estate investments	28		64,099
Sales of investments in real estate	(6)		(7,152	)
Provisions for impairment of real estate ⁽¹⁾			(1,861	)
Principal collections on direct financing lease receivables			(18	)
Gross investments, March 31, 2018			994,140
Less: Accumulated depreciation and amortization⁽²⁾			(31,310	)
Net investments, March 31, 2018	530	$	962,830

Gross investments, January 1, 2019	677	$	1,394,549
Acquisitions of and additions to real estate investments ⁽³⁾	51		123,896
Sales of investments in real estate	(7)		(10,651	)
Relinquishment of properties at end of ground lease term	(1)		(241	)
Provisions for impairment of real estate ⁽⁴⁾			(1,440	)
Investments in loans receivable⁽⁵⁾			207
Principal collections on and settlements of loans and direct financing lease receivables ⁽³⁾	(9)		(5,769	)
Other			(501	)
Gross investments, March 31, 2019			1,500,050
Less: Accumulated depreciation and amortization⁽²⁾			(60,230	)
Net investments, March 31, 2019	711	$	1,439,820

(1)	During the three months ended March 31, 2018, the Company identified and recorded provisions for impairment at 3 vacant and 4 tenanted properties. The amount in the table above excludes approximately $12,000 related to intangible lease liabilities for these assets.

(2)	Includes $45.3 million and $20.4 million of accumulated depreciation as of March 31, 2019 and 2018, respectively.

(3)	During the three months ended March 31, 2019, the Company acquired nine properties that had secured one of its loans receivable for a purchase price of $8.2 million. The loan receivable securing these properties had a carrying value of $5.7 million prior to its settlement.

(4)	During the three months ended March 31, 2019, the Company identified and recorded provisions for impairment at 1 vacant and 3 tenanted properties.

(5)	Relates to financing at one property securing a $3.4 million development construction loan as the land at this location is included in gross investments on January 1, 2019.

Schedule of Loans Receivable

The Company’s loans receivable as of March 31, 2019 and December 31, 2018 are summarized as follows (dollar amounts in thousands):

						Principal Outstanding
Loan Type	Monthly Payment	Number of Secured Properties		Interest Rate	Maturity Date	March 31, 2019		December 31, 2018
Mortgage ⁽¹⁾⁽²⁾	Interest only		2	10.00%	2021	$	2,376	$	2,376
Mortgage ⁽¹⁾	Interest only		9	7.55%	2019		—		5,748
Mortgage ⁽¹⁾⁽²⁾	Interest only		1	5.25%	2019		3,500		3,500
Development construction ⁽²⁾⁽³⁾	Principal + Interest		1	8.00%	2058		3,436		3,230
Net investment						$	9,312	$	14,854

(1)	Loan requires monthly payments of interest only with a balloon payment due at maturity.

(2)	Loan allows for prepayments in whole or in part without penalty.

(3)

Loan is secured by a mortgage on the building and improvements at the development property. The Company provides periodic funding to the borrower under this arrangement as construction progresses. Monthly payments are made based on a 40-year amortization schedule with any outstanding principal balance due at maturity or earlier upon the occurrence of certain other events. The mortgaged property is subject to a ground lease arrangement with the Company, as landlord, and borrower, as tenant. If the tenant does not exercise its right to renew the ground lease at the end of its initial 15-year term, the balance of the mortgage loan receivable will be forgiven, and the Company will retain title to the mortgaged property.

Scheduled Principal Payments Due to be Received under Loans Receivable

Scheduled principal payments due to be received under the Company’s loans receivable as of March 31, 2019 are as follows:

(in thousands)	Loans Receivable
April 1, 2019 - December 31, 2019	$	3,510
2020		14
2021		2,391
2022		17
2023		18
Thereafter		3,362
Total	$	9,312

Schedule of Direct Financing Lease Receivables

The components of the investments accounted for as direct financing lease receivables were as follows:

(in thousands)	March 31, 2019			December 31, 2018
Minimum lease payments receivable	$	4,117		$	4,198
Estimated unguaranteed residual value of leased assets		270			270
Unearned income from leased assets		(1,756	)		(1,817	)
Net investment	$	2,631		$	2,651

Scheduled Future Minimum Non-cancelable Base Rental Payments Under Direct Financing Lease Receivables

Scheduled future minimum non-cancelable base rental payments due to be received under the direct financing lease receivables as of March 31, 2019 are as follows:

(in thousands)	Future Minimum Base Rental Payments
April 1, 2019 - December 31, 2019	$	251
2020		338
2021		340
2022		345
2023		347
Thereafter		2,496
Total	$	4,117

Activity in Real Estate Investments and Intangible Lease Liabilities Held for Sale

The following table shows the activity in real estate investments held for sale and intangible lease liabilities held for sale during the three months ended March 31, 2019 and 2018.

(Dollar amounts in thousands)	Number of Properties			Real Estate Investments			Intangible Lease Liabilities			Net Carrying Value
Held for sale balance, December 31, 2017		3		$	4,173		$	(129	)	$	4,044
Transfers to held for sale classification		4			5,885			—			5,885
Sales		(3	)		(4,173	)		129			(4,044	)
Transfers to held and used classification		—			—			—			—
Held for sale balance, March 31, 2018		4		$	5,885		$	—		$	5,885

Held for sale balance, December 31, 2018		—		$	—		$	—		$	—
Transfers to held for sale classification		2			3,765			—			3,765
Sales		—			—			—			—
Transfers to held and used classification		—			—			—			—
Held for sale balance, March 31, 2019		2		$	3,765		$	—		$	3,765

Schedule of External Customers by Geographic Areas

The following table lists the states where the rental revenue from the properties in that state during the periods presented represented 10% or more of total rental revenue in the Company’s consolidated statements of operations and comprehensive income:

	Three months ended March 31,
State	2019	2018
Georgia	11.1%	12.0%
Texas	12.6%	13.6%

Schedule of Intangible Assets and Liabilities

Intangible assets and liabilities consisted of the following as of the dates presented:

	March 31, 2019						December 31, 2018
(in thousands)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Intangible assets:
In-place leases	$	53,476	$	10,603	$	42,873	$	50,317	$	9,498	$	40,819
Intangible market lease assets		15,656		4,669		10,987		16,104		4,144		11,960
Total intangible assets	$	69,132	$	15,272	$	53,860	$	66,421	$	13,642	$	52,779

Intangible market lease liabilities	$	12,322	$	2,248	$	10,074	$	14,894	$	3,278	$	11,616

Summary of Remaining Weighted Average Amortization Period for Intangible Assets and Liabilities

The remaining weighted average amortization period for the Company’s intangible assets and liabilities as of March 31, 2019, by category and in total, were as follows:

	Years Remaining
In-place leases		10.5
Intangible market lease assets		8.9
Total intangible assets		10.1

Intangible market lease liabilities		17.6

Summary of Amortization and Accretion Recognized

The following table discloses amounts recognized within the consolidated statements of operations and comprehensive income related to amortization of in-place leases, amortization and accretion of above- and below-market lease assets and liabilities, net and the amortization and accretion of above- and below-market ground leases for the periods presented:

	Three months ended March 31,
(in thousands)	2019		2018
Amortization of in-place leases ⁽¹⁾	$	1,332	$	1,229
Amortization (accretion) of market lease intangibles, net ⁽²⁾		244		280
Amortization (accretion) of above- and below-market ground lease intangibles, net ⁽³⁾		—		(141	)

(1)	Reflected within depreciation and amortization expense.

(2)	Reflected within rental revenue.

(3)	Reflected within property expenses.

Summary of Projected Amortization Expenses for Next Five Years

The following table provides the projected amortization of in-place lease assets to depreciation and amortization expense, net amortization of above- and below-market lease intangibles to rental revenue, and net amortization of above- and below-market ground lease intangibles into property expenses for the next five years:

(in thousands)	April 1 - December 31, 2019			2020			2021			2022			2023
In-place lease assets	$	3,836		$	4,712		$	4,515		$	4,387		$	4,036
Adjustment to amortization expense	$	3,836		$	4,712		$	4,515		$	4,387		$	4,036

Above-market lease assets	$	(1,035	)	$	(1,319	)	$	(1,300	)	$	(1,299	)	$	(1,267	)
Below-market lease liabilities		431			553			553			554			502
Net adjustment to rental revenue	$	(604	)	$	(766	)	$	(747	)	$	(745	)	$	(765	)