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Leases
 6 Months Ended
Jun. 30, 2024
Leases [Abstract]  
Leases Leases
Lessor – Operating leases
The Company’s rental revenue primarily consists of rent earned from operating leases at the Company’s net lease properties which consists of fixed annual rent that escalates annually throughout the term of the applicable leases, and the tenant is generally responsible for all property-related expenses, including taxes, insurance, and maintenance. The Company's net lease properties are each leased to a single tenant.
The following table details the components of operating lease income from leases in which the Company is the lessor.
Three Months EndedSix Months Ended
June 30, 2024June 30, 2023June 30, 2024June 30, 2023
Base rent(1)
$39,108 $37,901 $79,773 $72,799 
Straight-line rental revenue, net(2)
4,006 4,356 9,118 8,518 
Variable lease payments(3)
5,541 2,663 10,657 9,609 
Amortization of above/below market lease intangibles62 34 123 69 
Total Rental revenue$48,717 $44,954 $99,671 $90,995 
__________________
(1)Base rent consists of fixed lease payments.
(2)Represents lease income related to the excess (deficit) of straight-line rental revenue over fixed lease payments.
(3)Consists of reimbursement of common area maintenance (“CAM”) and real estate taxes, and amortization of tenant inducements.
The following table presents the undiscounted future minimum rents the Company expects to receive for its net lease properties classified as operating leases as of June 30, 2024.
YearFuture Minimum Rents
2024 (remaining)$80,022 
2025161,762 
2026164,513 
2027166,926 
2028169,431 
2029169,888 
Thereafter1,433,226 
Total$2,345,768 
Lessor – Financing receivables
In accordance with ASC 842, certain of the Company’s sales-type lease contracts are primarily accounted for as failed-sale leaseback transactions and were recorded as an Investment in leases - Financing receivables. During the six months ended June 30, 2024, the Company executed two sale-leaseback transactions that were accounted for as failed sale-leasebacks for $40,257. During the six months ended June 30, 2023, the Company did not execute any sale-leaseback transactions that were accounted for as failed-sale leasebacks. During the three and six months ended June 30, 2024, the Company recognized interest income of $15,037 and $29,571, respectively. During the three and six months ended June 30, 2023, the Company recognized interest income of $13,960 and $27,629, respectively. Interest income is recognized on an effective interest basis at a constant rate of return over the term of the applicable leases. Cash received under these contracts was $21,313 and $22,700 during the six months ended June 30, 2024 and 2023, respectively.
All of the lease payments are triple net basis to the tenant and the Company has rights in accordance with the individual lease agreements to protect the value of our leased properties. As of June 30, 2024, the future minimum payments of sales-type lease receivables were as follows:
YearFuture Minimum Payments
2024 (remaining)$25,602 
202551,969 
202652,954 
202754,081 
202856,401 
202957,465 
Thereafter7,132,524 
Total lease payment receivable7,430,996 
Less deferred interest income6,801,041 
Less allowance for credit losses17,380 
Total Investment in leases - Financing receivables$612,575 
The following table reflects the change to the allowance for credit losses on our real estate portfolio for the six months ended June 30, 2024 and 2023:
Six Months Ended
June 30, 2024June 30, 2023
Balance, beginning of period$16,638 $— 
Initial allowance upon adoption— 7,157 
Current period change in credit allowance742 816 
Balance, end of period$17,380 $7,973 
We assess the credit quality of our investments through the credit ratings of the lessee. The credit quality indicators are reviewed by us on a quarterly basis as of quarter-end. In instances where the lessee does not have a public credit rating, we may use either a comparable proxy company or the overall corporate credit rating, as applicable. We also use this credit rating to determine the probability of default (“PD”) when estimating credit losses for each investment.
The following tables detail the amortized cost basis of our investments by the credit quality indicator as of June 30, 2024 and December 31, 2023:
June 30, 2024
Ba1
Baa2B2
Caa2
Total
Investment in leases - Financing Receivables
$— $58,047 $358,768 $213,140 $629,955 
December 31, 2023
Ba1
Baa2B2Caa2Total
Investment in leases - Financing Receivables
$204,364 $52,247 $111,803 $210,914 $579,328 
Purchase Option Provisions
Certain of the Company’s leases include purchase option provisions. The provisions vary by agreement but generally allow the lessee to purchase the property during a specified period for the Company’s gross investment plus a specified proportion of appreciation. The Company expects that the purchase price will be greater than its net investment in the property at the time of potential exercise by the lessee.
Lessee - DST Program Master Lease
During the year ended December 31, 2023, the Company contributed two industrial assets to the DST as part of the initial DST Program offering. The assets are leased back to the Company by a wholly-owned subsidiary of the Company under the master lease agreement. The following table presents the undiscounted future minimum rent payment obligation of the wholly-owned subsidiary:
YearFuture Minimum Payments
2024 (remaining)$2,239 
20254,478 
20264,478 
20274,478 
20284,636 
20294,885 
Thereafter73,313 
Total$98,507 
Leases Leases
Lessor – Operating leases
The Company’s rental revenue primarily consists of rent earned from operating leases at the Company’s net lease properties which consists of fixed annual rent that escalates annually throughout the term of the applicable leases, and the tenant is generally responsible for all property-related expenses, including taxes, insurance, and maintenance. The Company's net lease properties are each leased to a single tenant.
The following table details the components of operating lease income from leases in which the Company is the lessor.
Three Months EndedSix Months Ended
June 30, 2024June 30, 2023June 30, 2024June 30, 2023
Base rent(1)
$39,108 $37,901 $79,773 $72,799 
Straight-line rental revenue, net(2)
4,006 4,356 9,118 8,518 
Variable lease payments(3)
5,541 2,663 10,657 9,609 
Amortization of above/below market lease intangibles62 34 123 69 
Total Rental revenue$48,717 $44,954 $99,671 $90,995 
__________________
(1)Base rent consists of fixed lease payments.
(2)Represents lease income related to the excess (deficit) of straight-line rental revenue over fixed lease payments.
(3)Consists of reimbursement of common area maintenance (“CAM”) and real estate taxes, and amortization of tenant inducements.
The following table presents the undiscounted future minimum rents the Company expects to receive for its net lease properties classified as operating leases as of June 30, 2024.
YearFuture Minimum Rents
2024 (remaining)$80,022 
2025161,762 
2026164,513 
2027166,926 
2028169,431 
2029169,888 
Thereafter1,433,226 
Total$2,345,768 
Lessor – Financing receivables
In accordance with ASC 842, certain of the Company’s sales-type lease contracts are primarily accounted for as failed-sale leaseback transactions and were recorded as an Investment in leases - Financing receivables. During the six months ended June 30, 2024, the Company executed two sale-leaseback transactions that were accounted for as failed sale-leasebacks for $40,257. During the six months ended June 30, 2023, the Company did not execute any sale-leaseback transactions that were accounted for as failed-sale leasebacks. During the three and six months ended June 30, 2024, the Company recognized interest income of $15,037 and $29,571, respectively. During the three and six months ended June 30, 2023, the Company recognized interest income of $13,960 and $27,629, respectively. Interest income is recognized on an effective interest basis at a constant rate of return over the term of the applicable leases. Cash received under these contracts was $21,313 and $22,700 during the six months ended June 30, 2024 and 2023, respectively.
All of the lease payments are triple net basis to the tenant and the Company has rights in accordance with the individual lease agreements to protect the value of our leased properties. As of June 30, 2024, the future minimum payments of sales-type lease receivables were as follows:
YearFuture Minimum Payments
2024 (remaining)$25,602 
202551,969 
202652,954 
202754,081 
202856,401 
202957,465 
Thereafter7,132,524 
Total lease payment receivable7,430,996 
Less deferred interest income6,801,041 
Less allowance for credit losses17,380 
Total Investment in leases - Financing receivables$612,575 
The following table reflects the change to the allowance for credit losses on our real estate portfolio for the six months ended June 30, 2024 and 2023:
Six Months Ended
June 30, 2024June 30, 2023
Balance, beginning of period$16,638 $— 
Initial allowance upon adoption— 7,157 
Current period change in credit allowance742 816 
Balance, end of period$17,380 $7,973 
We assess the credit quality of our investments through the credit ratings of the lessee. The credit quality indicators are reviewed by us on a quarterly basis as of quarter-end. In instances where the lessee does not have a public credit rating, we may use either a comparable proxy company or the overall corporate credit rating, as applicable. We also use this credit rating to determine the probability of default (“PD”) when estimating credit losses for each investment.
The following tables detail the amortized cost basis of our investments by the credit quality indicator as of June 30, 2024 and December 31, 2023:
June 30, 2024
Ba1
Baa2B2
Caa2
Total
Investment in leases - Financing Receivables
$— $58,047 $358,768 $213,140 $629,955 
December 31, 2023
Ba1
Baa2B2Caa2Total
Investment in leases - Financing Receivables
$204,364 $52,247 $111,803 $210,914 $579,328 
Purchase Option Provisions
Certain of the Company’s leases include purchase option provisions. The provisions vary by agreement but generally allow the lessee to purchase the property during a specified period for the Company’s gross investment plus a specified proportion of appreciation. The Company expects that the purchase price will be greater than its net investment in the property at the time of potential exercise by the lessee.
Lessee - DST Program Master Lease
During the year ended December 31, 2023, the Company contributed two industrial assets to the DST as part of the initial DST Program offering. The assets are leased back to the Company by a wholly-owned subsidiary of the Company under the master lease agreement. The following table presents the undiscounted future minimum rent payment obligation of the wholly-owned subsidiary:
YearFuture Minimum Payments
2024 (remaining)$2,239 
20254,478 
20264,478 
20274,478 
20284,636 
20294,885 
Thereafter73,313 
Total$98,507