NOTE 2. INCOME PROPERTIES

2016 Activity. During the year ended December 31, 2016, the Company acquired ten income properties, seven single-tenant and three multi-tenant, at an aggregate purchase price of approximately $86.7 million. Based on independent third-party purchase price allocation valuations, of the total acquisition cost, approximately $40.4 million was allocated to land, approximately $27.4 million was allocated to buildings and improvements, approximately $20.0 million was allocated to intangible assets pertaining to the in-place lease value and above-market lease value, and approximately $1.1 million was allocated to intangible liabilities pertaining to the below-market lease value. The weighted average amortization period for the intangible assets and liabilities was approximately 14.3 years at the time of acquisition. Acquisitions consisted of the following:

On February 18, 2016, the Company acquired a 4,685 square-foot building situated on approximately 0.37 acres in Dallas, Texas which was 100% occupied and leased to two tenants, anchored by 7-Eleven, Inc. The purchase price was approximately $2.5 million, and as of the acquisition date, the weighted average remaining term of the leases was approximately 8.2 years.

On August 17, 2016, the Company acquired approximately 1.26 acres in Monterey, California, leased to Bank of America. The 1.26 acres contains a 32,692 square-foot building occupied by the tenant. The purchase price was approximately $8.4 million, and as of the acquisition date, the remaining term of the lease was approximately 4.3 years.

On September 15, 2016, the Company acquired four buildings in a sales-leaseback transaction with Bloomin’ Brands, Inc. (the “Bloomin’ Portfolio”) for a total purchase price of approximately $14.9 million as described below. As of the acquisition date, the remaining lease terms were each approximately 15.0 years:

6,528 square-foot building leased to Carrabba’s Italian Grill located in Austin, Texas;

6,176 square-foot building leased to Outback Steakhouse located in Austin, Texas;

7,216 square-foot building leased to Outback Steakhouse located in Charlottesville, Virginia; and

6,297 square-foot building leased to Outback Steakhouse located in Huntersville, North Carolina.

On September 22, 2016, the Company acquired approximately 0.91 acres in Dallas, Texas, leased to CVS Pharmacy (“CVS”). The 0.91 acres contains a 10,340 square-foot building occupied by the tenant. The purchase price was approximately $14.9 million, and as of the acquisition date, the remaining term of the lease was approximately 25.4 years.

On September 29, 2016, the Company acquired a 116,334 square-foot building situated on approximately 10.64 acres in Raleigh, North Carolina, leased to a subsidiary of At Home Group, Inc. The purchase price was approximately $9.2 million, and as of the acquisition date, the remaining term of the lease was approximately 13.0 years.

On October 14, 2016, the Company acquired a 75,841 square-foot building situated on approximately 5.24 acres in Santa Clara, California for a purchase price of approximately $30.0 million. The two-tenant office building is 100% leased to Centrify Corporation and Adesto Technologies, and as of the acquisition date, the remaining lease terms were approximately 4.0 and 7.0 years, respectively.

On November 30, 2016, the Company acquired a 52,474 square-foot building situated on approximately 1.39 acres in Reno, Nevada for a purchase price of approximately $6.9 million. The retail building is 95% leased to Century Theatres, an affiliate of Cinemark, and as of the acquisition date, the remaining term of the lease was approximately 3.0 years.

Nineteen income properties were disposed of during the year ended December 31, 2016 for an aggregate sales price of approximately $74.3 million as described below:

On April 5, 2016, the Company sold its income property leased to American Signature Furniture located in Daytona Beach, Florida, which had 3.8 years remaining on the lease, for a sales price of approximately $5.2 million. The Company’s gain on the sale was approximately $197,000, or $0.02 per share after tax.

On April 6, 2016, the Company sold its income property leased to an affiliate of CVS, located in Sebring, Florida, which was sub-leased to Advanced Auto Parts and had approximately 3.1 years remaining on the lease, for a sales price of approximately $2.4 million. The Company’s loss on the sale was approximately $210,000, or $0.02 per share after tax, which was charged to earnings as an impairment during the three months ended March 31, 2016.

On April 22, 2016, the Company sold its 15,360 square foot self-developed property leased to Teledyne ODI, located in Daytona Beach, Florida, which had approximately 9.3 years remaining on the lease, for a sales price of approximately $3.0 million. The Company’s gain on the sale was approximately $822,000, or $0.09 per share after tax.

On June 22, 2016, the Company sold its income property leased to Lowe’s located in Lexington, North Carolina, which had 9.6 years remaining on the lease, for a sales price of approximately $9.1 million. The Company’s gain on the sale was approximately $344,000, or $0.04 per share after tax.

On September 16, 2016, the Company sold its portfolio of fourteen single-tenant income properties (the “Portfolio Sale”). The properties include nine properties leased to Bank of America, located primarily in Orange County and also in Los Angeles County, California; two properties leased to Walgreens, located in Boulder, Colorado and Palm Bay, Florida; a property leased to a subsidiary of CVS located in Tallahassee, Florida; a ground lease for a property leased to Chase Bank located in Chicago, Illinois; and a ground lease for a property leased to Buffalo Wild Wings in Phoenix, Arizona. The sales price for the Portfolio Sale was approximately $51.6 million, which included the buyer’s assumption of the Company’s existing $23.1 million mortgage loan secured by the fourteen properties. The Portfolio Sale resulted in a net gain of approximately $11.1 million, or approximately $1.20 per share, after tax, during the third quarter of 2016, with a loss due to additional legal costs of approximately $82,000 recognized in the fourth quarter of 2016 for a final net gain of approximately $11.0 million. The Company’s net gain on the Portfolio Sale of approximately $11.1 million consists of approximately $11.4 million, which is included in gain on disposition of assets, offset by approximately $367,000 of unamortized loan costs on the $23.1 million mortgage loan which were written off and included in interest expense on the consolidated statement of operations.

On September 30, 2016, the Company sold its income property leased to PNC Bank, N.A. located in Altamonte Springs, Florida, which was vacant and had approximately 3.1 years remaining on the lease, for a sales price of approximately $3.0 million. The Company’s loss on the sale was approximately $922,000, or $0.10 per share after tax, of which approximately $942,000 was previously recognized as an impairment charge during the three months ended June 30, 2016, with the difference of approximately $20,000 included in gain on disposition of assets during the three months ended September 30, 2016. The impairment charge of approximately $942,000 is described in Note 8, “Impairment of Long-Lived Assets.”

On April 5, 2016, the Company entered into a 15-year lease with 24 Hour Fitness for the anchor space at The Grove property located in Winter Park, Florida. The lease is for approximately 40,000 square feet, or 36%, of the 112,000 square foot multi-tenant retail center. On July 6, 2016, the Company funded approximately $4.0 million into an escrow account for customary tenant improvements for the build out of the space to be occupied by 24 Hour Fitness. 24 Hour Fitness began drawing funds from escrow in September of 2016, and continued doing so in accordance with the lease as construction progressed. As of December 31, 2016, approximately $3.6 million of construction has been funded from the escrow account, leaving a remaining cash commitment of approximately $375,000. The balance was funded during January of 2017, 24 Hour Fitness completed construction, and the grand opening took place on February 4, 2017.

2015 Activity. During the year ended December 31, 2015, the Company acquired four income properties, two single-tenant, one multi-tenant, and one vacant outparcel adjacent to one of our multi-tenant properties, at an aggregate acquisition cost of approximately $76.5 million, for an aggregate purchase price of approximately $76.4 million. Based on the finalization of independent third-party purchase price allocation valuations completed during 2015, of the total acquisition cost, approximately $17.1 million was allocated to land, approximately $78.9 million was allocated to buildings and improvements, approximately $12.1 million was allocated to intangible assets pertaining to the in-place lease value and above-market lease value, and approximately $31.6 million was allocated to intangible liabilities pertaining to the below-market lease value. The weighted average amortization period for the intangible assets and liabilities was approximately 15.7 years at the time of acquisition. Six income properties were disposed of during the year ended December 31, 2015, for an aggregate sales price of approximately $24.3 million. Aggregate gains on 2015 dispositions were approximately $5.5 million, while impairments on disposals were approximately $510,000.

2014 Activity. During the year ended December 31, 2014, the Company acquired four income properties, two single-tenant and two multi-tenant, at an aggregate acquisition cost of approximately $42.2 million. During the first quarter of 2015 independent third-party purchase price allocation valuations were completed on three of the four income properties acquired during the year ended December 31, 2014. As a result of the valuations, of the total acquisition cost, approximately $17.4 million was allocated to land, approximately $20.5 million was allocated to buildings and improvements, and approximately $4.3 million was allocated to intangible assets and liabilities pertaining to the in-place lease value and the above/below market lease value. The weighted average amortization period for the $4.3 million allocated to intangible assets and liabilities was approximately 9.1 years at the time of acquisition. One income property was disposed of during the year ended December 31, 2014. On November 17, 2014, the Company sold its interest in a 14,560 square-foot building, located in Apopka, Florida for approximately $3.3 million, which was leased to Walgreens.