Investments in Real Estate

3 Months Ended

Mar. 31, 2024

A. Acquisitions of Real Estate

Below is a summary of our acquisitions for the three months ended March 31, 2024:


	Number of Properties	Leasable Square Feet (in thousands, unaudited)	Investment ($ in millions)		Weighted Average Lease Term (Years)	Initial Weighted Average Cash Lease Yield (1)

Acquisitions - U.S.	5	194	$	16.0	8.9	7.1	%
Acquisitions - Europe	8	1,064	302.6		6.2	8.2	%
Total acquisitions	13	1,258	$	318.6	6.3	8.2	%
Properties under development (2)	140	5,410	241.3		15.9	7.3	%
Total (3)	153	6,668	$	559.9	10.2	7.8	%

(1)The initial weighted average cash lease yield for a property is generally computed as estimated contractual first year cash net operating income, which, in the case of a net leased property, is equal to the aggregate cash base rent for the first full year of each lease, divided by the total cost of the property. Since it is possible that a client could default on the payment of contractual rent (defined as the monthly aggregate cash amount charged to clients, inclusive of monthly base rent receivables), we cannot provide assurance that the actual return on the funds invested will remain at the percentages listed above. Contractual net operating income used in the calculation of initial weighted average cash lease yield includes approximately $0.5 million received as settlement credits as reimbursement of free rent periods for the three months ended March 31, 2024.

In the case of a property under development or expansion, the contractual lease rate is generally fixed such that rent varies based on the actual total investment in order to provide a fixed rate of return. When the lease does not provide for a fixed rate of return on a property under development or expansion, the initial weighted average cash lease yield is computed as follows: estimated cash net operating income (determined by the lease) for the first full year of each lease, divided by our projected total investment in the property, including land, construction and capitalized interest costs.

(2)Includes £8.7 million of investments in U.K. development properties and €8.4 million of investments in Spain development properties, converted at the applicable exchange rates on the funding dates.

(3)Our clients occupying the new properties are 89.7% retail and 10.3% industrial based on net operating income. Approximately 41.0% of the net operating income generated from acquisitions during the three months ended March 31, 2024 is from investment grade rated clients, their subsidiaries, or affiliated companies.

The aggregate purchase price of the assets acquired during the three months ended March 31, 2024 has been allocated as follows (in millions):


	Acquisitions - USD		Acquisitions - Sterling		Acquisitions - Euro
Land	$	18.4	£	59.0	€	2.0
Buildings and improvements	88.9		124.3		5.0
Lease intangible assets (1)	21.0		50.4		1.1
Other assets (2)	3.0		—		—
Lease intangible liabilities (3)	(3.2)		(0.9)		(0.2)
Other liabilities	—		—		—
	$	128.1	£	232.8	€	7.9

(1)The weighted average amortization period for acquired lease intangible assets is 9.4 years.

(2)USD-denominated other assets consist entirely of financing receivables with above-market terms.

(3)The weighted average amortization period for acquired lease intangible liabilities is 12.0 years.

The properties acquired during the three months ended March 31, 2024 generated total revenue and net income of $2.6 million and $0.9 million, respectively.

B. Investments in Existing Properties

During the three months ended March 31, 2024, we capitalized costs of $7.4 million on existing properties in our portfolio, consisting of $6.4 million for non-recurring building improvements, $0.9 million for re-leasing costs, and less than $0.1 million for recurring capital expenditures. In comparison, during the three months ended March 31, 2023, we capitalized costs of $13.8 million on existing properties in our portfolio, consisting of $13.3 million for non-recurring building improvements, $0.4 million for re-leasing costs, and $0.1 million for recurring capital expenditures.

C. Properties with Existing Leases

The value of the in-place and above-market leases is recorded to 'Lease intangible assets, net' on our consolidated balance sheets, and the value of the below-market leases is recorded to 'Lease intangible liabilities, net' on our consolidated balance sheets.

The values of the in-place leases are amortized as depreciation and amortization expense. The amounts amortized to expense for all of our in-place leases, for the three months ended March 31, 2024, and 2023 were $211.5 million and $157.4 million, respectively.

The values of the above-market and below-market leases are amortized over the term of the respective leases, including any bargain renewal options, as an adjustment to rental revenue in our consolidated statements of income and comprehensive income. The amounts amortized as a net decrease to rental revenue for capitalized above-market and below-market leases for the three months ended March 31, 2024, and 2023 were $9.1 million and $14.6 million, respectively. If a lease was to be terminated prior to its stated expiration, all unamortized amounts relating to that lease would be recorded to revenue or expense, as appropriate.

The following table presents the estimated impact during the next five years and thereafter related to the amortization of the above-market and below-market lease intangibles and the amortization of the in-place lease intangibles at March 31, 2024 (dollars in thousands):


	Net increase (decrease) to rental revenue		Increase to amortization expense
2024	$	(28,512)	$	634,920
2025	(35,497)		760,879
2026	(38,003)		672,398
2027	(37,681)		576,646
2028	(30,633)		489,554
Thereafter	291,466		2,282,113
Totals	$	121,140	$	5,416,510

D. Gain on Sales of Real Estate

The following table summarizes our properties sold during the periods indicated below (dollars in millions):


	Three months ended March 31,
		2024		2023
Number of properties		46		26
Net sales proceeds		$	95.6	$	28.6
Gain on sales of real estate		$	16.6	$	4.3