4. Investments in Real Estate

We acquire land, buildings and improvements necessary for the successful operations of commercial tenants.

A. Acquisitions during 2015 and 2014

During 2015, we invested $1.26 billion in 286 new properties and properties under development or expansion with an initial weighted average contractual lease rate of 6.6%. The 286 new properties and properties under development or expansion are located in 40 states, will contain approximately 6.2 million leasable square feet, and are 100% leased with a weighted average lease term of 16.5 years. The tenants occupying the new properties operate in 21 industries and the property types consist of 87.3% retail and 12.7% industrial, based on rental revenue. None of our investments during 2015 caused any one tenant to be 10% or more of our total assets at December 31, 2015.

The $1.26 billion invested during 2015 was allocated as follows: $257.1 million to land, $937.1 million to buildings and improvements, $105.8 million to intangible assets related to leases, and $40.9 million to intangible liabilities related to leases and other assumed liabilities. There was no contingent consideration associated with these acquisitions.

The properties acquired during 2015 generated total revenues of $43.4 million and income from continuing operations of $21.1 million.

Of the $1.26 billion we invested during 2015, $195.4 million of the purchase price allocation is based on a preliminary measurement of fair value that is subject to change. The allocation for these properties represents our current best estimate of fair value, and we expect to finalize the valuations and complete the purchase price allocations in 2016. During 2015, we finalized the purchase price allocations for $147.1 million invested in the fourth quarter of 2014. There were no material changes to our consolidated balance sheets or income statements as a result of these purchase price allocations being finalized.

In comparison, during 2014, we invested $1.4 billion in 506 new properties and properties under development or expansion with an initial weighted average contractual lease rate of 7.1%. The 506 new properties and properties under development or expansion are located in 42 states, contain approximately 9.8 million leasable square feet, and are 100% leased with a weighted average lease term of 12.8 years. The tenants occupying the new properties operate in 32 industries and the property types consist of 85.7% retail, 6.6% industrial, 6.4% office, and 1.3% manufacturing, based on rental revenue.

The $1.4 billion invested during 2014 was allocated as follows: $295.6 million to land, $984.1 million to buildings and improvements, $209.4 million to intangible assets related to leases, $901,000 to other assets, net, and $87.4 million to intangible liabilities related to leases and other assumed liabilities. We also recorded mortgage premiums of $604,000 associated with the mortgages acquired. There was no contingent consideration associated with these acquisitions.

The properties acquired during 2014 generated total revenues of $75.1 million and income from continuing operations of $27.8 million for year ended December 31, 2014.

The estimated initial weighted average contractual lease rate for a property is generally computed as estimated contractual net operating income, which, in the case of a net leased property, is equal to the aggregate base rent for the first full year of each lease, divided by the total cost of the property. Since it is possible that a tenant could default on the payment of contractual rent, we cannot provide assurance that the actual return on the funds invested will remain at the percentages listed above.

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 estimated initial weighted average contractual lease rate is computed as follows: estimated 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. Of the $1.26 billion we invested during 2015, $45.8 million was invested in 35 properties under development or expansion with an estimated initial weighted average contractual lease rate of 9.7%. Of the $1.4 billion we invested during 2014, $81.9 million was invested in 40 properties under development or expansion with an estimated initial weighted average contractual lease rate of 8.4%.

B. Acquisition Transaction Costs

Acquisition transaction costs of $913,000 and $453,000 were recorded to general and administrative expense on our consolidated statements of income during 2015 and 2014, respectively.

C. Investments in Existing Properties

During 2015, we capitalized costs of $11.5 million on existing properties in our portfolio, consisting of $748,000 for re-leasing costs, $7.6 million for recurring capital expenditures and $3.2 million for non-recurring building improvements. In comparison, during 2014, we capitalized costs of $6.0 million on existing properties in our portfolio.

D. Properties with Existing Leases

Of the $1.26 billion we invested during 2015, approximately $391.4 million was used to acquire 86 properties with existing leases. In comparison, of the $1.4 billion we invested during 2014, approximately $957.4 million was used to acquire 201 properties with existing leases. The value of the in-place and above-market leases is recorded to acquired lease intangible assets, net on our consolidated balance sheets, and the value of the below-market leases is recorded to acquired 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 2015, 2014, and 2013 were $87.9 million, $83.6 million, and $65.5 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 on our consolidated statements of income. The amounts amortized as a net decrease to rental revenue for capitalized above-market and below-market leases for 2015, 2014, and 2013 were $7.9 million, $8.0 million, and $8.2 million, respectively. If a lease were 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 acquired above-market and below-market lease intangibles and the amortization of the in-place lease intangibles for properties held for investment at December 31, 2015 (in thousands):

	Net increase			Increase to
	(decrease) to			amortization
	rental revenue			expense
2016	$	(8,075	)	$	89,858
2017	(8,019		)	88,669
2018	(7,771		)	86,174
2019	(6,781		)	76,109
2020	(6,108		)	70,915
Thereafter	45,569			380,591


Totals	$	8,815		$	792,316