Quarterly report pursuant to Section 13 or 15(d)

Real Estate Investments and Related Intangibles

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Real Estate Investments and Related Intangibles
 3 Months Ended
Mar. 31, 2024
Real Estate [Abstract]  
Real Estate Investments and Related Intangibles
Note 3 – Real Estate Investments and Related Intangibles
Property Acquisitions
During the three months ended March 31, 2024, the Company acquired for no consideration the fee interest in one parcel of land in connection with the maturity of the tax advantaged bond and ground lease structure. As a result of the transaction, $3.5 million that was previously classified as a finance lease right-of-use asset with respect to such land parcel previously subject to the ground lease was reclassified from other assets, net to real estate investments in the Company’s consolidated balance sheet as of March 31, 2024. The Company did not have any other acquisitions during the three months ended March 31, 2024. During the three months ended March 31, 2023, the Company had no acquisitions.
Property Dispositions and Real Estate Assets Held for Sale
During the three months ended March 31, 2024 and 2023, the Company had no dispositions. As of March 31, 2024, the Company had no properties classified as held for sale.
Intangible Lease Assets and Liabilities
Intangible lease assets and liabilities consisted of the following (in thousands, except weighted-average useful life):
Weighted-Average Useful Life (Years) March 31, 2024 December 31, 2023
Intangible lease assets:
In-place leases, net of accumulated amortization of $186,666 and $193,470, respectively
 6.8 $ 88,375  $ 103,997 
Leasing commissions, net of accumulated amortization of $3,451 and $3,033, respectively
 12.4 13,772  13,539 
Above-market lease assets, net of accumulated amortization of $11,111 and $10,372, respectively
 7.4 4,221  5,006 
Deferred lease incentives, net of accumulated amortization of $541 and $419, respectively
 10.5 3,777  3,822 
Total intangible lease assets, net $ 110,145  $ 126,364 
Intangible lease liabilities:
Below-market leases, net of accumulated amortization of $23,026 and $23,176, respectively
 11.9 $ 6,753  $ 8,074 
The aggregate amount of amortization of above-market and below-market leases included as a net increase to rental revenue was $0.5 million and $0.2 million for the three months ended March 31, 2024 and 2023, respectively. The aggregate amount of amortization of deferred lease incentives included as net decreases to rental revenue were $0.1 million for the three months ended March 31, 2024 and 2023. The aggregate amount of in-place leases, leasing commissions and other lease intangibles amortized and included in depreciation and amortization expense was $16.0 million and $19.7 million for the three months ended March 31, 2024 and 2023, respectively.
The following table provides the projected amortization expense and adjustments to rental revenue related to the intangible lease assets and liabilities for the next five years as of March 31, 2024 (in thousands):
Remainder of 2024 2025 2026 2027 2028 2029
In-place leases:
Total projected to be included in amortization expense $ 33,762  $ 21,627  $ 15,247  $ 7,337  $ 4,592  $ 1,872 
Leasing commissions:
Total projected to be included in amortization expense $ 1,151  $ 1,480  $ 1,476  $ 1,450  $ 1,306  $ 1,125 
Above-market lease assets:
Total projected to be deducted from rental revenue $ 2,176  $ 850  $ 682  $ 237  $ 115  $ 63 
Deferred lease incentives:
Total projected to be deducted from rental revenue $ 373  $ 480  $ 383  $ 359  $ 346  $ 335 
Below-market lease liabilities:
Total projected to be added to rental revenue $ 2,465  $ 1,036  $ 817  $ 655  $ 571  $ 389 
Investment in Unconsolidated Joint Venture
The following is a summary of the Company’s investment in the Arch Street Joint Venture, as of March 31, 2024 and December 31, 2023 and for the three months ended March 31, 2024 and 2023 (dollars in thousands):
Ownership % (1)
Number of Properties Carrying Value of
Investment		 Equity in Loss, Net
Three Months Ended
Investment March 31, 2024 March 31, 2024 December 31, 2023 March 31, 2024 March 31, 2023
Arch Street Joint Venture (2) (3)
20% 6 $ 12,972  13,549  $ (116) (123)
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(1)The Company’s ownership interest reflects its legal ownership interest. The Company’s legal ownership interest may, at times, not equal the Company’s economic interest because of various provisions in the joint venture agreement regarding capital contributions, distributions of cash flow based on capital account balances and allocations of profits and losses. As a result, the Company’s actual economic interest (as distinct from its legal ownership interest) in certain of the properties could fluctuate from time to time and may not wholly align with its legal ownership interest.
(2)During the three months ended March 31, 2024 and 2023, the Arch Street Joint Venture did not acquire any properties.
(3)The total carrying value of the Company’s investment in the Arch Street Joint Venture was greater than the underlying equity in net assets by $0.3 million and $0.4 million as of March 31, 2024 and December 31, 2023, respectively. This difference is related to a step up in the fair value of the investment in the Arch Street Joint Venture in connection with the Separation and the Distribution. The step up in fair value was allocated based on the underlying assets and liabilities of the Arch Street Joint Venture and is being amortized over the estimated useful lives of the respective assets and liabilities in accordance with the Company’s accounting policies.
The non-recourse mortgage notes associated with the Arch Street Joint Venture of $136.7 million as of March 31, 2024 are scheduled to mature on November 27, 2024, and the Arch Street Joint Venture has two successive one-year options to extend the maturity until November 27, 2026. The extension options are subject to satisfaction of certain conditions, including satisfaction of certain financial and operating covenants. The Arch Street Joint Venture may be unable to satisfy the extension conditions, and is also evaluating alternatives to refinance this obligation. The Company cannot provide any assurance the Arch Street Joint Venture will be able to satisfy the extension conditions or otherwise extend or refinance the loan. If the Arch Street Joint Venture is unable to extend or refinance the mortgage notes, the Company’s investment in the Arch Street Joint Venture could be materially adversely affected.