Annual report [Section 13 and 15(d), not S-K Item 405]

Real Estate Investments and Related Intangibles

v3.25.4
Real Estate Investments and Related Intangibles
 12 Months Ended
Dec. 31, 2025
Real Estate [Abstract]  
Real Estate Investments and Related Intangibles
Note 3 – Real Estate Investments and Related Intangibles
Property Acquisitions
During the years ended December 31, 2025 and 2023, the Company had no acquisitions.
During the year ended December 31, 2024, the Company acquired fee simple, controlling financial interest in one real property and the improvements thereon including an approximate 97,000 square foot flex/laboratory and R&D facility located in San Ramon, California for a gross purchase price of $34.6 million and external acquisition-related expenses of $0.1 million that were capitalized. The property was fully leased to a single tenant with a remaining lease term of 15.0 years as of the acquisition date.
The following table presents the allocation of the purchase consideration and capitalized transaction costs to the assets acquired and liabilities assumed based on their relative fair values during the year ended December 31, 2024 (in thousands):
Real estate investment, at cost:
Land $ 12,250 
Building, fixtures and improvements 25,269 
Total real estate investment, at cost 37,519 
Acquired intangible assets:
Intangible lease asset 13,847 
Assumed intangible liabilities:
Below-market lease liability (16,632)
Net assets acquired $ 34,734 
Additionally, during the year ended December 31, 2024, the Company acquired for no consideration, the fee simple 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 land in the accompanying consolidated balance sheet as of December 31, 2024.
Property Dispositions and Real Estate Assets Held for Sale
The following table summarizes the Company’s property dispositions during the periods indicated below (dollars in thousands):
Year Ended December 31,
2025 2024 2023
Total dispositions 10  2  6 
Aggregate gross sales price $ 80,660  $ 5,260  $ 25,425 
Gain on disposition of real estate assets $ 7,058  $ —  $ 31 
Property count 6  —  3 
Impairments on disposition of real estate assets $ 8,728  $ 2,720  $ 575 
Property count 4  2  3 
As of December 31, 2025, the Company had two properties classified as held for sale with a carrying value of $12.8 million, primarily comprised of land of $3.8 million and building, fixtures and improvements, net, of $9.0 million, included in real estate assets held for sale, net in the accompanying consolidated balance sheets. During January 2026, the Company closed on the sale of both held for sale properties, see Note 15 – Subsequent Events, below.
During the years ended December 31, 2025, 2024 and 2023, the Company recorded losses of $19.8 million, $8.6 million and $4.4 million, respectively, related to properties that were classified as held for sale, which are included as part of impairments in the accompanying consolidated statements of operations.
Intangible Lease Assets and Liabilities
Intangible lease assets and liabilities consisted of the following as of the dates indicated below (in thousands, except weighted average useful life as of December 31, 2025):
Weighted Average Useful Life (Years) December 31, 2025 December 31, 2024
Intangible lease assets:
In-place leases, net of accumulated amortization of $152,989 and $169,898, respectively
 11.0 $ 43,906  $ 68,099 
Leasing commissions, net of accumulated amortization of $7,522 and $4,508, respectively
 12.6 25,171  21,834 
Above-market lease assets, net of accumulated amortization of $12,451 and $12,831, respectively
 11.8 1,194  2,041 
Deferred lease incentives, net of accumulated amortization of $1,295 and $927, respectively
 11.6 5,676  3,970 
Total intangible lease assets, net $ 75,947  $ 95,944 
Intangible lease liabilities:
Below-market leases, net of accumulated amortization of $20,211 and $24,877, respectively
 15.2 $ 18,449  $ 20,596 
The aggregate amount of amortization of above-market and below-market leases included as a net increase to rental revenue in the accompanying statements of operations was $1.3 million, $1.1 million and $1.2 million for the years ended December 31, 2025, 2024 and 2023, respectively. The aggregate amount of amortization of deferred lease incentives included as a net decrease to rental revenue was $0.5 million, $0.5 million and $0.3 million for the years ended December 31, 2025, 2024 and 2023, respectively. The aggregate amount of in-place leases, leasing commissions and other lease intangibles amortized and included in depreciation and amortization expense in the accompanying statements of operations was $26.0 million, $51.4 million and $75.0 million for the years ended December 31, 2025, 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 December 31, 2025 (in thousands):
2026 2027 2028 2029 2030
In-place leases:
Total projected to be included in amortization expense $ 14,873  $ 7,810  $ 5,517  $ 2,797  $ 2,377 
Leasing commissions:
Total projected to be included in amortization expense $ 2,764  $ 2,565  $ 2,272  $ 1,980  $ 1,955 
Above-market lease assets:
Total projected to be deducted from rental revenue $ 680  $ 237  $ 115  $ 63  $ 63 
Deferred lease incentives:
Total projected to be deducted from rental revenue $ 462  $ 439  $ 425  $ 415  $ 412 
Below-market lease liabilities:
Total projected to be added to rental revenue $ 1,928  $ 1,766  $ 1,682  $ 1,500  $ 1,425 
Consolidated Joint Venture
The Company had an interest in one consolidated joint venture that owned one property as of December 31, 2025 and 2024. The consolidated joint venture had total assets of $24.0 million, including $21.8 million of real estate investments, net of accumulated depreciation and amortization as of December 31, 2025, and total assets of $24.5 million, including $22.6 million of real estate investments, net as of December 31, 2024. The Company’s joint venture partner is the managing member of the joint venture. However, in accordance with the joint venture agreement, the Company has the ability to control the operating and financing policies of the consolidated joint venture and the joint venture partner must obtain the Company’s approval for any major transactions. The Company and the joint venture partner are subject to the provisions of the joint venture agreement, which includes provisions for when additional contributions may be required to fund certain cash shortfalls.
Investment in Unconsolidated Joint Venture
The following is a summary of the Company’s investment in the Arch Street Joint Venture, as of the dates and for the periods indicated below (dollars in thousands):
Ownership % (1)
Number of Properties Carrying Value of
Investment		 Equity in Loss and Impairment of Investment in Unconsolidated Joint Venture, Net
Year Ended
Investment December 31, 2025 December 31, 2025 December 31, 2024 December 31, 2025 December 31, 2024 December 31, 2023
Arch Street Joint Venture 20% 6 $ —  $ 11,822  $ (11,822) $ (740) $ (435)
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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.
The non-recourse mortgage notes associated with the Arch Street Joint Venture were scheduled to mature on November 27, 2025, subject to one remaining one-year borrower option to extend the maturity until November 27, 2026. The Arch Street Joint Venture exercised the extension option during September 2025. However, in order to extend the debt, the Arch Street Joint Venture is required to make an approximately $16.0 million prepayment of loan principal outstanding to satisfy the 60% loan-to-value extension condition. Due to capital constraints of the Company’s joint venture partner, the joint venture has been unable to make this prepayment. The loan was temporarily extended until February 26, 2026 and the joint venture remains in discussions with the lenders about next steps which may include an additional short-term extension and restructuring of the debt with a lender excess cash flow sweep, and the requirement to sell one or more properties and utilize the net proceeds to prepay principal outstanding under the debt. The Company cannot provide any assurance that the Arch Street Joint Venture will be able to satisfy the loan-to-value condition or otherwise extend or refinance this debt obligation or that the lenders will not seek to enforce their remedies due to the existing payment default.
During November 2024, the Company provided a member loan to the Arch Street Joint Venture of $1.4 million in connection with a partial repayment of the Arch Street Joint Venture mortgage notes to satisfy the maximum 60% loan-to-value
extension condition. During February 2025, the Company made an additional member loan of $8.3 million to fund leasing costs related to a lease extension that was completed for one of the properties in the Arch Street Joint Venture portfolio. The Company’s member loan to the Arch Street Joint Venture, which had $6.6 million receivable as of December 31, 2025, is legally entitled to receive interest at 15%, matures on November 27, 2026, and is non-recourse and unsecured, structurally subordinate to the Arch Street Joint Venture mortgage notes. However, interest and principal are payable monthly solely out of the excess cash from the joint venture after payment of property operating expenses, interest and principal on the Arch Street mortgage notes and other joint venture expenses and excess proceeds from the sale of any of the joint venture properties.
Due to the uncertainties with regard to recovery of the Company’s Arch Street Joint Venture investments, the Company recorded an other-than-temporary impairment loss on its investment in the Arch Street Joint Venture, which is included in equity in loss and impairment of investment in unconsolidated joint venture, net in the accompanying consolidated statements of operations, thereby reducing the carrying value of the investment to zero, and recorded a loan loss reserve of $5.9 million against the $6.6 million member loan to the Arch Street Joint Venture during the year ended December 31, 2025. Beginning in 2026, the Company will record management fees from the Arch Street Joint Venture and interest income on the member loan on a cash basis rather than accrual basis.