Quarterly report [Sections 13 or 15(d)]

Real Estate Investments and Related Intangibles

v3.26.1
Real Estate Investments and Related Intangibles
 3 Months Ended
Mar. 31, 2026
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, 2026, the Company acquired one 75,000 square foot flex/R&D facility located in Northbrook, Illinois for a gross purchase price of $15.0 million and net purchase price of $14.2 million, which includes capitalized external acquisition-related expenses of $0.1 million and is net of $0.9 million of adjustments to and credits against the gross purchase price agreed to by the Company pursuant to the purchase and sale agreement. The property is fully leased to a single tenant through December 2036.
During the three months ended March 31, 2025, the Company had no acquisitions.
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 three months ended March 31, 2026 (in thousands):
Real estate investment, at cost:
Land $ 2,724 
Building, fixtures and improvements 5,041 
Total real estate investment, at cost 7,765 
Acquired intangible assets:
Intangible lease asset 6,421 
Net assets acquired $ 14,186 
Property Dispositions and Real Estate Assets Held for Sale
During the three months ended March 31, 2026, the Company closed on the sale of two properties for an aggregate gross sales price of $13.1 million. The two properties were classified as held for sale as of December 31, 2025, at which time the Company recorded impairment losses of $12.1 million. Accordingly, no gain or impairment on disposition of real estate assets was recognized on the sales during the three months ended March 31, 2026. Subsequent to March 31, 2026, the Company closed on the sale of six properties in Deerfield, Illinois and one property in Glen Burnie, Maryland. See Note 15 – Subsequent Events for further details.
During the three months ended March 31, 2025, the Company had no dispositions.
As of March 31, 2026, the Company had no properties classified as held for sale.
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 March 31, 2026):
Weighted Average Useful Life (Years) March 31, 2026 December 31, 2025
Intangible lease assets:
In-place leases, net of accumulated amortization of $157,459 and $152,989, respectively
 11.3 $ 45,857  $ 43,906 
Leasing commissions, net of accumulated amortization of $8,300 and $7,522, respectively
 12.7 28,332  25,171 
Above-market lease assets, net of accumulated amortization of $12,650 and $12,451, respectively
 12.4 995  1,194 
Deferred lease incentives, net of accumulated amortization of $1,457 and $1,295, respectively
 12.7 6,507  5,676 
Total intangible lease assets, net $ 81,691  $ 75,947 
Intangible lease liabilities:
Below-market leases, net of accumulated amortization of $20,721 and $20,211, respectively
 15.3 $ 17,939  $ 18,449 
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 $0.3 million and $0.4 million for the three months ended March 31, 2026 and 2025, respectively. The aggregate amount of amortization of deferred lease incentives included as a net decrease to rental revenue was $0.2 million and $0.1 million for the three months ended March 31, 2026 and 2025, 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 $5.3 million and $7.7 million for the three months ended March 31, 2026 and 2025, 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, 2026 (in thousands):
Remainder of 2026 2027 2028 2029 2030 2031
In-place leases:
Total projected to be included in amortization expense $ 10,900  $ 8,403  $ 6,110  $ 3,390  $ 2,969  $ 2,595 
Leasing commissions:
Total projected to be included in amortization expense $ 2,338  $ 3,025  $ 2,732  $ 2,440  $ 2,415  $ 2,360 
Above-market lease assets:
Total projected to be deducted from rental revenue $ 482  $ 237  $ 115  $ 63  $ 63  $ 34 
Deferred lease incentives:
Total projected to be deducted from rental revenue $ 399  $ 532  $ 518  $ 508  $ 505  $ 503 
Below-market lease liabilities:
Total projected to be added to rental revenue $ 1,418  $ 1,766  $ 1,682  $ 1,500  $ 1,425  $ 1,135 
Investment in Unconsolidated Joint Venture
The following is a summary of the Company’s investment in the Unconsolidated 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 of Unconsolidated Joint Venture, Net
Three Months Ended
Investment March 31, 2026 March 31, 2026 December 31, 2025 March 31, 2026 March 31, 2025
Unconsolidated Joint Venture 20% 6 $ —  $ —  $ —  $ (246)
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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 Unconsolidated Joint Venture, which had an outstanding principal balance of $128.2 million as of May 7, 2026, experienced a payment default at maturity during February 2026. The lenders’ agent under the loan has issued a default notice and has informed the joint venture that it intends to seek to compel a sale of the properties in the joint venture in order to repay the loan. As a result of the ongoing default, the lenders have various rights and remedies that are customary in a non-recourse mortgage financing, such as to implement an excess cash flow sweep, collect default interest, institute a proceeding for foreclosure and apply for the appointment of a receiver. The joint venture remains in discussions with the lenders about next steps which may include a 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 Unconsolidated Joint Venture will be able to extend or refinance this debt obligation or that the lenders will not seek to enforce their remedies due to the ongoing payment default.
Due to the uncertainties with regard to recovery of its investments in the Unconsolidated Joint Venture, the Company recorded an other-than-temporary impairment loss on its investment in the Unconsolidated Joint Venture as of December 31, 2025, thereby reducing the carrying value of the investment to zero, and has recorded a loan loss reserve for the entire outstanding principal of its member loan to the Unconsolidated Joint Venture (the “Member Loan”). The Company accounts for its investment in the Unconsolidated Joint Venture under the equity method of accounting and during the year ended December 31, 2025, its share of losses exceeded the carrying amount of its investment. Accordingly, the Company has suspended recognition of its share of additional losses and will resume recognizing its share of earnings only after the Unconsolidated Joint Venture generates net income that exceeds the previously recognized losses. The Company has not recognized any further losses in excess of its investment and no contingent liabilities have been recorded related to the Unconsolidated Joint Venture as of and for the three months ended March 31, 2026. Additionally, beginning January 1, 2026, the Company is recording management fees from the Unconsolidated Joint Venture and interest income on the Member Loan on a cash basis rather than an accrual basis.