Investment in Rental Property and Lease Arrangements

The Company primarily leases its investment rental property to established tenants in the industrial and retail property types. At June 30, 2025, the Company had 766 real estate properties, 754 of which were leased under leases that have been classified as operating leases, nine that have been classified as direct financing leases, one that has been classified as a sales-type lease, and two that were vacant. Of the nine leases classified as direct financing leases, three include land portions which are accounted for as operating leases. The sales-type lease includes a land portion which is accounted for as an operating lease. Most leases have initial terms of 10 to 20 years. The Company’s leases generally provide for limited increases in rent as a result of fixed increases, increases in the Consumer Price Index (“CPI”), or increases in the tenant’s sales volume. Generally, tenants are also required to pay all property taxes and assessments, substantially maintain the interior and exterior of the building, and maintain property and liability insurance coverage. The leases also typically provide for one or more multiple-year renewal options, at the election of the tenant, and are subject to generally the same terms and conditions as the initial lease.

Investment in Rental Property – Accounted for Using the Operating Method

Depreciation expense on investment in rental property was as follows:


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(in thousands)	2025		2024		2025		2024
Depreciation	$	31,660	$	29,480	$	63,119	$	59,474

Estimated lease payments to be received under non-cancelable operating leases with tenants at June 30, 2025 are as follows:


(in thousands)
Remainder of 2025	$	202,079
2026	418,448
2027	416,252
2028	401,670
2029	390,967
Thereafter	3,052,913
	$	4,882,329

Since lease renewal periods are exercisable at the option of the tenant, the above amounts only include future lease payments due during the initial lease terms. Such amounts exclude any potential variable rent increases that are based on changes in the CPI or future variable rents which may be received under the leases based on a percentage of the tenant’s gross sales. Additionally, certain of our leases provide tenants with the option to terminate their leases in exchange for termination penalties, or that are contingent upon the occurrence of a future event. Future lease payments within the table above have not been adjusted for these termination rights.

Investment in Rental Property – Direct Financing Leases

The Company’s net investment in direct financing leases was comprised of the following:


(in thousands)	June 30, 2025		December 31, 2024
Undiscounted estimated lease payments to be received	$	30,346	$	31,983
Estimated unguaranteed residual values	14,547		14,547
Unearned revenue	(18,962)		(20,277)
Reserve for credit losses	(86)		(99)
Net investment in direct financing leases	$	25,845	$	26,154

Undiscounted estimated lease payments to be received under non-cancelable direct financing leases with tenants at June 30, 2025 are as follows:


(in thousands)
Remainder of 2025	$	1,647
2026	3,357
2027	3,426
2028	3,496
2029	3,561
Thereafter	14,859
	$	30,346

The above rental receipts do not include future lease payments for renewal periods, potential variable CPI rent increases, or variable percentage rent payments that may become due in future periods.

The following table summarizes amounts reported as Lease revenues, net in the Condensed Consolidated Statements of Income and Comprehensive Income:


(in thousands)	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2025		2024		2025		2024
Contractual rental amounts billed for operating leases	$	101,014	$	95,736	$	200,328	$	193,285
Adjustment to recognize contractual operating lease billings on a straight-line basis	5,753		5,177		11,818		10,281
Net write-offs of accrued rental income	—		—		(2,228)		(2,556)
Variable rental amounts earned	718		659		1,398		1,257
Earned income from direct financing leases	679		689		1,361		1,371
Interest income from sales-type leases	14		15		29		29
Operating expenses billed to tenants	4,795		4,651		9,739		9,756
Other income from real estate transactions	63		12		139		79
Adjustment to revenue recognized for uncollectible rental amounts billed, net	(50)		(1,032)		(907)		(2,228)
Total lease revenues, net	$	112,986	$	105,907	$	221,677	$	211,274