Investment in Rental Property and Lease Arrangements

The Company generally leases its investment rental property to established tenants in the industrial and retail property types. At September 30, 2026, the Company had 767 real estate properties, 746 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, 10 properties under development, and one that was vacant. Of the nine leases classified as direct financing leases, three include land portions which are accounted for as operating leases (see Revenue Recognition within Note 2). 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 – Operating Leases

Depreciation expense on investment in rental property was as follows:


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in thousands)	2026		2025		2026		2025
Depreciation	$	42,682	$	31,933	$	115,988	$	95,052

For the three and nine months ended September 30, 2026, depreciation expense includes $8.5 million and $15.0 million, respectively, of accelerated depreciation resulting from a change in the useful lives of buildings and improvements at two properties being redeveloped. There was no accelerated depreciation for the three and nine months ended September 30, 2025.

Estimated lease payments to be received under non-cancelable operating leases with tenants at September 30, 2026 are as follows:


(in thousands)
Remainder of 2026	$	116,720
2027	441,965
2028	440,778
2029	431,626
2030	407,001
Thereafter	3,128,079
	$	4,966,169

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)	September 30, 2026		December 31, 2025
Undiscounted estimated lease payments to be received	$	26,182	$	28,699
Estimated unguaranteed residual values	14,547		14,547
Unearned revenue	(15,746)		(17,663)
Reserve for credit losses	(72)		(86)
Net investment in direct financing leases	$	24,911	$	25,497

Undiscounted estimated lease payments to be received under non-cancelable direct financing leases with tenants at September 30, 2026 are as follows:


(in thousands)
Remainder of 2026	$	840
2027	3,426
2028	3,496
2029	3,561
2030	3,682
Thereafter	11,177
	$	26,182

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.

Investment in Rental Property – Sales-Type Leases

The Company’s net investment in a sales-type lease was $14.4 million at September 30, 2026 and December 31, 2025, and was comprised of one lease. The lease has $15.5 million of undiscounted estimated lease payments to be received throughout the remaining lease term, which expires in April 2027.

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 September 30,				For the Nine Months Ended September 30,
	2026		2025		2026		2025
Contractual rental amounts billed for operating leases	$	110,191	$	102,270	$	327,183	$	302,598
Adjustment to recognize contractual operating lease billings on a straight-line basis	5,672		5,134		17,322		16,952
Net write-offs of accrued rental income	(2,881)		(755)		(2,881)		(2,983)
Variable rental amounts earned	716		732		2,290		2,130
Earned income from direct financing leases	657		675		1,986		2,036
Interest income from sales-type leases	473		326		1,420		354
Operating expenses billed to tenants	6,435		5,752		17,146		15,491
Other income from real estate transactions	722		43		759		183
Adjustment to revenue recognized for uncollectible rental amounts billed, net	(118)		(10)		352		(917)
Total lease revenues, net	$	121,867	$	114,167	$	365,577	$	335,844