Investments in Real Estate |
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| Investments in Real Estate | Investments in Real Estate Certain acquisitions of real estate did not satisfy the requirements for sale-leaseback accounting and therefore as of both September 30, 2026 and December 31, 2025, acquisitions of $16.8 million have been recognized as notes receivable and are included in other assets, net on our consolidated balance sheets. During the three and nine months ended September 30, 2026, we recognized an impairment loss on real estate of $0.6 million relating to one of our properties in Michigan. No impairment losses were recognized during the three months ended September 30, 2025. During the nine months ended September 30, 2025, we recognized an impairment loss on real estate of $3.5 million related to one of our properties in Palm Springs, California. Acquired In-Place Lease Intangible Assets In-place lease intangible assets and related accumulated amortization as of September 30, 2026 and December 31, 2025 are as follows (in thousands):
During the nine months ended September 30, 2026, the Company wrote off certain in-place lease intangible assets and related accumulated amortization in connection with the termination of the underlying leases. Amortization of in-place lease intangible assets classified in depreciation and amortization expense in our consolidated statements of income was $1.8 million and $2.6 million for the three and nine months ended September 30, 2026, respectively, and $0.4 million and $0.8 million for the three and nine months ended September 30, 2025, respectively. The weighted-average remaining amortization period of the acquired in-place leases was 7.2 years. As of September 30, 2026, estimated future amortization expense related to acquired in-place lease intangible asset was $0.1 million for the remainder of 2026, $0.5 million annually for 2027 through 2030, and $1.5 million thereafter. Lease Amendments, Terminations and New Leases In January 2024, the lease modifications for two of our leases to extend the initial term of each lease changed the lease classification from operating lease to sales-type lease that did not satisfy all the criteria for recognition as a completed sale. Accordingly, we continue to recognize the underlying assets within net real estate held for investment and all lease payments received, as well as any future lease payments, will be recognized as a deposit liability and will be included in other liabilities on our consolidated balance sheet until certain criteria are met or the lease is terminated. In August 2026, one of these leases was modified, which among other changes, resulted in a change in lease classification to an operating lease. For the remaining lease, as of September 30, 2026, we have received lease payments of $2.4 million that have been included in other liabilities on our consolidated balance sheet. The underlying assets’ land and building and improvements had a gross carrying value of $2.3 million and $13.2 million, respectively, and accumulated depreciation of $2.1 million as of September 30, 2026. During the three months ended September 30, 2026, we terminated 16 leases representing an aggregate of approximately 1.2 million square feet, including three leases representing approximately 467,000 square feet for which we concurrently entered into new leases with different tenants. In addition, we entered into new leases for three previously vacant properties representing approximately 137,000 square feet. During the nine months ended September 30, 2026, we terminated 26 leases representing an aggregate of approximately 1.9 million square feet, including six leases representing approximately 785,000 square feet for which we concurrently entered into new leases with different tenants. In addition, we entered into new leases for five previously vacant properties representing approximately 208,000 square feet. Capitalized Costs During the nine months ended September 30, 2026, we capitalized costs of $4.1 million relating to improvements and construction activities at our properties. Property Dispositions In April 2025, we sold a property in Michigan for $9.0 million (excluding transaction costs) and provided a secured loan for $8.5 million to the buyer of the property. The loan matures on April 24, 2028 with an option to extend the maturity for twelve months, conditional on the payment of an extension fee. The loan is interest only and payments are payable monthly in advance. The transaction did not qualify for recognition as a completed sale under GAAP since not all of the criteria were met. Accordingly, we have not derecognized the assets transferred on our consolidated balance sheets. All consideration received, as well as any future payments, from the buyer will be recognized as a deposit liability and will be included in other liabilities on our consolidated balance sheet until such time the criteria for recognition as a sale have been met. As of September 30, 2026, we have received a total of $2.3 million for a loan origination fee and interest. In addition, as we have not met all of the held-for-sale criteria, land and building and improvements with a gross carrying value of $0.4 million and $9.6 million, respectively, and accumulated depreciation of $2.3 million as of September 30, 2026, remain on the consolidated balance sheet, and the buildings and improvements continue to be depreciated. In May 2026, we sold a property in New York for a contractual sales price of $88.5 million and recognized a gain on sale of real estate of $16.7 million. At closing, the Company received $39.5 million in cash and provided a secured loan for $49.0 million to the buyer of the property (see Note 8 “Loans Receivable”). On October 2, 2026, we received $49.0 million in full repayment of the outstanding principal balance of the seller financing note. The repayment was made without a prepayment penalty, and we have no remaining principal outstanding under the note. In addition, during the nine months ended September 30, 2026, we sold a property in Arizona and a property in Texas for total net proceeds of $5.7 million and recognized a total net loss of $4.4 million. Future Contractual Minimum Rent Future contractual minimum rent (including base rent and property management fees) to be received on our leases as of September 30, 2026 for future periods is summarized as follows (in thousands):
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