NOTE 4—REAL ESTATE INVESTMENTS AND MINIMUM FUTURE RENTALS

Real Estate Acquisitions

        The following charts detail the Company's acquisitions of real estate and an interest in a joint venture during 2016 and 2015 (amounts in thousands):

                                                                                                                                                                                    

 

                                                                                                                                                                                    

        The following charts detail the allocation of the purchase price for the Company's acquisitions of real estate and an interest in a joint venture during 2016 and 2015 (amounts in thousands):

                                                                                                                                                                                    

 

        As of December 31, 2016, the weighted average amortization period for the 2016 acquisitions is 9.3 years and 13.0 years for the intangible lease assets and intangible lease liabilities, respectively. As of December 31, 2015, the weighted average amortization period for the 2015 acquisitions is 6.8 years and 6.4 years for the intangible lease assets and intangible lease liabilities, respectively.

        At December 31, 2016 and 2015, accumulated amortization of intangible lease assets was $16,074,000 and $12,392,000, respectively, and accumulated amortization of intangible lease liabilities was $6,386,000 and $5,091,000, respectively.

        For the years ended December 31, 2016, 2015 and 2014, the Company recognized net rental income of $712,000, $723,000 and $267,000, respectively, for the amortization of the above/below market leases. For the years ended December 31, 2016, 2015 and 2014, the Company recognized amortization expense of $3,612,000, $3,467,000 and $2,430,000, respectively, relating to the amortization of the origination costs, which is included in Depreciation and amortization expense.

        The unamortized balance of intangible lease assets as a result of acquired above market leases at December 31, 2016 will be deducted from rental income through 2032 as follows (amounts in thousands):

                                                                                                                                                                                    

        The unamortized balance of intangible lease liabilities as a result of acquired below market leases at December 31, 2016 will be added to rental income through 2055 as follows (amounts in thousands):

                                                                                                                                                                                    

        The unamortized balance of origination costs associated with in-place leases at December 31, 2016 will be charged to amortization expense through 2055 as follows (amounts in thousands):

                                                                                                                                                                                    

Purchase of Partner's 50% Interest

        On March 31, 2015, the Company purchased for $6,300,000, its partner's 50% interest in an unconsolidated joint venture that owned a property in Lincoln, Nebraska, and as a result, the Company obtained a controlling financial interest. The payment was comprised of (i) $2,636,000 paid directly to the partner and (ii) $3,664,000, substantially all of which was used to pay off the partner's 50% share of the underlying joint venture mortgage. The Company had presented the investee in accordance with the equity method for the periods prior to gaining control and ceased the equity method of accounting and consolidated the investment at March 31, 2015, the date on which 100% control was obtained. In consolidating the investment, the Company recorded a purchase price fair value adjustment of $960,000 on the consolidated statement of income, representing the difference between the book value of its preexisting equity investment on the March 31, 2015 purchase date and the fair value of the net assets acquired.

Minimum Future Rents

        The rental properties owned at December 31, 2016 are leased under operating leases with current expirations ranging from 2017 to 2033, with certain tenant renewal rights.

        The minimum future contractual rents do not include (i) straight-line rent or amortization of intangibles and (ii) rental income which can be deferred under the Company's ground leases on the basis of the respective property's operating performance. Such rentals amounted to $2,379,000, $1,458,000 and $336,000 for the years ended December 31, 2016, 2015 and 2014, respectively.

        The minimum future contractual rents to be received over the next five years and thereafter on non-cancellable operating leases in effect at December 31, 2016 are as follows (amounts in thousands):

                                                                                                                                                                                    

Unbilled Rent Receivable

        At December 31, 2016 and 2015, the Company's unbilled rent receivables aggregating $13,797,000 and $13,577,000, respectively, represent rent reported on a straight-line basis in excess of rental payments required under the respective leases. The unbilled rent receivable is to be billed and received pursuant to the lease terms during the next 25 years.

        During the years ended December 31, 2016 and 2015, the Company wrote off $2,060,000 and $120,000, respectively, of unbilled straight-line rent receivable related to the properties sold during such years, which reduced the gain on sale reported on the consolidated statements of income (see Note 5). The Company also wrote off $7,000 of unbilled straight-line rent receivable related to the Greenwood Village, Colorado property (see Note 2).

        During the year ended December 31, 2015, the Company wrote off unbilled straight-line rent receivables of $477,000 related to lease terminations effected prior to lease expirations (see Note 8) and $89,000 related to a property in Philadelphia, Pennsylvania (see Note 6).

Unaudited Pro Forma Information

        The following table summarizes, on an unaudited pro forma basis, the combined results of operations of the Company for the years ended December 31, 2016 and 2015 as though the purchases of the nine properties in 2016, excluding the two asset acquisitions (the Wheaton, Illinois and Beachwood, Ohio land acquisitions), were completed on January 1, 2015. The total acquisition costs of $582,000 paid in connection with such 2016 purchases are included as a reduction of net income in the year ended December 31, 2015. This unaudited proforma information does not purport to represent what the actual results of operations of the Company would have been had such acquisitions occurred as of January 1, 2015, nor does it purport to predict the results of operations for future periods.

                                                                                                                                                                                    

        Revenues and net income related to these nine properties already included in the results of operations for the year ended December 31, 2016 amounted to $4,251,000 and $654,000, respectively.