|9 Months Ended|
Sep. 30, 2022
|Real Estate [Abstract]|
|Real Estate||Real Estate
Investment properties consist of the following (in thousands, unaudited):
The Company’s depreciation expense on investment properties was $3.39 million and $8.97 million for the three and nine months ended September 30, 2022, respectively. The Company’s depreciation expense on investment properties was $2.80 million and $8.19 million for the three and nine months ended September 30, 2021, respectively.
A significant portion of the Company’s land, buildings and improvements serve as collateral for its mortgage loans. Accordingly, restrictions exist as to the encumbered property’s transferability, use and other common rights typically associated with property ownership.
Assets Held for Sale and Dispositions
At September 30, 2022, assets held for sale included Harbor Pointe Associates, LLC, as the Company has committed to a plan to sell the entity, which holds an approximate 5 acre land parcel ("Harbor Pointe Land Parcel"). At December 31, 2021, assets held for sale included Walnut Hill Plaza.
Impairment expenses on assets held for sale are a result of reducing the carrying value for the amount that exceeded the property's fair value less estimated selling costs. The valuation assumptions are based on the three-level valuation hierarchy for fair value measurement and represent Level 2 inputs. Impairment expense was $0 and $760 thousand for the three months and nine months ended September 30, 2022, respectively, resulting from reducing the carrying value of Harbor Pointe Land Parcel. Impairment expense was $0 and $2.20 million for the three and nine months ended September 30, 2021, respectively, resulting from reducing the carrying value of Columbia Fire Station.
Assets held for sale and associated liabilities consisted of the following (in thousands, unaudited):
The following properties were sold during the nine months ended September 30, 2022 and 2021 (in thousands, unaudited):
On August 22, 2022, the Company acquired Cedar, a 2.8 million square foot shopping center portfolio consisting of 19 properties located primarily in the Northeast from Virginia to Massachusetts (the "Cedar Portfolio"). The Cedar Portfolio was acquired through the purchase of the issued and outstanding shares of Cedar’s common stock, par value $0.06 per share (“Cedar Common Stock”), and the issued and outstanding common units of Cedar OP held by persons other than Cedar for an aggregate of $135.51 million of cash merger consideration and acquisition costs.
The following summarizes the consideration paid and the purchase allocation of assets acquired and liabilities assumed in conjunction with the acquisition described above in accordance with ASU 2017-01, along with a description of the methods used to determine the purchase price allocation (in thousands, unaudited). In determining the purchase price allocation, the Company considered many factors including, but not limited to, cash flows, market capitalization rates, location, occupancy rates, appraisals, other acquisitions and management’s knowledge of the current acquisition market for similar properties. The following table summarizes the purchase price allocation based on the Company's initial valuation, including estimates and assumptions of the acquisition date fair value of the tangible and intangible assets acquired and liabilities assumed (in thousands):
a.Represents the purchase price allocation of the net investment properties acquired which includes land, buildings, site improvements and tenant improvements. The purchase price allocation was determined using following approaches:
i.the market approach valuation methodology for land by considering similar transactions in the markets;
ii.a combination of the cost approach and income approach valuation methodologies for buildings, including replacement cost evaluations, “go dark” analyses and residual calculations incorporating the land values; and
iii.the cost approach valuation methodology for site and tenant improvements, including replacement costs and prevailing quoted market rates.
b. Represents the purchase price allocation of lease intangibles and other assets. Lease intangibles include in place
leases. The income approach was used to determine the allocation of these intangible assets which included estimated market rates and expenses.
c.Represents the purchase price allocation of above and below market leases. The income approach was used to determine the allocation of above/below market leases using market rental rates for similar properties.
d.Represents the purchase price allocation of the lease liability and corresponding right of use asset associated with a ground lease. The Company used an incremental borrowing rate of 5.25% for the purpose of calculating the lease liability.
e.Represents the fair market value of Cedar's outstanding 7.25% Series B Preferred Stock and 6.50% Series C Preferred Stock.
f.Represents merger consideration and capitalized transaction costs.
Unaudited pro forma financial information in the aggregate is presented below for the acquisition of the Cedar properties. The unaudited pro forma information presented below includes the effects of the Cedar Acquisition as if it had been consummated as January 1, 2021. The pro forma results include adjustments for depreciation and amortization associated with acquired tangible and intangible assets, straight-line rent adjustments, interest expense related to debt incurred. The unaudited pro forma financial information is presented for informational purposes only and may not be indicative of the results of operations that would have been achieved if this acquisition had taken place in January 1, 2021 or 2022. (Amounts presented in thousands, except per share figures).
The entire disclosure for certain real estate investment financial statements, real estate investment trust operating support agreements, real estate owned, retail land sales, time share transactions, as well as other real estate related disclosures.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef