v3.24.2
Land, Buildings and Improvements, and Assets Held for Sale
 6 Months Ended
Jun. 30, 2024
Real Estate [Abstract]  
Land, Buildings and Improvements, and Assets Held for Sale Land, Buildings and Improvements, and Assets Held for Sale
 
Land, Buildings and Improvements — Net Lease and Other

Land and buildings leased to others, which are subject to operating leases, and real estate under construction, are summarized as follows (in thousands):
June 30, 2024December 31, 2023
Land$2,299,528 $2,248,300 
Buildings and improvements10,004,871 9,801,596 
Real estate under construction37,580 45,562 
Less: Accumulated depreciation(1,589,966)(1,509,730)
$10,752,013 $10,585,728 

During the six months ended June 30, 2024, the U.S. dollar strengthened against the euro, as the end-of-period rate for the U.S. dollar in relation to the euro decreased by 3.1% to $1.0705 from $1.1050. As a result of this fluctuation in foreign currency exchange rates, the carrying value of our Land, buildings and improvements — net lease and other decreased by $111.7 million from December 31, 2023 to June 30, 2024.

In connection with changes in lease classifications due to extensions of the underlying leases or entering into a new lease, we reclassified 14 properties with an aggregate carrying value of $105.5 million from Net investments in finance leases and loans receivable to Land, buildings and improvements — net lease and other during the six months ended June 30, 2024 (Note 5).

Depreciation expense, including the effect of foreign currency translation, on our buildings and improvements subject to operating leases was $72.5 million and $79.7 million for the three months ended June 30, 2024 and 2023, respectively, and $144.1 million and $171.0 million for the six months ended June 30, 2024 and 2023, respectively.
Acquisitions of Real Estate

During the six months ended June 30, 2024, we entered into the following investments, which were deemed to be real estate asset acquisitions (dollars in thousands):
Property Location(s)Number of PropertiesDate of AcquisitionProperty TypeTotal Capitalized Costs
Doncaster, United Kingdom (a)
21/9/2024Retail $30,055 
Various, Italy (a)
51/30/2024Industrial, Warehouse 148,130 
Laval, Canada (a)
13/26/2024Industrial2,604 
Commercial Point, Ohio14/5/2024Warehouse 94,220 
Tucson, Arizona15/13/2024Warehouse 38,784 
Portfolio Acquisition:
Various, United States55/15/2024Industrial, Warehouse 44,400 
Various, United States45/15/2024Industrial 23,330 
Sylacauga, Alabama15/15/2024Industrial 5,852 
Moxee, Washington and La Porte, Indiana (b)
26/26/2024Industrial 37,019 
Portfolio Total12110,601 
Mesa and Laveen, Arizona26/3/2024Retail 26,964 
24$451,358 
__________
(a)Amount reflects the applicable exchange rate on the date of transaction.
(b)In connection with this acquisition, we assumed a non-recourse mortgage loan encumbering the properties with an outstanding principal balance of $21.9 million (Note 10).

The aggregate purchase price allocation for investments disclosed above is as follows (dollars in thousands):
Total Capitalized Costs
Land$82,449 
Buildings and improvements311,003 
Intangible assets and liabilities:
In-place lease (weighted-average expected life of 14.9 years)
56,855 
Below-market rent (expected life of 12.8 years)
(408)
Debt discount and deferred financing costs on non-recourse mortgage loan assumed1,459 
$451,358 

Real Estate Under Construction — Net Lease and Operating Properties

During the six months ended June 30, 2024, we capitalized real estate under construction totaling $24.2 million. The number of construction projects in progress with balances included in real estate under construction was three and 11 as of June 30, 2024 and December 31, 2023, respectively. Aggregate unfunded commitments totaled approximately $92.6 million and $71.8 million as of June 30, 2024 and December 31, 2023, respectively.
During the six months ended June 30, 2024, we completed the following construction projects (dollars in thousands):
Property Location(s)Primary Transaction TypeNumber of PropertiesDate of CompletionProperty TypeTotal Capitalized Costs
Salisbury, North CarolinaExpansion13/8/2024Industrial $14,737 
Little Rock, ArkansasExpansion14/10/2024Self-Storage (Operating)3,280 
Irvine, CaliforniaRedevelopment16/27/2024Industrial15,222 
3$33,239 

During the six months ended June 30, 2024, we committed to fund a redevelopment project for $44.1 million. We currently expect to complete the project in 2025.

Capitalized interest incurred during construction was $0.2 million and less than $0.1 million for the three months ended June 30, 2024 and 2023, respectively, and $0.4 million and $0.1 million for the six months ended June 30, 2024 and 2023, respectively, which reduces Interest expense in the consolidated statements of income.

Dispositions of Properties

During the six months ended June 30, 2024, we sold 14 properties, which were classified as Land, buildings and improvements — net lease and other. As a result, the carrying value of our Land, buildings and improvements — net lease and other decreased by $102.9 million from December 31, 2023 to June 30, 2024 (Note 14).

Other Lease-Related Income

2024 — For the three and six months ended June 30, 2024, other lease-related income on our consolidated statements of income included other lease-related settlements totaling $8.9 million and $10.7 million, respectively.

2023 — For the three and six months ended June 30, 2023, other lease-related income on our consolidated statements of income included: (i) other lease-related settlements totaling $4.3 million and $5.6 million, respectively and (ii) lease termination income totaling $11.4 million for the six months ended June 30, 2023, received from two tenants in connection with the sales of the properties they occupied.

Leases

Operating Lease Income

Lease income related to operating leases recognized and included in the consolidated statements of income is as follows (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Lease income — fixed
$287,709 $324,468 $573,883 $632,534 
Lease income — variable (a)
36,395 44,656 72,472 88,926 
Total operating lease income$324,104 $369,124 $646,355 $721,460 
__________
(a)Includes (i) rent increases based on changes in the U.S. Consumer Price Index and other comparable indices and (ii) reimbursements for property taxes, insurance, and common area maintenance services.
Land, Buildings and Improvements — Operating Properties

At June 30, 2024, Land, buildings and improvements — operating properties consisted of our investments in 80 consolidated self-storage properties, four consolidated hotels, and two consolidated student housing properties. At December 31, 2023, Land, buildings and improvements — operating properties consisted of our investments in 80 consolidated self-storage properties, five consolidated hotels, and two consolidated student housing properties. Below is a summary of our Land, buildings and improvements — operating properties (in thousands):
June 30, 2024December 31, 2023
Land$147,170 $150,084 
Buildings and improvements1,091,170 1,104,635 
Real estate under construction— 1,530 
Less: Accumulated depreciation(88,885)(80,057)
$1,149,455 $1,176,192 

During the six months ended June 30, 2024, we sold one hotel operating property, which was classified as Land, buildings and improvements — operating properties. As a result, the carrying value of our Land, buildings and improvements — operating properties decreased by $14.3 million from December 31, 2023 to June 30, 2024 (Note 14).

Depreciation expense, including the effect of foreign currency translation, on our buildings and improvements attributable to operating properties was $7.4 million and $7.7 million for the three months ended June 30, 2024 and 2023, respectively, and $14.7 million and $14.9 million for the six months ended June 30, 2024 and 2023, respectively.
Assets Held for Sale, Net

Below is a summary of our properties held for sale (in thousands):
June 30, 2024December 31, 2023
Land, buildings and improvements — net lease and other
$10,676 $46,986 
In-place lease intangible assets and other778 5,222 
Above-market rent intangible assets— 8,374 
Accumulated depreciation and amortization(3,711)(23,460)
Assets held for sale, net$7,743 $37,122 

At June 30, 2024, we had one property classified as Assets held for sale, net, with a carrying value of $7.7 million. This property was sold in July 2024 (Note 15). At December 31, 2023 we had two properties classified as Assets held for sale, net, with an aggregate carrying value of $37.1 million. These properties were sold in January 2024.