Acquisitions and Dispositions

9 Months Ended

Sep. 30, 2021

Acquisitions and dispositions for the periods presented were completed in accordance with our strategy to reposition our investment concentration among the markets in which we operate and to increase our overall investments in quality industrial projects. Transaction costs related to asset acquisitions are capitalized and transaction costs related to business combinations and dispositions are expensed.

Acquisitions

We paid cash of $242.9 million for four building acquisitions in Southern California and Northern New Jersey and paid a combination of $64.0 million of cash and Limited Partner Units with a fair value of $11.6 million for a container storage lot in Northern New Jersey during the nine months ended September 30, 2021. All of these properties were fully leased at the date of acquisition. We paid cash of $85.5 million for five property acquisitions during the nine months ended September 30, 2020.

The following table summarizes amounts recognized for each major class of assets and liabilities (in thousands) for these acquisitions during the nine months ended September 30, 2021:


Real estate assets	$	351,398
Lease related intangibles	11,796
Total acquired assets	$	363,194

Below market lease liabilities	$	43,734

The leases in the acquired properties had a weighted average remaining life at acquisition of approximately 11.0 years.

Distribution of Joint Venture Properties

As part of a plan of dissolution, we received a non-cash distribution of real estate assets from two 50%-owned unconsolidated joint ventures. These joint ventures distributed their ownership in two in-service properties and certain parcels of undeveloped land to our partner, who shares control with us over both joint ventures, while distributing their ownership interest in an in-service property, a property under construction and a parcel of undeveloped land to us. These distributions were based on values negotiated between us and our partner on an arms-length basis and we determined that these negotiated values represented the fair value of the assets at their highest and best use, as determined from the perspective of a market participant. Concurrent with these asset distributions, both we and our partner assumed and repaid all of the joint ventures' unsecured debt, with each party paying off an amount necessary for the value of the assets distributed, net of debt repayments, to be equal.

As the result of this dissolution transaction, we recognized a gain of $10.6 million (included in equity in earnings in the Consolidated Statements of Operations), which was related to the properties distributed to our partner. We did not recognize a gain to remeasure our existing ownership interest in the assets we received in distribution and we recognized such assets at a combined basis of $52.2 million in the Consolidated Balance Sheets. We assumed and immediately repaid unsecured debt of the joint ventures totaling $40.2 million.

Fair Value Measurements

We determine the fair value of the individual components of real estate asset acquisitions primarily through calculating the "as-if vacant" value of a building, using an income approach, which relies significantly upon internally determined assumptions. We have determined that these estimates primarily rely upon level 3 inputs, which are unobservable inputs based on our own assumptions. The most significant assumptions used in calculating the "as-if vacant" value for acquisition activity during the nine months ended September 30, 2021 are as follows:


	Low			High
Exit capitalization rate	3.50		%	5.00		%
Annual net rental rate per square foot on acquired buildings	$	6.62		$	15.00
Annual net rental rate per acre on acquired ground lease	$	182,136		$	182,136

Capitalized acquisition costs were insignificant and the fair value of net assets acquired from unrelated parties during the nine months ended September 30, 2021, was substantially the same as the cost of acquisition.

Dispositions

Dispositions of buildings and undeveloped land generated net cash proceeds of $989.1 million and $55.7 million during the nine months ended September 30, 2021 and 2020, respectively. The number of buildings sold is disclosed in Note 11.

On July 22, 2021, we closed on the sale of 14 wholly-owned buildings and 15 acres of undeveloped land, for net cash proceeds of $286.3 million, which completed our previously announced exit from the St. Louis market.

In addition, in July 2021 we entered into a 20%-owned unconsolidated joint venture with plans to contribute three tranches of properties for a total of nine properties. Pursuant to the terms of the joint venture, on July 27, 2021, we contributed to the joint venture the first tranche of three properties, which consisted of two buildings and one trailer storage lot in Chicago and Atlanta, for net cash proceeds of $115.7 million. On September 21, 2021, we contributed to the joint venture the second tranche of three properties which consisted of two buildings and one trailer storage lot in Baltimore, for net cash proceeds of $172.9 million. The joint venture financed the acquisition of these properties with a combination of third party first mortgage loans and equity contributions from our partner in this joint venture. As part of the closings, we have also received $41.1 million for our ownership share of proceeds from third party first mortgage loans, which was included in capital distributions from unconsolidated joint ventures

in the Consolidated Statements of Cash Flows for the nine months ended September 30, 2021. We expect to close the third tranche in early 2022.During the nine months ended September 30, 2020, we collected the remaining $110.0 million of principal on our outstanding notes receivable, which was related to the sale of our medical office portfolio during 2017.