Land and buildings leased to others, which are subject to operating leases, and real estate under construction, are summarized as follows (in thousands):


	March 31, 2023		December 31, 2022
Land	$	2,335,399	$	2,400,002
Buildings and improvements	10,566,418		10,916,630
Real estate under construction	32,862		22,225
Less: Accumulated depreciation	(1,591,780)		(1,672,091)
	$	11,342,899	$	11,666,766

During the three months ended March 31, 2023, the U.S. dollar weakened against the euro, as the end-of-period rate for the U.S. dollar in relation to the euro increased by 2.0% to $1.0875 from $1.0666. As a result of this fluctuation in foreign currency exchange rates, the carrying value of our Land, buildings and improvements — net lease and other increased by $66.4 million from December 31, 2022 to March 31, 2023.

During the three months ended March 31, 2023, we reclassified a portfolio of 78 properties classified as Land, buildings and improvements — net lease and other to Net investments in finance leases and loans receivable due to the tenant’s notice of intention to exercise a purchase option. As a result, the carrying value of our Land, buildings and improvements — net lease and other decreased by $288.2 million from December 31, 2022 to March 31, 2023 (Note 5).

On January 31, 2023, the master lease expired on certain hotel properties previously classified as net-lease properties, which converted to operating properties. As a result, in February 2023, we reclassified 12 consolidated hotel properties with an aggregate carrying value of $164.6 million from Land, buildings and improvements — net lease and other to Land, buildings and improvements — operating properties. Effective as of that time, we began recognizing operating property revenues and expenses from these properties, whereas previously we recognized lease revenues from these properties.

In connection with a change in lease classification due to an extension of the underlying lease, we reclassified one property with an aggregate carrying value of $10.9 million from Net investments in finance leases and loans receivable to Land, buildings and improvements — net lease and other during the three months ended March 31, 2023 (Note 5).

Depreciation expense, including the effect of foreign currency translation, on our buildings and improvements subject to operating leases was $91.3 million and $72.0 million for the three months ended March 31, 2023 and 2022, respectively.

During the three months ended March 31, 2023, we entered into the following investments, which were deemed to be real estate asset acquisitions (dollars in thousands):


Property Location(s)	Number of Properties	Date of Acquisition	Property Type	Total Capitalized Costs
Various, United States	6	1/12/2023	Industrial	$	64,861
Various, Italy (5 properties) and Spain (3 properties) (a)	8	3/23/2023	Industrial	79,218
	14			$	144,079


	Total Capitalized Costs
Land	$	32,671
Buildings and improvements	99,140
Intangible assets:
In-place lease (weighted-average expected life of 24.5 years)	19,150
Prepaid rent liabilities	(6,882)
	$	144,079

During the three months ended March 31, 2023, we capitalized real estate under construction totaling $34.1 million. The number of construction projects in progress with balances included in real estate under construction was nine and eight as of March 31, 2023 and December 31, 2022, respectively. Aggregate unfunded commitments totaled approximately $60.7 million and $61.1 million as of March 31, 2023 and December 31, 2022, respectively.

Property Location(s)

Primary Transaction Type

Number of Properties

Date of Completion

Property Type

Total Capitalized Costs

Evansville, Indiana and Lawrence, Kansas

Renovation

3/23/2023

Industrial

20,637

During the three months ended March 31, 2023, we committed to fund a redevelopment project for $15.1 million. We currently expect to complete the project in the fourth quarter of 2023.

Capitalized interest incurred during construction was $0.1 million and $0.7 million for the three months ended March 31, 2023 and 2022, respectively, which reduces Interest expense in the consolidated statements of income.

During the three months ended March 31, 2023, we sold three 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 $23.7 million from December 31, 2022 to March 31, 2023 (Note 14).

2023 — For the three months ended March 31, 2023, other lease-related income on our consolidated statements of income included: (i) lease termination income totaling $11.4 million received from two tenants in connection with the sales of the properties they occupied and (ii) other lease-related settlements totaling $1.3 million.

2022 — For the three months ended March 31, 2022, other lease-related income on our consolidated statements of income included: (i) lease termination income of $8.2 million received from a tenant; (ii) other lease-related settlements totaling $4.7 million; and (iii) income from a parking garage attached to one of our net-leased properties totaling $0.6 million.

Lease income related to operating leases recognized and included in the consolidated statements of income is as follows (in thousands):


	Three Months Ended March 31,
	2023		2022
Lease income — fixed	$	308,066	$	276,141
Lease income — variable (a)	44,270		31,584
Total operating lease income	$	352,336	$	307,725

(a)Includes (i) rent increases based on changes in the U.S. Consumer Price Index (“CPI”) and other comparable indices and (ii) reimbursements for property taxes, insurance, and common area maintenance services.

At March 31, 2023, Land, buildings and improvements — operating properties consisted of our investments in 75 consolidated self-storage properties, 13 consolidated hotels, and two consolidated student housing properties. At December 31, 2022, Land, buildings and improvements — operating properties consisted of our investments in 75 consolidated self-storage properties, two consolidated student housing properties, and one consolidated hotel. Below is a summary of our Land, buildings and improvements — operating properties (in thousands):


	March 31, 2023		December 31, 2022
Land	$	152,416	$	122,317
Buildings and improvements	1,170,631		955,009
Real estate under construction	—		18,566
Less: Accumulated depreciation	(91,933)		(28,295)
	$	1,231,114	$	1,067,597

As described above under Land, Buildings and Improvements — Net Lease and Other, on January 31, 2023, the master lease expired on certain hotel properties previously classified as net-lease properties, which converted to operating properties. As a result, in February 2023, we reclassified 12 consolidated hotel properties with an aggregate carrying value of $164.6 million from Land, buildings and improvements — net lease and other to Land, buildings and improvements — operating properties.

During the three months ended March 31, 2023, we completed a student housing development project and reclassified $21.4 million from real estate under construction to buildings and improvements attributable to operating properties.

Depreciation expense on our buildings and improvements attributable to operating properties was $7.2 million and $0.7 million for the three months ended March 31, 2023 and 2022, respectively.


	March 31, 2023		December 31, 2022
Land, buildings and improvements — net lease and other	$	34,708	$	47,134
In-place lease intangible assets and other	8,139		10,854
Above-market rent intangible assets	191		3,210
Accumulated depreciation and amortization	—		(3,254)
Assets held for sale, net	$	43,038	$	57,944

At March 31, 2023, we had one property classified as Assets held for sale, net, with a carrying value of $43.0 million. At December 31, 2022 we had three properties classified as Assets held for sale, net, with an aggregate carrying value of $57.9 million. Two of these properties were sold in the first quarter of 2023.