Investment Properties |
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Investment Properties | 3. Investment Properties Investment properties consist of the following:
The Company’s depreciation expense on investment properties was $3,683,815 and $3,381,249 for the years ended December 31, 2023 and 2022, respectively. Capitalized tenant improvements The Company carries two categories of capitalized tenant improvements on its consolidated balance sheets, both of which are recorded under investment properties, net, on the Company’s consolidated balance sheets. The first category is the allocation of acquisition costs to tenant improvements that is recorded on the Company’s consolidated balance sheet as of the date of the Company’s acquisition of the investment property. The second category are tenant improvement costs incurred and paid by the Company subsequent to the acquisition of the investment property. Both are recorded as a component of investment properties on the Company’s consolidated balance sheets. Depreciation expense on both categories of tenant improvements is recorded as a component of depreciation expense on the Company’s consolidated statement of operations. The Company generally records depreciation of capitalized tenant improvements on a straight-line basis over the terms of the related leases. Details of these deferred costs, net of depreciation are as follows:
Depreciation of capitalized tenant improvements arising from the acquisition cost allocation was $651,935 and $622,827 for the years ended December 31, 2023 and 2022, respectively. Additionally, the Company wrote off capitalized tenant improvements arising from the acquisition cost allocation of $21,646 associated with two of the tenants which terminated leases early during the year ended December 31, 2023. During the year ended December 31, 2022, the Company wrote off capitalized tenant improvements arising from the acquisition cost allocation of $13,879 associated with the two tenants which defaulted on their leases and abandoned their premises. During the years ended December 31, 2023 and 2022, the Company recorded $828,676 and $177,373, respectively, in capitalized tenant improvements. Depreciation of capitalized tenant improvements incurred subsequent to acquisition was $184,161 and $95,877 for the years ended December 31, 2023 and 2022, respectively. During the year ended December 31, 2023, the Company transferred $84,478 in capitalized tenant improvements related to the Hanover Square Shopping Center to assets held for sale on the Company’s consolidated balance sheets. Capitalized leasing commissions The Company carries two categories of capitalized leasing commissions on its consolidated balance sheets. The first category is the allocation of acquisition costs to leasing commissions that is recorded as an intangible asset (see Note 2, above, for a discussion of the Company’s accounting treatment for intangible assets) on the Company’s consolidated balance sheet as of the date of the Company’s acquisition of the investment property. The second category is leasing commissions incurred and paid by the Company subsequent to the acquisition of the investment property. These costs are carried on the Company’s consolidated balance sheets under investment properties. The Company generally records depreciation of capitalized leasing commissions on a straight-line basis over the terms of the related leases. Details of these deferred costs, net of depreciation are as follows:
During the years ended December 31, 2023 and 2022, the Company recorded $432,613 and $300,333, respectively in capitalized leasing commissions. Depreciation on capitalized leasing commissions was $152,661 and $100,702 for the years ended December 31, 2023 and 2022, respectively. Additionally, the Company wrote off capitalized leasing commissions of $8,078 associated with a tenant that abandoned its premises during the year ended December 31, 2023. No such write offs were recorded during the year ended December 31, 2022. Assets held for sale The Company records properties as assets held for sale, and any associated mortgages payable, net, as mortgages payable, net, associated with assets held for sale, on the Company's consolidated balance sheets when management has committed to a plan to sell the assets, actively seeks a buyer for the assets, and the consummation of the sale is considered probable and is expected within one year. During November 2023, the Company committed to a plan to sell an asset group associated with the Hanover Square Property that includes the land, site improvements, building, and building improvements. As a result, as of December 1, 2023, the Company reclassified these assets, and the related mortgage payable, net, for the Hanover Square Property as assets held for sale and liabilities associated with assets held for sale, respectively. Under ASC 360, depreciation of assets held for sale is discontinued, so no further depreciation or amortization was recorded subsequent to December 1, 2023. The Company believes that the fair value, less estimated costs to sell, exceeds the Company’s carrying cost, so the Company has not recorded any impairment of assets held for sale related to the Hanover Square Property for the year ended December 31, 2023. As of December 31, 2023 and 2022, assets held for sale and liabilities associated with assets held for sale consisted of the following:
Sale of investment property On September 29, 2022, the Company sold the Clemson Best Western Hotel Property to an unrelated third party for a sale price of $10,015,000, resulting in a loss on disposal of investment properties of $421,096 reported on the Company's consolidated statement of operations for the year ended December 31, 2022. The Company reports properties that have been either previously disposed or that are currently held for sale in continuing operations in the Company's consolidated statements of operations if the disposition, or anticipated disposition, of the assets does not represent a shift in the Company's investment strategy. The Company's sale of the Clemson Best Western Hotel Property does not constitute a change in the Company's investment strategy, which continues to include limited-service hotels as a targeted asset class. Operating results of the Clemson Best Western Hotel Property which are included in continuing operations, are as follows:
2022 Property Acquisitions On June 13, 2022, the Company completed its acquisition of the Salisbury Marketplace Property, a 79,732 square foot retail property located in Salisbury, North Carolina, through a wholly owned subsidiary. The Salisbury Marketplace Property, built in 1986, was 85.3% leased as of December 31, 2023, and is anchored by Food Lion, Citi Trends and Family Dollar. The purchase price for the Salisbury Marketplace Property was $10,025,000 paid through a combination of cash provided by the Company and the incurrence of new mortgage debt. The Company’s total investment was $10,279,714. The Company incurred $254,714 of acquisition and closing costs which were capitalized and added to the tangible assets acquired.
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