Investments in Real Estate

12 Months Ended

Dec. 31, 2023

A. Acquisitions of Real Estate

Below is a summary of our acquisitions for the year ended December 31, 2023 (unaudited):


	Number of Properties	Leasable Square Feet (in thousands, unaudited)	Investment ($ in millions)		Weighted Average Lease Term (Years)	Initial Weighted Average Cash Lease Yield (1)

Acquisitions - U.S.	838	15,030	$	3,802.3	15.9	6.9	%
Acquisitions - Europe	177	14,737	3,080.4		13.7	7.1	%
Total acquisitions	1,015	29,767	$	6,882.7	14.9	7.0	%
Properties under development (2)	390	8,094	1,270.3		16.4	6.8	%
Total (3)	1,405	37,861	$	8,153.0	15.1	7.0	%

(1)The initial weighted average cash lease yield for a property is generally computed as estimated contractual first year cash net operating income, which, in the case of a net leased property, is equal to the aggregate cash base rent for the first full year of each lease, divided by the total cost of the property. Since it is possible that a client could default on the payment of contractual rent (defined as the monthly aggregate cash amount charged to clients, inclusive of monthly base rent receivables), we cannot provide assurance that the actual return on the funds invested will remain at the percentages listed above. Contractual net operating income used in the calculation of initial weighted average cash lease yield includes approximately $4.4 million received as settlement credits as reimbursement of free rent periods for the year ended December 31, 2023.

In the case of a property under development or expansion, the contractual lease rate is generally fixed such that rent varies based on the actual total investment in order to provide a fixed rate of return. When the lease does not provide for a fixed rate of return on a property under development or expansion, the initial weighted average cash lease yield is computed as follows: estimated cash net operating income (determined by the lease) for the first full year of each lease, divided by our projected total investment in the property, including land, construction and capitalized interest costs.

(2)Includes £34.3 million of investments in U.K. development properties and €29.3 million of investment in Spain development properties, converted at the applicable exchange rates on the funding dates.

(3)Our clients occupying the new properties are 88.7% retail, 8.5% industrial, and 2.8% other property types based on net operating income. Approximately 31.4% of the net operating income generated from acquisitions during the year ended December 31, 2023 is from investment grade rated clients, their subsidiaries, or affiliated companies.

The aggregate purchase price of the assets acquired during the year ended December 31, 2023 has been allocated as follows (in millions):


	Acquisitions - USD		Acquisitions - Sterling		Acquisitions - Euro
Land (1)	$	779.5	£	477.2	€	288.6
Buildings and improvements	2,842.5		909.0		462.3
Lease intangible assets (2)	430.0		130.1		36.8
Other assets (3)	559.9		257.3		35.2
Lease intangible liabilities (4)	(115.1)		(12.4)		(0.9)
Other liabilities (5)	(9.1)		(2.6)		(9.6)
	$	4,487.7	£	1,758.6	€	812.4

(1)Sterling-denominated land includes £7.1 million of right of use assets under long-term ground leases.

(2)The weighted average amortization period for acquired lease intangible assets is 11.3 years.

(3)USD-denominated other assets consist entirely of financing receivables with above-market terms. Sterling-denominated other assets primarily consist of £66.1 million of financing receivables with above-market terms and £191.1 million of right-of-use assets accounted for as finance leases. Euro-denominated other assets consist of €17.4 million of financing receivables with above-market terms, €10.6 million of right-of-use assets accounted for as finance leases and €7.2 million of right-of-use assets under ground leases.

(4)The weighted average amortization period for acquired lease intangible liabilities is 16.9 years.

(5)USD-denominated other liabilities consist entirely of deferred rent on certain below-market leases. Sterling-denominated other liabilities primarily consist of £2.3 million of deferred rent on certain below-market leases and £0.2 million of lease liabilities under financing leases. Euro-denominated other liabilities consists of €1.6 million of deferred rent on certain below-market leases, €4.4 million of lease liabilities under ground leases, €2.1 million of lease liabilities under financing leases, and €1.5 million of other liabilities.

The properties acquired during the year ended December 31, 2023 generated total revenue and net income of $302.3 million and $152.4 million, respectively.

B. Investments in Existing Properties

During the year ended December 31, 2023, we capitalized costs of $59.8 million on existing properties in our portfolio, consisting of $49.6 million for non-recurring building improvements, $9.9 million for re-leasing costs, and $0.3 million for recurring capital expenditures. In comparison, during the year ended December 31, 2022, we capitalized costs of $96.7 million on existing properties in our portfolio, consisting of $88.3 million for non-recurring building improvements, $5.2 million for re-leasing costs, and $3.2 million for recurring capital expenditures.

C. Properties with Existing Leases

The value of the in-place and above-market leases is recorded to 'Lease intangible assets, net' on our consolidated balance sheets, and the value of the below-market leases is recorded to 'Lease intangible liabilities, net' on our consolidated balance sheets.

The values of the in-place leases are amortized as depreciation and amortization expense. The amounts amortized to expense for all of our in-place leases, for the years ended December 31, 2023, 2022 and 2021 were $651.1 million, $634.9 million, and $247.6 million, respectively.

The values of the above-market and below-market leases are amortized over the term of the respective leases, including any bargain renewal options, as an adjustment to rental revenue in our consolidated statements of income and comprehensive income. The amounts amortized as a net decrease to rental revenue for capitalized above-market and below-market leases for the years ended December 31, 2023, 2022 and 2021 were $61.5 million, $55.6 million, and $35.4 million, respectively. If a lease was to be terminated prior to its stated expiration, all unamortized amounts relating to that lease would be recorded to revenue or expense, as appropriate.

The following table presents the estimated impact during the next five years and thereafter related to the amortization of the above-market and below-market lease intangibles and the amortization of the in-place lease intangibles at December 31, 2023 (dollars in thousands):


	Net increase (decrease) to rental revenue		Increase to amortization expense
2024	$	(57,431)	$	593,845
2025	(51,025)		512,189
2026	(43,447)		456,383
2027	(34,900)		395,966
2028	(24,525)		336,868
Thereafter	356,100		1,458,777
Totals	$	144,772	$	3,754,028

D. Gain on Sales of Real Estate

The following table summarizes our properties sold during the periods indicated below (dollars in millions):


	Years ended December 31,
		2023		2022		2021
Number of properties		121		170		154
Net sales proceeds		$	117.4	$	436.1	$	250.3
Gain on sales of real estate		$	25.7	$	103.0	$	55.8