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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                  to                 
Commission File Number: 001-36008
Rexford Industrial Realty, Inc.
(Exact name of registrant as specified in its charter) 
 
Maryland46-2024407
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
11620 Wilshire Boulevard, Suite 1000Los AngelesCalifornia90025
(Address of principal executive offices)(Zip Code)
(310) 966-1680
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbolsName of each exchange on which registered
Common Stock, $0.01 par value REXRNew York Stock Exchange
5.875% Series B Cumulative Redeemable Preferred StockREXR-PBNew York Stock Exchange
5.625% Series C Cumulative Redeemable Preferred StockREXR-PCNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.      
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
The number of shares of common stock outstanding at April 17, 2024 was 217,821,430.



REXFORD INDUSTRIAL REALTY, INC.
QUARTERLY REPORT FOR THE THREE MONTHS ENDED MARCH 31, 2024
TABLE OF CONTENTS
 
PART I 
  
  
  
  
  
  
  
 
 
 
PART II. 
 
 
 
 
 
 
 
 

2


PART I. FINANCIAL INFORMATION
 
Item 1.        Financial Statements

REXFORD INDUSTRIAL REALTY, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands – except share and per share data)
 March 31, 2024December 31, 2023
ASSETS  
Land$7,568,720 $6,815,622 
Buildings and improvements4,260,512 3,933,379 
Tenant improvements172,707 167,251 
Furniture, fixtures and equipment132 132 
Construction in progress258,413 240,010 
Total real estate held for investment12,260,484 11,156,394 
Accumulated depreciation(827,576)(782,461)
Investments in real estate, net11,432,908 10,373,933 
Cash and cash equivalents336,960 33,444 
Loan receivable, net122,899 122,784 
Rents and other receivables, net17,896 17,494 
Deferred rent receivable, net130,694 123,325 
Deferred leasing costs, net61,017 59,351 
Deferred loan costs, net3,069 3,426 
Acquired lease intangible assets, net223,698 153,670 
Acquired indefinite-lived intangible5,156 5,156 
Interest rate swap asset16,737 9,896 
Other assets22,114 25,225 
Acquisition related deposits7,975 2,125 
Total Assets$12,381,123 $10,929,829 
LIABILITIES & EQUITY  
Liabilities  
Notes payable$3,349,120 $2,225,914 
Accounts payable, accrued expenses and other liabilities148,920 128,842 
Dividends and distributions payable94,356 83,733 
Acquired lease intangible liabilities, net171,687 147,561 
Tenant security deposits91,034 84,872 
Tenant prepaid rents110,727 115,002 
Total Liabilities3,965,844 2,785,924 
Equity  
Rexford Industrial Realty, Inc. stockholders’ equity  
Preferred stock, $0.01 par value per share, 10,050,000 shares authorized:
5.875% series B cumulative redeemable preferred stock, 3,000,000 shares outstanding at March 31, 2024 and December 31, 2023 ($75,000 liquidation preference)
72,443 72,443 
5.625% series C cumulative redeemable preferred stock, 3,450,000 shares outstanding at March 31, 2024 and December 31, 2023 ($86,250 liquidation preference)
83,233 83,233 
Common Stock, $0.01 par value per share, 489,950,000 authorized and 217,822,056 and 212,346,450 shares outstanding at March 31, 2024 and December 31, 2023, respectively
2,178 2,123 
Additional paid-in capital8,233,127 7,940,781 
Cumulative distributions in excess of earnings(370,720)(338,835)
Accumulated other comprehensive income13,922 7,172 
Total stockholders’ equity8,034,183 7,766,917 
Noncontrolling interests381,096 376,988 
Total Equity8,415,279 8,143,905 
Total Liabilities and Equity$12,381,123 $10,929,829 
The accompanying notes are an integral part of these consolidated financial statements.
3


REXFORD INDUSTRIAL REALTY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and in thousands – except share and per share data)

 Three Months Ended March 31,
 20242023
REVENUES 
Rental income$210,990 $185,164 
Management and leasing services132 190 
Interest income2,974 882 
TOTAL REVENUES214,096 186,236 
OPERATING EXPENSES
Property expenses47,482 42,825 
General and administrative19,980 18,197 
Depreciation and amortization66,278 59,429 
TOTAL OPERATING EXPENSES133,740 120,451 
OTHER EXPENSES
Other expenses1,408 647 
Interest expense14,671 13,701 
TOTAL EXPENSES149,819 134,799 
Gains on sale of real estate 12,133 
NET INCOME64,277 63,570 
 Less: net income attributable to noncontrolling interests(2,906)(3,064)
NET INCOME ATTRIBUTABLE TO REXFORD INDUSTRIAL REALTY, INC.61,371 60,506 
 Less: preferred stock dividends(2,314)(2,314)
 Less: earnings allocated to participating securities (418)(320)
NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS$58,639 $57,872 
Net income attributable to common stockholders per share - basic$0.27 $0.30 
Net income attributable to common stockholders per share - diluted$0.27 $0.30 
Weighted average shares of common stock outstanding - basic214,401,661 195,366,969 
Weighted average shares of common stock outstanding - diluted214,437,913 195,779,007 
 
The accompanying notes are an integral part of these consolidated financial statements.
4


REXFORD INDUSTRIAL REALTY, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited and in thousands)
 
 
Three Months Ended March 31,
 20242023
Net income$64,277 $63,570 
Other comprehensive income (loss): cash flow hedge adjustments6,979 (5,342)
Comprehensive income71,256 58,228 
Comprehensive income attributable to noncontrolling interests(3,135)(2,852)
Comprehensive income attributable to Rexford Industrial Realty, Inc.
$68,121 $55,376 
 
 
The accompanying notes are an integral part of these consolidated financial statements.
5


REXFORD INDUSTRIAL REALTY, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited and in thousands – except share data) 
 
Preferred StockNumber of Common
Shares
Common
Stock
Additional
Paid-in Capital
Cumulative Distributions in Excess of EarningsAccumulated
Other
Comprehensive Income
Total
Stockholders’
Equity
Noncontrolling
Interests
Total Equity
Balance at December 31, 2023$155,676 212,346,450 $2,123 $7,940,781 $(338,835)$7,172 $7,766,917 $376,988 $8,143,905 
Issuance of common stock— 5,263,602 52 291,036 — — 291,088 — 291,088 
Offering costs— — — (972)— — (972)— (972)
Share-based compensation— 196,219 2 2,132 — — 2,134 7,324 9,458 
Shares acquired to satisfy employee tax withholding requirements on vesting restricted stock— (38,164)— (1,989)— — (1,989)— (1,989)
Conversion of OP Units to common stock— 53,949 1 2,139 — — 2,140 (2,140) 
Net income2,314 — — — 59,057 — 61,371 2,906 64,277 
Other comprehensive income— — — — — 6,750 6,750 229 6,979 
Preferred stock dividends ($0.367188 per series B preferred share and $0.351563 per series C preferred share)
(2,314)— — — — — (2,314)— (2,314)
Preferred unit distributions— — — — — — — (801)(801)
Common stock dividends ($0.4175 per common share)
— — — — (90,942)— (90,942)— (90,942)
Common unit distributions— — — — — — — (3,410)(3,410)
Balance at March 31, 2024$155,676 217,822,056 $2,178 $8,233,127 $(370,720)$13,922 $8,034,183 $381,096 $8,415,279 

The accompanying notes are an integral part of these consolidated financial statements.

6



REXFORD INDUSTRIAL REALTY, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Continued)
(Unaudited and in thousands – except share data) 
 Preferred StockNumber of Common
Shares
Common
Stock
Additional
Paid-in Capital
Cumulative Distributions in Excess of EarningsAccumulated
Other
Comprehensive
(Loss) Income
Total
Stockholders’
Equity
Noncontrolling
Interests
Total Equity
Balance at December 31, 2022$155,676 189,114,129 $1,891 $6,646,867 $(255,743)$8,247 $6,556,938 $366,404 $6,923,342 
Issuance of common stock— 11,504,656 115 656,544 — — 656,659 — 656,659 
Offering costs— — — (4,062)— — (4,062)— (4,062)
Share-based compensation— 177,848 2 1,586 — — 1,588 6,785 8,373 
Shares acquired to satisfy employee tax withholding requirements on vesting restricted stock— (29,281)— (1,748)— — (1,748)— (1,748)
Conversion of OP Units to common stock— 16,778  650 — — 650 (650) 
Net income2,314 — — — 58,192 — 60,506 3,064 63,570 
Other comprehensive loss— — — — — (5,130)(5,130)(212)(5,342)
Preferred stock dividends ($0.367188 per series B preferred share and $0.351563 per series C preferred share)
(2,314)— — — — — (2,314)— (2,314)
Preferred unit distributions— — — — — — — (802)(802)
Common stock dividends ($0.38 per common share)
— — — — (76,298)— (76,298)— (76,298)
Common unit distributions— — — — — — — (3,068)(3,068)
Balance at March 31, 2023$155,676 200,784,130 $2,008 $7,299,837 $(273,849)$3,117 $7,186,789 $371,521 $7,558,310 

The accompanying notes are an integral part of these consolidated financial statements.

7


REXFORD INDUSTRIAL REALTY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)
 Three Months Ended March 31,
  20242023
CASH FLOWS FROM OPERATING ACTIVITIES:  
Net income$64,277 $63,570 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization66,278 59,429 
Amortization of net (below) above market lease intangibles and other deferred rent on certain other below-market leases
(7,591)(8,290)
Amortization of debt issuance costs1,011 856 
Amortization of discount (premium) on notes payable, net293 66 
Impairment of right-of-use asset 188 
Accretion of net loan origination fees and costs
(115) 
Gains on sale of real estate (12,133)
Equity based compensation expense9,088 8,178 
Straight-line rent(7,368)(7,628)
Payments for termination/settlement of interest rate derivatives (161)
Amortization related to termination/settlement of interest rate derivatives138 129 
Change in working capital components:  
Rents and other receivables(402)1,393 
Deferred leasing costs(5,331)(3,444)
Other assets4,556 3,467 
Accounts payable, accrued expenses and other liabilities21,093 15,304 
Tenant security deposits(1,432)1,201 
Prepaid rents(10,739)(2,619)
Net cash provided by operating activities133,756 119,506 
CASH FLOWS FROM INVESTING ACTIVITIES:  
Acquisition of investments in real estate(1,068,031)(734,257)
Capital expenditures(79,901)(44,235)
Payments for deposits on real estate acquisitions, net(5,850)(3,625)
Proceeds from sale of real estate 16,239 
Net cash used in investing activities(1,153,782)(765,878)
CASH FLOWS FROM FINANCING ACTIVITIES:  
Issuance of common stock, net290,116 652,597 
Proceeds from borrowings1,129,875 646,925 
Repayment of borrowings(3,937)(350,379)
Debt issuance costs(3,679)(2,807)
Dividends paid to preferred stockholders(2,314)(2,314)
Dividends paid to common stockholders(80,692)(59,570)
Distributions paid to common unitholders(3,041)(2,463)
Distributions paid to preferred unitholders(797)(798)
Repurchase of common shares to satisfy employee tax withholding requirements(1,989)(1,748)
Net cash provided by financing activities1,323,542 879,443 
Increase in cash, cash equivalents and restricted cash
303,516 233,071 
Cash, cash equivalents and restricted cash, beginning of period33,444 36,786 
Cash, cash equivalents and restricted cash, end of period$336,960 $269,857 
Supplemental disclosure of cash flow information:  
Cash paid for interest (net of capitalized interest of $7,926 and $4,990 for the three months ended March 31, 2024 and 2023, respectively)
$11,049 $13,307 
Supplemental disclosure of noncash transactions:  
Accrual for capital expenditures$54,239 $25,154 
Accrual of dividends and distributions$94,356 $79,370 
The accompanying notes are an integral part of these consolidated financial statements.
8


REXFORD INDUSTRIAL REALTY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.    Organization
    Rexford Industrial Realty, Inc. is a self-administered and self-managed full-service real estate investment trust (“REIT”) focused on owning and operating industrial properties in Southern California infill markets. We were formed as a Maryland corporation on January 18, 2013, and Rexford Industrial Realty, L.P. (the “Operating Partnership”), of which we are the sole general partner, was formed as a Maryland limited partnership on January 18, 2013. Through our controlling interest in our Operating Partnership and its subsidiaries, we own, manage, lease, acquire, reposition and redevelop industrial real estate principally located in Southern California infill markets, and, from time to time, acquire or provide mortgage debt secured by industrial zoned property or property suitable for industrial development. As of March 31, 2024, our consolidated portfolio consisted of 422 properties with approximately 49.2 million rentable square feet.
    The terms “us,” “we,” “our,” and the “Company” as used in these financial statements refer to Rexford Industrial Realty, Inc. and, unless the context requires otherwise, its subsidiaries (including our Operating Partnership).
 2.    Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
As of March 31, 2024 and December 31, 2023, and for the three months ended March 31, 2024 and 2023, the financial statements presented are the consolidated financial statements of Rexford Industrial Realty, Inc. and its subsidiaries, including our Operating Partnership. All significant intercompany balances and transactions have been eliminated in the consolidated financial statements.
Under consolidation guidance, we have determined that our Operating Partnership is a variable interest entity because the holders of limited partnership interests do not have substantive kick-out rights or participating rights. Furthermore, we are the primary beneficiary of the Operating Partnership because we have the obligation to absorb losses and the right to receive benefits from the Operating Partnership and the exclusive power to direct the activities of the Operating Partnership. As of March 31, 2024 and December 31, 2023, the assets and liabilities of the Company and the Operating Partnership are substantially the same, as the Company does not have any significant assets other than its investment in the Operating Partnership.
The accompanying unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) may have been condensed or omitted pursuant to SEC rules and regulations, although we believe that the disclosures are adequate to make their presentation not misleading. The accompanying unaudited financial statements include, in our opinion, all adjustments, consisting of normal recurring adjustments, necessary to present fairly the financial information set forth therein. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. The interim financial statements should be read in conjunction with the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2023 and the notes thereto.
Any references to the number of properties, buildings and square footage are unaudited and outside the scope of our independent registered public accounting firm’s review of our financial statements in accordance with the standards of the United States Public Company Accounting Oversight Board.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.  
Cash and Cash Equivalents
Cash and cash equivalents include all cash and liquid investments with an initial maturity of three months or less. The carrying amount approximates fair value due to the short-term maturity of these investments.
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Restricted Cash
Restricted cash is comprised of escrow reserves that we are required to set aside for future costs as required by certain agreements with our lenders, and from time to time, includes cash proceeds from property sales that are being held by qualified intermediaries for purposes of facilitating tax-deferred like-kind exchanges under Section 1031 of the Internal Revenue Code of 1986, as amended (the “Code”).
Restricted cash balances are included with cash and cash equivalents balances as of the beginning and ending of each period presented in the consolidated statements of cash flows. The following table provides a reconciliation of our cash and cash equivalents and restricted cash at the beginning and end of the three months ended March 31, 2024 and 2023 (in thousands):
Three Months Ended March 31,
20242023
Cash and cash equivalents$33,444 $36,786 
Restricted cash  
Cash, cash equivalents and restricted cash, beginning of period$33,444 $36,786 
Cash and cash equivalents$336,960 $253,618 
Restricted cash 16,239 
Cash, cash equivalents and restricted cash, end of period$336,960 $269,857 
Investments in Real Estate
Acquisitions
We account for acquisitions of properties under Accounting Standards Update (“ASU”) 2017-01, Business Combinations - Clarifying the Definition of a Business, which provides a framework for determining whether transactions should be accounted for as acquisitions of assets or businesses and further revises the definition of a business. Our acquisitions of properties generally do not meet the revised definition of a business and accordingly are accounted for as asset acquisitions.
For asset acquisitions, we allocate the cost of the acquisition, which includes cash and non-cash consideration paid to the seller and associated acquisition transaction costs, to the individual assets acquired and liabilities assumed on a relative fair value basis. These individual assets and liabilities typically include land, building and improvements, tenant improvements, intangible assets and liabilities related to above- and below-market leases, intangible assets related to in-place leases, and from time to time, assumed mortgage debt. As there is no measurement period concept for an asset acquisition, the allocated cost of the acquired assets is finalized in the period in which the acquisition occurs.
We determine the fair value of the tangible assets of an acquired property by valuing the property as if it was vacant. This “as-if vacant” value is estimated using an income, or discounted cash flow, approach that relies upon Level 3 inputs, which are unobservable inputs based on the Company’s assumptions with respect to the assumptions a market participant would use. These Level 3 inputs include discount rates, exit capitalization rates, market rental rates, rental growth rates and comparable sales data, including land sales, for similar properties. Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, and market and economic conditions. In determining the “as-if-vacant” value for the properties we acquired during the three months ended March 31, 2024, we used discount rates ranging from 5.50% to 8.25% and exit capitalization rates ranging from 4.50% to 6.50%.
In determining the fair value of intangible lease assets or liabilities, we also consider Level 3 inputs. Acquired above- and below-market leases are valued based on the present value of the difference between prevailing market rental rates and the in-place rental rates measured over a period equal to the remaining term of the lease for above-market leases and the initial term plus the term of any below-market fixed rate renewal options for below-market leases determined to be reasonably certain of exercise, if applicable. The estimated fair value of acquired in-place at-market tenant leases are the estimated costs that would have been incurred to lease the property to the occupancy level of the property at the date of acquisition. We consider estimated costs such as the value associated with leasing commissions, legal and other costs, as well as the estimated period of time necessary to lease such a property to its occupancy level at the time of its acquisition. In determining the fair value of acquisitions completed during the three months ended March 31, 2024, we used an estimated average lease-up period ranging from six months to fifteen months.
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From time to time, we may engage in a sale-leaseback transaction whereby we execute a lease with the seller/tenant simultaneously with the acquisition of a property. Sale-leaseback transactions entered into at off-market terms are adjusted so that the transaction is recorded at fair value. If the purchase price is less than the fair value of the acquired property, or the present value of contractual leaseback payments is less than the present value of market rental payments, the difference is recognized as “Tenant prepaid rent” in the consolidated balance sheets and is recognized as rental income on a straight-line basis over the term of the lease.
The difference between the fair value and the face value of debt assumed, if any, in connection with an acquisition is recorded as a premium or discount and amortized to “interest expense” over the life of the debt assumed. The valuation of assumed liabilities is based on our estimate of the current market rates for similar liabilities in effect at the acquisition date.
Demolition costs incurred in conjunction with the acquisition of real estate are capitalized as part of the cost of the acquisition if the demolition (i) is contemplated as part of the acquisition and (ii) occurs within a reasonable period of time after the acquisition. If demolition was not contemplated as part of the acquisition or the demolition does not occur within a reasonable period of time after the acquisition, the costs of the demolition are expensed as incurred.
Capitalization of Costs
We capitalize direct costs incurred in developing, renovating, rehabilitating and improving real estate assets as part of the investment basis. This includes certain general and administrative costs, including payroll, bonus and non-cash equity compensation of the personnel performing redevelopment, renovations and rehabilitation if such costs are identifiable to a specific activity to get the real estate asset ready for its intended use. During the redevelopment and construction periods of a project, we also capitalize interest, real estate taxes and insurance costs. We cease capitalization of costs upon substantial completion of the project, but no later than one year from cessation of major construction activity. If some portions of a project are substantially complete and ready for use and other portions have not yet reached that stage, we cease capitalizing costs on the completed portion of the project but continue to capitalize for the incomplete portion of the project. Costs incurred in making repairs and maintaining real estate assets are expensed as incurred.
We capitalized interest costs of $7.9 million and $5.0 million during the three months ended March 31, 2024 and 2023, respectively. We capitalized real estate taxes and insurance costs aggregating $2.4 million and $1.6 million during the three months ended March 31, 2024 and 2023, respectively. We capitalized compensation costs for employees who provide construction services of $3.2 million and $2.5 million during the three months ended March 31, 2024 and 2023, respectively.
Depreciation and Amortization
Real estate, including land, building and land improvements, tenant improvements, furniture, fixtures and equipment and intangible lease assets and liabilities are stated at historical cost less accumulated depreciation and amortization, unless circumstances indicate that the cost cannot be recovered, in which case, the carrying value of the property is reduced to estimated fair value as discussed below in our policy with regard to impairment of long-lived assets. We estimate the depreciable portion of our real estate assets and related useful lives in order to record depreciation expense.
The values allocated to buildings, site improvements, in-place lease intangibles and tenant improvements are depreciated on a straight-line basis using an estimated useful life that typically ranges from 10-30 years for buildings, 5-25 years for site improvements, and the shorter of the estimated useful life or respective lease term for in-place lease intangibles and tenant improvements.
As discussed above in—Investments in Real Estate—Acquisitions, in connection with property acquisitions, we may acquire leases with rental rates above or below the market rental rates. Such differences are recorded as an acquired lease intangible asset or liability and amortized to “rental income” over the remaining term of the related leases.
Our estimate of the useful life of our assets is evaluated upon acquisition and when circumstances indicate that a change in the useful life has occurred, which requires significant judgment regarding the economic obsolescence of tangible and intangible assets.
Assets Held for Sale
We classify a property as held for sale when all of the criteria set forth in the Accounting Standards Codification (“ASC”) Topic 360: Property, Plant and Equipment (“ASC 360”) have been met. The criteria are as follows: (i) management, having the authority to approve the action, commits to a plan to sell the property; (ii) the property is available for immediate sale in its present condition, subject only to terms that are usual and customary; (iii) an active program to locate a buyer and other actions required to complete the plan to sell have been initiated; (iv) the sale of the property is probable and is expected to be completed within one year; (v) the property is being actively marketed for sale at a price that is reasonable in relation to its
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current fair value; and (vi) actions necessary to complete the plan of sale indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. At the time we classify a property as held for sale, we cease recording depreciation and amortization. A property classified as held for sale is measured and reported at the lower of its carrying amount or its estimated fair value less cost to sell. As of March 31, 2024 and December 31, 2023, we did not have any properties classified as held for sale.
Impairment of Long-Lived Assets
In accordance with the provisions of the Impairment or Disposal of Long-Lived Assets Subsections of ASC 360, we assess the carrying values of our respective long-lived assets, including operating lease right-of-use assets (“ROU assets”), whenever events or changes in circumstances indicate that the carrying amounts of these assets may not be fully recoverable. Recoverability of real estate assets and other long-lived assets is measured by comparison of the carrying amount of the asset to the estimated future undiscounted cash flows.
To review real estate assets for recoverability, we consider current market conditions as well as our intent with respect to holding or disposing of the asset. The intent with regards to the underlying assets might change as market conditions and other factors change. For office space ROU assets, the execution of a sublease where the remaining lease payments of the original office space lease exceed the sublease receipts reflects an indication of impairment which suggests the carrying value of the ROU asset may not be recoverable. Fair value is determined through various valuation techniques, including discounted cash flow models, applying a capitalization rate to estimated net operating income of a property, quoted market values and third-party appraisals, where considered necessary. The use of projected future cash flows is based on assumptions that are consistent with estimates of future expectations and the strategic plan used to manage our underlying business.
If our analysis indicates that the carrying value of the real estate asset and other long-lived assets is not recoverable on an undiscounted cash flow basis, we will recognize an impairment charge for the amount by which the carrying value exceeds the current estimated fair value of the real estate property.
Assumptions and estimates used in the recoverability analyses for future cash flows, discount rates and capitalization rates are complex and subjective. Changes in economic and operating conditions or our intent with respect to our investment that occur subsequent to our impairment analyses could impact these assumptions and result in future impairment of our real estate properties. During the three months ended March 31, 2024 and 2023, there were no impairment charges recorded to the carrying value of our properties.
During the three months ended March 31, 2023, in connection with the early termination of a sublease for one of our office space leases, we recorded a $0.2 million impairment charge to reduce the carrying value of the related ROU asset. No such impairment charge was recorded during the three months ended March 31, 2024. The impairment charge is presented in “Other expenses” in the consolidated statements of operations. See also “Note 7 – Leases” for details.
Accounting for Leases
Leases as Lessor
We evaluate new leases originated or leases assumed as part of an acquisition transaction under ASC Topic 842: Leases to determine lease classification. Generally, all of our leases have historically been classified as operating leases. A lease is classified by a lessor as a sales-type lease if the significant risks and rewards of ownership reside with the tenant. This situation is met if, among other things, there is an automatic transfer of title during the lease, there is a purchase option that the tenant is reasonably certain to exercise, the lease term, including extension options that the tenant is reasonably certain to exercise, is for more than a major part of the remaining economic useful life of the asset (e.g., equal to or greater than 75%), if the present value of the minimum lease payments represents substantially all (e.g., equal to or greater than 90%) of the leased property’s fair value at lease inception, or if the asset is so specialized in nature that it provides no alternative use to the lessor (and therefore would not provide any future value to the lessor) after the lease term. Further, such new leases would be evaluated to consider whether they would be failed sale-leaseback transactions and accounted for as financing transactions by the lessor, if applicable. As of March 31, 2024 and December 31, 2023, we did not have any leases that were classified as sales-type or financing leases under sale-leaseback rules.
Leases as a Lessee
We determine if an arrangement is a lease at inception. Operating lease ROU assets are included in “Other assets” and lease liabilities are included in “Accounts payable, accrued expenses and other liabilities” in our consolidated balance sheets. ROU assets represent our right to use, or control the use of, a specified asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the
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commencement date based on the present value of lease payments over the lease term. Because our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is generally recognized on a straight-line basis over the term of the lease through the amortization of the ROU assets and lease liabilities. Additionally, for our operating leases, we do not separate non-lease components, such as common area maintenance, from associated lease components. See “Note 7 – Leases” for additional lessee disclosures required under lease accounting standards.
Income Taxes
We have elected to be taxed as a REIT under the Code commencing with our initial taxable year ended December 31, 2013. To qualify as a REIT, we are required (among other things) to distribute at least 90% of our REIT taxable income to our stockholders and meet the various other requirements imposed by the Code relating to matters such as operating results, asset holdings, distribution levels and diversity of stock ownership. Provided we qualify for taxation as a REIT, we are generally not subject to corporate-level income tax on the earnings distributed currently to our stockholders that we derive from our activities. If we fail to qualify as a REIT in any taxable year and were unable to avail ourselves of certain savings provisions set forth in the Code, all of our taxable income would be subject to regular federal corporate income tax, including any applicable alternative minimum tax on our taxable income.
We own and may acquire direct or indirect interests in one or more entities that have elected or will elect to be taxed as REITs under the Code (each, a “Subsidiary REIT”). A Subsidiary REIT is subject to the various REIT qualification requirements and other limitations described herein that are applicable to us. If a Subsidiary REIT were to fail to qualify as a REIT, then (i) that Subsidiary REIT would become subject to regular federal corporate income tax, (ii) shares in such Subsidiary REIT would cease to be qualifying assets for purposes of the asset tests applicable to REITs, and (iii) it is possible that we would fail certain of the asset tests applicable to REITs, in which event we would fail to qualify as a REIT unless we could avail ourselves of certain relief provisions.
We are subject to taxation by various state and local jurisdictions, including those in which we transact business or reside. Other than our Subsidiary REIT (a private REIT acquired on July 18, 2022), our non-taxable subsidiaries, including our Operating Partnership, are either partnerships or disregarded entities for federal income tax purposes. Under applicable federal and state income tax rules, the allocated share of net income or loss from disregarded entities and flow-through entities such as partnerships is reportable in the income tax returns of the respective equity holders. Our taxable REIT subsidiary is a C-corporation subject to federal and state income tax. However, it has a cumulative unrecognized net operating loss carryforward. Accordingly, no income tax provision is included in the accompanying consolidated financial statements for the three months ended March 31, 2024 and 2023.
We periodically evaluate our tax positions to determine whether it is more likely than not that such positions would be sustained upon examination by a tax authority for all open tax years, as defined by the statute of limitations, based on their technical merits. As of March 31, 2024, and December 31, 2023, we have not established a liability for uncertain tax positions.
Derivative Instruments and Hedging Activities
We are exposed to certain risks arising from both our business operations and economic conditions. We principally manage our exposures to a wide variety of business and operational risks through management of our core business activities. We manage economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources and duration of our debt funding and through the use of derivative financial instruments. Specifically, we enter into derivative financial instruments to manage exposures that arise from business activities that result in the payment of future known and uncertain cash amounts, the value of which are determined by interest rates.  Our derivative financial instruments are used to manage differences in the amount, timing and duration of our known or expected cash payments principally related to our borrowings.
In accordance with ASC Topic 815: Derivatives and Hedging, we record all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, and whether we have elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the
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recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. We may enter into derivative contracts that are intended to economically hedge certain risks, even though hedge accounting does not apply or we elect not to apply hedge accounting.
Our objectives in using interest rate derivatives are to add stability to interest expense and to manage exposure to interest rate movements. To accomplish this objective, we primarily use interest rate swaps as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for us making fixed-rate payments over the life of the agreements without exchange of the underlying notional value. From time to time, we also utilize cash flow hedges to lock U.S. Treasury rates in anticipation of future fixed-rate debt issuances (“treasury rate lock agreements”). The gains or losses resulting from changes in fair value of derivatives that qualify as cash flow hedges are recognized in accumulated other comprehensive income/(loss) (“AOCI”). Upon the termination of a derivative for which cash flow hedging was being applied, the balance, which was recorded in AOCI, is amortized to interest expense over the remaining contractual term of the derivative as long as the hedged forecasted transactions continue to be probable of occurring. Upon the settlement of treasury rate lock agreements, amounts remaining in AOCI are amortized through earnings over the underlying term of the hedged transaction. Cash payments made to terminate or settle interest rate derivatives are presented in cash flows provided by operating activities in the accompanying consolidated statements of cash flows, given the nature of the underlying cash flows that the derivative was hedging. See “Note 8 – Interest Rate Derivatives” for details.
Revenue Recognition
Our primary sources of income are rental income, management and leasing services, gains on sale of real estate and interest income.
Rental Income
We lease industrial space to tenants primarily under non-cancelable operating leases that generally contain provisions for minimum base rents plus reimbursement for certain operating expenses. Total minimum annual lease payments are recognized in rental income on a straight-line basis over the term of the related lease, regardless of when payments are contractually due, when collectability is probable. Rental revenue recognition commences when the tenant takes possession of or controls the physical use of the leased space. Lease termination fees, which are included in rental income, are recognized when the related leases are canceled and we have no continuing obligation to provide services to such former tenants.
Our lease agreements with tenants generally contain provisions that require tenants to reimburse us for certain property expenses. Estimated reimbursements from tenants for these property expenses, which include real estate taxes, insurance, common area maintenance and other recoverable operating expenses, are recognized as revenues in the period that the expenses are incurred. Subsequent to year-end, we perform final reconciliations on a lease-by-lease basis and bill or credit each tenant for any cumulative annual adjustments. As the timing and pattern of revenue recognition is the same and as the lease component would be classified as an operating lease if it were accounted for separately, rents and tenant reimbursements are treated as a combined lease component and presented as a single line item “Rental income” in our consolidated statements of operations.
We record revenues and expenses on a gross basis for lessor costs (which include real estate taxes) when these costs are reimbursed to us by our tenants. Conversely, we record revenues and expenses on a net basis for lessor costs when they are paid by our tenants directly to the taxing authorities on our behalf.
Management and leasing services
We provide property management services and leasing services to related party and third-party property owners, the customer, in exchange for fees and commissions. Property management services include performing property inspections, monitoring repairs and maintenance, negotiating vendor contracts, maintaining tenant relations and providing financial and accounting oversight. For these services, we earn monthly management fees, which are based on a fixed percentage of each managed property’s monthly tenant cash receipts. We have determined that control over the services is passed to the customer simultaneously as performance occurs. Accordingly, management fee revenue is earned as the services are provided to our customers.
Leasing commissions are earned when we provide leasing services that result in an executed lease with a tenant. We have determined that control over the services is transferred to the customer upon execution of each lease agreement. We earn leasing commissions based on a fixed percentage of rental income generated for each executed lease agreement and there is no variable income component.
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Gain or Loss on Sale of Real Estate
We account for dispositions of real estate properties, which are considered nonfinancial assets, in accordance with ASC 610-20: Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets and recognize a gain or loss on sale of real estate upon transferring control of the nonfinancial asset to the purchaser, which is generally satisfied at the time of sale. If we were to conduct a partial sale of real estate by transferring a controlling interest in a nonfinancial asset, while retaining a noncontrolling ownership interest, we would measure any noncontrolling interest received or retained at fair value, and recognize a full gain or loss. If we receive consideration before transferring control of a nonfinancial asset, we recognize a contract liability. If we transfer control of the asset before consideration is received, we recognize a contract asset.
When leases contain purchase options, we assess the probability that the tenant will execute the purchase option both at lease commencement and at the time the tenant communicates its intent to exercise the purchase option. If we determine the exercise of the purchase option is reasonably certain, we will account for the lease as a sales-type lease and derecognize the associated real estate assets on our balance sheet and record a gain or loss on sale of real estate.
Interest Income
Interest income on our loan receivable is recognized on an accrual basis over the life of the loan using the interest method. Loan origination fees, net of origination costs, are accreted or amortized over the term of the loan as an adjustment to interest income using the effective interest method. Generally, a loan is placed on nonaccrual status when delinquent for more than 90 days or when determined not to be probable of full collection. Interest income recognition is suspended when loans are placed on nonaccrual status. Interest accrued, but not collected, at the date loans are placed on nonaccrual status is reversed and subsequently recognized only to the extent it is received in cash or until it qualifies for return to accrual status. However, when there is doubt regarding the ultimate collectability of loan principal, all cash received is applied to reduce the carrying value of such loans. Loans are restored to accrual status only when contractually current or the collection of future payments is reasonably assured.
Valuation of Operating Lease Receivables    
We may be subject to tenant defaults and bankruptcies that could affect the collection of outstanding receivables, including deferred rent receivables arising from the straight-line recognition of rental income, related to our operating leases. In order to mitigate these risks, we perform credit reviews and analyses on prospective tenants before significant leases are executed and on existing tenants before properties are acquired. On a quarterly basis, we perform an assessment of the collectability of operating lease receivables on a tenant-by-tenant basis, which includes reviewing the age and nature of our receivables, the payment history and financial condition of the tenant, our assessment of the tenant’s ability to meet its lease obligations and the status of negotiations of any disputes with the tenant. Any changes in the collectability assessment for an operating lease is recognized as an adjustment, which can be a reduction or increase, to rental income in the consolidated statements of operations. As a result of our quarterly collectability assessments, we recognized $1.7 million and $0.3 million as a net reduction adjustment to rental income for the three months ended March 31, 2024 and 2023, respectively.
Loan Receivable
Our loan receivable is reflected at amortized cost in the consolidated balance sheets. The amortized cost of our loan receivable is the outstanding unpaid principal balance, net of unamortized costs and fees directly associated with the origination of the loan.
Accrued interest receivable related to our loan receivable is recorded at the net amount expected to be collected within “Rents and other receivables, net” in the consolidated balance sheets.
The current expected credit losses approach under ASC Topic 326: Financial Instruments-Credit Losses requires an estimate of the credit losses expected over the life of a loan. We assess the need for an allowance for credit losses related to our loan receivable and the related interest receivable by evaluating the following: (i) asset-specific risks, which include the nature of the collateral, current loan-to-value ratio and the potential future changes in the collateral’s fair value, (ii) other relevant available information, from internal and external sources, relating to current conditions that may affect the borrower’s ability to repay the loan upon maturity, such as the borrower’s current financial condition and credit rating, and (iii) historical losses (adjusted for current conditions and reasonable and supportable forecasts) for financial assets secured with similar collateral (all taken together, the “credit loss evaluation criteria”). See “Note 5 – Loan Receivable” for details.
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Deferred Leasing Costs
We capitalize the incremental direct costs of originating a lease that would not have been incurred had the lease not been executed. As a result, deferred leasing costs will generally only include third-party broker commissions.
Debt Issuance Costs
Debt issuance costs related to a recognized debt liability are presented in the balance sheet as a reduction from the carrying value of the debt liability. This offset against the debt liability is treated similarly to a debt discount, which effectively reduces the proceeds of a borrowing. For line of credit arrangements, we present debt issuance costs as an asset and amortize the cost over the term of the line of credit arrangement. See “Note 6 – Notes Payable” for details.
Equity Based Compensation
We account for equity-based compensation in accordance with ASC Topic 718: Compensation - Stock Compensation.  Total compensation cost for all share-based awards is based on the estimated fair market value of the equity instrument issued on the grant date. For share-based awards that vest based solely on a service condition, we recognize compensation cost on a straight-line basis over the total requisite service period for the entire award. For share-based awards that vest based on a market condition, we recognize compensation cost on a straight-line basis over the requisite service period of each separately vesting tranche.  For share-based awards that vest based on a performance condition, we recognize compensation cost based on the number of awards that are expected to vest based on the probable outcome of the performance condition. Compensation cost for these awards will be adjusted to reflect the number of awards that ultimately vest. Forfeitures are recognized in the period in which they occur. See “Note 13 – Incentive Award Plan” for details.
Equity Offerings
Underwriting commissions and offering costs incurred in connection with common stock offerings and our at-the-market equity offering programs have been reflected as a reduction of additional paid-in capital. Underwriting commissions and offering costs related to our preferred stock issuances have been reflected as a direct reduction of the preferred stock balance.
Under relevant accounting guidance, sales of our common stock under forward equity sale agreements (as discussed in “Note 12 – Equity”) are not deemed to be liabilities, and furthermore, meet the derivatives and hedging guidance scope exception to be accounted for as equity instruments based on the following assessment: (i) none of the agreements’ exercise contingencies were based on observable markets or indices besides those related to the market for our own stock price and operations; and (ii) none of the settlement provisions precluded the agreements from being indexed to our own stock.
Earnings Per Share
We calculate earnings per share (“EPS”) in accordance with ASC 260: Earnings Per Share (“ASC 260”). Under ASC 260, unvested share-based payment awards that contain non-forfeitable rights to dividends are participating securities and, therefore, are included in the computation of basic EPS pursuant to the two-class method. The two-class method determines EPS for each class of common stock and participating securities according to dividends declared (or accumulated) and their respective participation rights in undistributed earnings.
Basic EPS is calculated by dividing the net income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period.
    Diluted EPS is calculated by dividing the net income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding determined for the basic EPS computation plus the potential effect of any dilutive securities including shares issuable under forward equity sale agreements and unvested share-based awards under the treasury stock method. We include unvested shares of restricted stock and unvested LTIP units in the computation of diluted EPS by using the more dilutive of the two-class method or treasury stock method. We include unvested performance units as contingently issuable shares in the computation of diluted EPS once the market criteria are met, assuming that the end of the reporting period is the end of the contingency period. In addition, we include the exchangeable notes in the computation of diluted earnings per share if the effect is dilutive. Any anti-dilutive securities are excluded from the diluted EPS calculation. See “Note 14 – Earnings Per Share” for details.
Segment Reporting
Management views the Company as a single reportable segment based on its method of internal reporting in addition to its allocation of capital and resources.
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Adoption of New Accounting Pronouncements
In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”). ASU 2022-03 clarifies that contractual sale restrictions are not considered in measuring the fair value of equity securities, and requires specific disclosures for all entities with equity securities subject to a contractual sale restriction including (1) the fair value of such equity securities reflected in the balance sheet, (2) the nature and remaining duration of the corresponding restrictions, and (3) any circumstances that could cause a lapse in the restrictions. In addition, ASU 2022-03 prohibits an entity from recognizing a contractual sale as a separate unit of account. ASU 2022-03 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. The adoption of ASU 2022-03 did not have a material impact on our consolidated financial statements.
Recent Accounting Pronouncements (Issued and Not Yet Adopted)
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). The amendments in ASU 2023-07 improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the potential impact of adopting ASU 2023-07 on our consolidated financial statements and disclosures.
3.    Investments in Real Estate
Acquisitions
The following table summarizes the wholly-owned properties we acquired during the three months ended March 31, 2024: 
PropertySubmarketDate of AcquisitionRentable Square FeetNumber of Buildings
Contractual Purchase Price(1)
(in thousands)
5000 & 5010 Azusa Canyon RdSan Gabriel Valley1/31/2024233,984 2 $84,000 
Blackstone Industrial Assets(2)
Various3/28/20243,008,578 48 996,800 
Total 2024 Property Acquisitions3,242,562 50 $1,080,800 
(1)Represents the gross contractual purchase price before certain credits, prorations, closing costs and other acquisition related costs. Total capitalized closing costs and acquisition related costs, net of certain credits, not included in the gross contractual purchase price in the above table is approximately $0.4 million. Each acquisition was funded with available cash on hand unless otherwise noted.
(2)Represents the acquisition of 48 properties pursuant to three separate transactions with three Blackstone Real Estate entities.
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    The following table summarizes amounts allocated to each major class of asset and liability on a relative fair value basis for the acquisitions noted in the table above, as of the date of each acquisition (in thousands):
 2024 Acquisitions
Assets:
Land$753,097 
Buildings and improvements276,565 
Tenant improvements3,169 
Acquired lease intangible assets(1)
79,950 
Other acquired assets(2)
1,800 
Total assets acquired$1,114,581 
Liabilities:
Acquired lease intangible liabilities(3)
$31,581 
Other assumed liabilities(4)
14,969 
Total liabilities assumed$46,550 
Net assets acquired$1,068,031 
(1)Acquired lease intangible assets is comprised of (i) $57.6 million of in-place lease intangibles with a weighted average amortization period of 4.4 years and (ii) $22.4 million of above-market lease intangibles with a weighted average amortization period of 4.0 years.
(2)Includes other working capital assets acquired at the time of acquisition.
(3)Represents below-market lease intangibles with a weighted average amortization period of 11.9 years.
(4)Includes other liabilities assumed at the time of acquisition.

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4.    Acquired Lease Intangibles  
    The following table summarizes our acquisition related intangible assets, including the value of in-place tenant leases, above-market tenant leases and a below-market ground lease, and our acquisition related intangible liabilities, including below-market tenant leases (in thousands): 
 March 31, 2024December 31, 2023
Acquired Lease Intangible Assets:  
In-place lease intangibles$394,632 $338,001 
Accumulated amortization(216,022)(207,804)
In-place lease intangibles, net$178,610 $130,197 
Above-market tenant leases$47,986 $25,598 
Accumulated amortization(15,540)(14,808)
Above-market tenant leases, net$32,446 $10,790 
Below-market ground lease$12,978 $12,978 
Accumulated amortization(336)(295)
Below-market ground lease, net$12,642 $12,683 
Acquired lease intangible assets, net$223,698 $153,670 
Acquired Lease Intangible Liabilities:  
Below-market tenant leases$(280,887)$(249,853)
Accumulated amortization
109,200 102,292 
Below-market tenant leases, net$(171,687)$(147,561)
Acquired lease intangible liabilities, net$(171,687)$(147,561)
    The following table summarizes the amortization related to our acquired lease intangible assets and liabilities for the three months ended March 31, 2024 and 2023 (in thousands):
 Three Months Ended March 31,
 20242023
In-place lease intangibles(1)
$9,148 $10,979 
Net below-market tenant leases(2)
$(6,722)$(8,331)
Below-market ground leases(3)
$41 $41 
(1)The amortization of in-place lease intangibles is recorded to depreciation and amortization expense in the consolidated statements of operations for the periods presented.
(2)The amortization of net below-market tenant leases is recorded as an increase to rental income in the consolidated statements of operations for the periods presented.
(3)The amortization of net below-market ground lease is recorded as an increase to property expenses in the consolidated statements of operations for the periods presented.
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5.    Loan Receivable

On October 26, 2023, in conjunction with the acquisition of the property located at 15801 West 1st Street, we issued a $125.0 million loan to the seller that is securitized by an adjacent 150-acre industrial development site as well as two escrow reserve accounts that were funded with loan proceeds at closing (the “loan collateral”). At issuance, the loan receivable had a loan to value ratio of less than 60% based on the estimated fair value of the loan collateral. The loan bears interest at 7.50% per annum, requires monthly interest-only payments with a balloon payment at maturity, and has an effective interest rate of 8.00% including loan origination costs and fees. The loan has a maturity date of October 26, 2028, with one 1-year extension available at the borrower’s option, subject to certain conditions plus the payment of a 0.25% extension fee. The loan allows for prepayment, in part or whole, with penalties ranging from 1.00% to 2.00% of the amount prepaid, depending on the timing of the prepayment. The loan also includes a right of first offer for us to acquire the underlying industrial development site in the future.
As of March 31, 2024, the carrying value of the loan receivable was $122.9 million, which reflects $2.1 million of unamortized origination fees/costs. As of December 31, 2023, the carrying value of the loan receivable was $122.8 million, which reflects $2.2 million of unamortized origination fees/costs. Based on our current assessment of the credit loss evaluation criteria, we determined that the allowance for potential credit losses on our loan receivable is immaterial as of March 31, 2024 and December 31, 2023.
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6.    Notes Payable
    The following table summarizes the components and significant terms of our indebtedness as of March 31, 2024 and December 31, 2023 (dollars in thousands):
 March 31, 2024December 31, 2023Margin Above SOFR
Interest Rate(1)
 
Contractual
Maturity Date
 
Unsecured and Secured Debt
Unsecured Debt:
Revolving Credit Facility$ $ S+0.685 %
(2)
6.125 %
(3)
5/26/2026
(4)
$400M Term Loan400,000 400,000 S+0.760 %
(2)
4.832 %
(5)
7/19/2024
(4)
$100M Senior Notes100,000 100,000 n/a4.290 %
 
8/6/2025
$575M Exchangeable Senior Notes due 2027
575,000  n/a4.375 %3/15/2027
$300M Term Loan300,000 300,000 S+0.760 %
(2)
3.677 %
(6)
5/26/2027
$125M Senior Notes125,000 125,000 n/a3.930 %7/13/2027
$300M Senior Notes due 2028300,000 300,000 n/a5.000 %6/15/2028
$575M Exchangeable Senior Notes due 2029
575,000  n/a4.125 %3/15/2029
$25M Series 2019A Senior Notes25,000 25,000 n/a3.880 %7/16/2029
$400M Senior Notes due 2030400,000 400,000 n/a2.125 %12/1/2030
$400M Senior Notes due 2031400,000 400,000 n/a2.150 %9/1/2031
$75M Series 2019B Senior Notes75,000 75,000 n/a4.030 %7/16/2034
Total Unsecured Debt$3,275,000 $2,125,000 
Secured Debt:   
 
 
 
7612-7642 Woodwind Drive
$ $3,613 n/a5.240 %1/5/2024
11600 Los Nietos Road(7)
2,246 2,290 n/a4.190 %5/1/2024
$60M Term Loan(8)
60,000 60,000 S+1.250 %5.060 %
(8)
10/27/2024
5160 Richton Street(7)
3,997 4,029 n/a3.790 %11/15/2024
22895 Eastpark Drive(7)
2,520 2,539 n/a4.330 %11/15/2024
701-751 Kingshill Place(7)
6,951 6,984 n/a3.900 %1/5/2026
13943-13955 Balboa Boulevard(7)
14,502 14,596 n/a3.930 %7/1/2027
2205 126th Street(9)
5,200 5,200 n/a3.910 %12/1/2027
2410-2420 Santa Fe Avenue(9)
10,300 10,300 n/a3.700 %1/1/2028
11832-11954 La Cienega Boulevard(7)
3,832 3,852 n/a4.260 %7/1/2028
Gilbert/La Palma(7)
1,692 1,741 n/a5.125 %3/1/2031
7817 Woodley Avenue(7)
2,848 2,881 n/a4.140 %8/1/2039
Total Secured Debt$114,088 $118,025 
Total Unsecured and Secured Debt$3,389,088 $2,243,025 
Less: Unamortized premium/discount and debt issuance costs(10)
(39,968)(17,111)
Total $3,349,120 $2,225,914 
 
 
 
(1)Reflects the contractual interest rate under the terms of each loan as of March 31, 2024, and includes the effect of interest rate swaps that were effective as of March 31, 2024. The interest rate is not adjusted to include the amortization of debt issuance costs or unamortized fair market value premiums and discounts.
(2)As of March 31, 2024, the interest rates on these loans are comprised of daily Secured Overnight Financing Rate (“SOFR”) for both the unsecured revolving credit facility and $400.0 million unsecured term loan, and 1-month term SOFR (“Term SOFR”) for the $300.0 million unsecured term loan (in each case increased by a 0.10% SOFR adjustment), plus an applicable margin of 0.725% per annum for the unsecured revolving credit facility and 0.80% per annum for the $300.0 million and $400.0 million unsecured term loans, based on our leverage ratio and investment grade ratings, minus a sustainability-related interest rate adjustment of 0.04%. These loans are also subject to a 0% SOFR floor.
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(3)The unsecured revolving credit facility is subject to an applicable facility fee which is calculated as a percentage of the total lenders’ commitment amount, regardless of usage. As of March 31, 2024, the applicable facility fee is 0.125% per annum, less a sustainability-related interest rate adjustment of 0.01% per annum.
(4)The unsecured revolving credit facility has two six-month extensions, and the $400.0 million unsecured term loan has two one-year extensions available at the borrower’s option, subject to certain terms and conditions. In March 2024, we submitted our notice to the lender to extend the maturity date of the $400.0 million unsecured term loan by one year to July 18, 2025.
(5)Effective April 3, 2023, daily SOFR for our $400.0 million unsecured term loan has been swapped to a fixed rate of 3.97231%, resulting in an all-in fixed rate of 4.83231% after adding the SOFR adjustment and applicable margin and subtracting the sustainability-related interest rate adjustment.
(6)Effective July 27, 2022, Term SOFR for our $300.0 million unsecured term loan has been swapped to a fixed rate of 2.81725%, resulting in an all-in fixed rate of 3.67725% after adding the SOFR adjustment and applicable margin and subtracting the sustainability-related interest rate adjustment.
(7)Fixed monthly payments of interest and principal until maturity as follows: 11600 Los Nietos ($22,637), 5160 Richton Street ($23,270), 22895 Eastpark Drive ($15,396), 701-751 Kingshill Place ($33,488), 13943-13955 Balboa Boulevard ($79,198), 11832-11954 La Cienega Boulevard ($20,194), Gilbert/La Palma ($24,008) and 7817 Woodley Avenue ($20,855).
(8)The loan is secured by six properties and has three one-year extensions available at the borrower’s option, subject to certain terms and conditions. Loan has interest-only payment terms bearing interest at Term SOFR increased by a 0.10% SOFR adjustment plus an applicable margin of 1.25% per annum. Effective April 3, 2023, Term SOFR for this loan has been swapped to a fixed rate of 3.710%, resulting in an all-in fixed rate of 5.060% after adding the SOFR adjustment and applicable margin.
(9)Fixed monthly payments of interest only.
(10)Excludes unamortized debt issuance costs related to our unsecured revolving credit facility, which are presented in the line item “Deferred loan costs, net” in the consolidated balance sheets.
Contractual Debt Maturities    
    The following table summarizes the contractual debt maturities and scheduled amortization payments, excluding debt premiums/discounts and debt issuance costs, as of March 31, 2024, and does not consider extension options available to us as noted in the table above (in thousands):
April 1, 2024 - December 31, 2024$469,466 
2025100,973 
20267,587 
20271,019,078 
2028314,218 
Thereafter1,477,766 
Total$3,389,088 
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Issuance of Exchangeable Senior Notes
In March 2024, we issued $575.0 million in aggregate principal amount of 4.375% exchangeable senior unsecured notes due 2027 (the “2027 Exchangeable Notes”) and $575.0 million in aggregate principal amount of 4.125% exchangeable senior unsecured notes due 2029 (the “2029 Exchangeable Notes” and together with the 2027 Exchangeable Notes, the “Exchangeable Notes”). The net proceeds from the issuance, after deducting the initial purchasers’ discounts, underwriting commissions and other offering expenses, were approximately $563.1 million for the 2027 Exchangeable Notes and $563.1 million for the 2029 Exchangeable Notes. Interest on the Exchangeable Notes is payable semiannually on March 15 and September 15 of each year beginning on September 15, 2024. The 2027 Exchangeable Notes will mature on March 15, 2027 and the 2029 Exchangeable Notes will mature on March 15, 2029, in each case unless earlier repurchased, exchanged or (in the case of 2029 Exchangeable Notes) redeemed.
Before December 15, 2026 (in the case of the 2027 Exchangeable Notes) or December 15, 2028 (in the case of the 2029 Exchangeable Notes), noteholders will have the right to exchange their notes only upon the occurrence of certain events. From and after December 15, 2026 (in the case of the 2027 Exchangeable Notes) or December 15, 2028 (in the case of the 2029 Exchangeable Notes), noteholders may exchange their notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date of the applicable series of Exchangeable Notes. Exchanges will be settled by delivering cash up to the principal amount of the Exchangeable Notes exchanged, and in respect of the remainder of the exchanged value, if any, in excess thereof, in cash or in a combination of cash and shares of our common stock, at our option. The initial exchange rate is 15.7146 shares of our common stock per $1,000 principal amount of the Exchangeable Notes, which represents an initial exchange price of approximately $63.64 per share of our common stock. The initial exchange price represents a premium of approximately 30.0% over the last reported sale price of $48.95 per share of our common stock on March 26, 2024.
We may not redeem the 2027 Exchangeable Notes at our option prior to their maturity. The 2029 Exchangeable Notes will be redeemable, in whole or in part (subject to certain limitations), for cash at our option at any time, and from time to time, on or after May 20, 2027 and on or before the 41st scheduled trading day immediately before the maturity date of the 2029 Exchangeable Notes, but only if the last reported sale price per share of our common stock exceeds 130% of the exchange price of the 2029 Exchangeable Notes for a specified period of time and certain other conditions are satisfied. The redemption price will be equal to the principal amount of the 2029 Exchangeable Notes to be redeemed, plus accrued and unpaid interest, if any.
If a fundamental change (e.g. change in control, delisting of our common stock or shareholders’ approval of liquidation or dissolution plan) occurs, then, subject to limited exception, noteholders may require us to repurchase their notes for cash at a repurchase price equal to the principal amount plus any accrued and unpaid interest. In addition, if a specific make-whole fundamental change occurs prior to the maturity date or if we issue a notice of redemption with respect to the 2029 Exchangeable Notes, the exchange rate will be increased, in certain circumstances by pre-defined amounts.
In connection with the offering for each series of Exchangeable Notes, we entered into a registration rights agreement pursuant to which we agreed to register the resale of the shares of our common stock, if any, deliverable upon exchange of the Exchangeable Notes. If certain conditions relating to our obligations under the registration rights agreement are not satisfied, then we will pay additional interest on the applicable series of Exchangeable Notes, in certain circumstances, at a rate per annum not exceeding 0.5%. In addition, if those conditions are not satisfied after the regular record date immediately preceding the maturity date of Exchangeable Notes, then we will pay an additional interest payment at maturity for an amount equal to 3% of principal for the applicable series of Exchangeable Notes. We account for such additional interest amounts as contingent obligations in accordance with ASC Subtopic 825-20: Financial Instrument - Registration Payment Arrangements, which are measured separately in accordance with ASC Subtopic 450-20: Loss Contingencies. Because payment of such additional interest amounts is not probable as of March 31, 2024, they have not been recognized or included in the allocation of the proceeds from Exchangeable Notes as of March 31, 2024.
Credit Agreement
As of March 31, 2024, under the Fourth Amended and Restated Credit Agreement (the “Credit Agreement”), we have a $1.0 billion unsecured revolving credit facility (the “Revolver”), a $300.0 million unsecured term loan facility (the “$300 Million Term Loan”) and a $400.0 million unsecured term loan facility (the “$400 Million Term Loan” and together with the $300 Million Term Loan, the “Term Facility”). Subject to certain terms and conditions set forth in the Credit Agreement, we may request additional lender commitments and increase the size of the Credit Agreement by an additional $800.0 million, which may be comprised of additional revolving commitments under the Revolver, an increase to the Term Facility, additional term loan tranches or any combination of the foregoing.
The Revolver is scheduled to mature on May 26, 2026 and has two six-month extension options available. The $400 Million Term Loan is scheduled to mature on July 19, 2024 and has two one-year extension options available. In March 2024,
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we submitted our notice to the lender to extend the maturity date of the $400.0 million unsecured term loan by one year to July 18, 2025. The $300 Million Term Loan matures on May 26, 2027.
Interest on the Credit Agreement is generally to be paid based upon, at our option, either (i) Term SOFR plus the applicable margin; (ii) daily SOFR plus the applicable margin or (iii) the applicable base rate (which is defined as the highest of (a) the federal funds rate plus 0.50%, (b) the administrative agent’s prime rate, (c) Term SOFR plus 1.00%, and (d) one percent (1.00%) plus the applicable margin. Additionally, Term SOFR and daily SOFR will be increased by a 0.10% SOFR adjustment. The applicable margin for the Term Facility ranges from 0.80% to 1.60% per annum for SOFR-based loans and 0.00% to 0.60% per annum for base rate loans, depending on our leverage ratio and investment grade ratings. The applicable margin for the Revolver ranges from 0.725% to 1.400% per annum for SOFR-based loans and 0.00% to 0.40% per annum for base rate loans, depending on our leverage ratio and investment grade ratings. In addition to the interest payable on amounts outstanding under the Revolver, we are required to pay an applicable credit facility fee, on each lender's commitment amount under the Revolver, regardless of usage. The applicable credit facility fee ranges from 0.125% to 0.300% per annum, depending on our leverage ratio and investment grade rating.
In addition, the Credit Agreement also features a sustainability-linked pricing component whereby the applicable margin and applicable credit facility fee can decrease by 0.04% and 0.01%, respectively, or increase by 0.04% and 0.01%, respectively, if we meet, or do not meet, certain sustainability performance targets, as applicable. In February 2023, after certifying that our sustainability performance target was met for 2022, the applicable margin decreased by 0.040% to 0.685% and 0.760% for the Revolver and Term Facility, respectively, and the credit facility fee decreased by 0.010% to 0.115%.
The Revolver and the Term Facility may be voluntarily prepaid in whole or in part at any time without premium or penalty. Amounts borrowed under the Term Facility and repaid or prepaid may not be reborrowed.
The Credit Agreement contains usual and customary events of default including defaults in the payment of principal, interest or fees, defaults in compliance with the covenants set forth in the Credit Agreement and other loan documentation, cross-defaults to certain other indebtedness, and bankruptcy and other insolvency defaults. If an event of default occurs and is continuing under the Credit Agreement, the unpaid principal amount of all outstanding loans, together with all accrued unpaid interest and other amounts owing in respect thereof, may be declared immediately due and payable.
On March 31, 2024, we did not have any borrowings outstanding under the Revolver, leaving $1.0 billion available for future borrowings.
Debt Covenants
The Credit Agreement, $60.0 million term loan facility (“$60 Million Term Loan”), $100.0 million unsecured guaranteed senior notes (the “$100 Million Notes”), $125.0 million unsecured guaranteed senior notes (the “$125 Million Notes”) and $25.0 million unsecured guaranteed senior notes and $75.0 million unsecured guaranteed senior notes (together the “Series 2019A and 2019B Notes”) all include a series of financial and other covenants that we must comply with, including the following covenants which are tested on a quarterly basis:
Maintaining a ratio of total indebtedness to total asset value of not more than 60%;
For the Credit Agreement and $60 Million Term Loan, maintaining a ratio of secured debt to total asset value of not more than 45%;
For the $100 Million Notes, $125 Million Notes and Series 2019A and 2019B Notes (together the “Senior Notes”), maintaining a ratio of secured debt to total asset value of not more than 40%;
For the Senior Notes, maintaining a ratio of total secured recourse debt to total asset value of not more than 15%;
For the Senior Notes, maintaining a minimum tangible net worth of at least the sum of (i) $760,740,750, and (ii) an amount equal to at least 75% of the net equity proceeds received by the Company after September 30, 2016;
Maintaining a ratio of adjusted EBITDA (as defined in each of the loan agreements) to fixed charges of at least 1.5 to 1.0; 
For the Credit Agreement and Senior Notes, maintaining a ratio of total unsecured debt to total unencumbered asset value of not more than 60%; and
For the Credit Agreement and Senior Notes, maintaining a ratio of unencumbered NOI (as defined in each of the loan agreements) to unsecured interest expense of at least 1.75 to 1.00. 
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The $300.0 million of 5.000% Senior Notes due 2028, $400.0 million of 2.125% Senior Notes due 2030 and $400.0 million of 2.150% Senior Notes due 2031 (together the “Registered Notes”) contain the following covenants (as defined in the indentures) that we must comply with:
Maintaining a ratio of total indebtedness to total asset value of not more than 60%;
Maintaining a ratio of secured debt to total asset value of not more than 40%;
Maintaining a Debt Service Coverage Ratio of at least 1.5 to 1.0; and
Maintaining a ratio of unencumbered assets to unsecured debt of at least 1.5 to 1.0.
    Subject to the terms of the Credit Agreement, $60 Million Term Loan, Senior Notes and Registered Notes, upon certain events of default, including, but not limited to, (i) a default in the payment of any principal or interest, (ii) a default in the payment of certain of our other indebtedness and (iii) a default in compliance with the covenants set forth in the debt agreement, the principal and accrued and unpaid interest on the outstanding debt may be declared immediately due and payable at the option of the administrative agent, lenders, trustee and/or noteholders, as applicable, and in the event of bankruptcy and other insolvency defaults, the principal and accrued and unpaid interest on the outstanding debt will become immediately due and payable. In addition, we are required to maintain at all times a credit rating on the Senior Notes from either Standard and Poor’s Ratings Services (“S&P), Moody’s Investors Services (“Moody’s”) or Fitch Ratings. Our credit ratings as of March 31, 2024, were BBB+ from S&P, BBB+ from Fitch Ratings and Baa2 from Moody’s.
    We were in compliance with all of our required quarterly debt covenants as of March 31, 2024. 
 
7.    Leases
    Lessor
    We lease industrial space to tenants primarily under non-cancelable operating leases that generally contain provisions for minimum base rents plus reimbursement for certain operating expenses. Total minimum lease payments are recognized in rental income on a straight-line basis over the term of the related lease and estimated reimbursements from tenants for real estate taxes, insurance, common area maintenance and other recoverable operating expenses are recognized in rental income in the period that the expenses are incurred.
    For the three months ended March 31, 2024, we recognized $204.3 million of rental income related to operating lease payments, of which $167.8 million are for fixed lease payments and $36.5 million are for variable lease payments, respectively. For the comparable three month-period ended March 31, 2023, we recognized $176.8 million of rental income related to operating lease payments, of which $144.8 million were for fixed lease payments and $32.0 million were for variable lease payments, respectively.
    The following table sets forth the undiscounted cash flows for future minimum base rents to be received under operating leases as of March 31, 2024 (in thousands):
Twelve Months Ended March 31, 
2025$685,870 
2026615,758 
2027506,498 
2028388,387 
2029295,636 
Thereafter944,009 
Total$3,436,158 
    The future minimum base rents in the table above excludes tenant reimbursements of operating expenses, amortization of adjustments for deferred rent receivables and the amortization of above/below-market lease intangibles.
    Lessee    
    We lease office space as part of conducting our day-to-day business. As of March 31, 2024, our office space leases have current remaining lease terms ranging from approximately one year to four years with options to renew for an additional term of five years each. As of March 31, 2024, we also have a ground lease which we assumed in the acquisition of 2970 East 50th Street in March 2022 that has a current remaining lease term of approximately 36.8 and four additional ten-year options to renew.
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In November 2021, we executed a sublease agreement for one of our leased office spaces as a result of the implementation of a work from home flexibility program in 2021. In February 2023, the sublease was terminated prior to its September 2025 expiration. As a result, we recorded a $0.2 million impairment charge for the write down of the ROU asset associated with the original office space lease during the three months ended March 31, 2023, which is included in “Other expenses” in the accompanying consolidated statements of operations, with a corresponding adjustment to “Other assets” in the consolidated balance sheets.
    As of March 31, 2024, total ROU assets and lease liabilities were approximately $6.7 million and $8.4 million, respectively. As of December 31, 2023, total ROU assets and lease liabilities were approximately $7.0 million and $8.9 million, respectively.
    The tables below present financial and supplemental information associated with our leases.
Three Months Ended March 31,
Lease Cost(1) (in thousands)
20242023
Operating lease cost$415 $484 
Variable lease cost43 33 
Total lease cost$458 $517 
(1)Amounts are included in “General and administrative” and “Property expenses” in the accompanying consolidated statements of operations.
Three Months Ended March 31,
Other Information (in thousands)20242023
Cash paid for amounts included in the measurement of operating lease liabilities$572 $583 
Lease Term and Discount RateMarch 31, 2024December 31, 2023
Weighted-average remaining lease term(1)
45.7 years43.4 years
Weighted-average discount rate(2)
3.85 %3.84 %
(1)Includes the impact of extension options that we are reasonably certain to exercise.
(2)Because the rate implicit in each of our leases was not readily determinable, we used our incremental borrowing rate. In determining our incremental borrowing rate for each lease, we considered recent rates on secured borrowings, observable risk-free interest rates and credit spreads correlating to our creditworthiness, the impact of collateralization and the term of each of our lease agreements.
    The following table summarizes the maturity of operating of lease liabilities under our corporate office leases and ground leases as of March 31, 2024 (in thousands):
March 31, 2024
April 1, 2024 - December 31, 2024$1,725 
20251,122 
2026681 
2027696 
2028164 
Thereafter19,887 
Total undiscounted lease payments$24,275 
Less imputed interest(15,851)
Total lease liabilities$8,424 

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8.    Interest Rate Derivatives
The following table sets forth a summary of the terms and fair value of our interest rate swaps at March 31, 2024 and December 31, 2023 (dollars in thousands):
    Notional Value
Fair Value of Interest Rate
Derivative Assets/ (Liabilities)(1)
Derivative InstrumentEffective DateMaturity DateInterest Strike RateMarch 31, 2024December 31, 2023March 31, 2024December 31, 2023
Interest Rate Swaps
7/27/20225/26/20272.81700 %$150,000 $150,000 $5,922 $3,894 
Interest Rate Swaps
7/27/20225/26/20272.81750 %$150,000 $150,000 $5,913 $3,886 
Interest Rate Swaps
4/3/20236/30/20253.98500 %$200,000 $200,000 $1,990 $951 
Interest Rate Swap
4/3/20236/30/20253.96625 %$100,000 $100,000 $1,018 $503 
Interest Rate Swap
4/3/20236/30/20253.95300 %$100,000 $100,000 $1,034 $522 
Interest Rate Swap
4/3/20237/30/20263.71000 %$60,000 $60,000 $860 $140 
(1)The fair value of derivative assets is included in the line item “Interest rate swap asset” in the accompanying consolidated balance sheets.
Our interest rate swaps and T-Locks are designated and qualify as cash flow hedges. We do not use derivatives for trading or speculative purposes. The change in fair value of derivatives designated and qualifying as cash flow hedges is initially recorded in AOCI and is subsequently reclassified from AOCI into earnings in the period that the hedged forecasted transactions affect earnings. The following table sets forth the impact of our interest rate derivatives on our financial statements for the periods presented (in thousands): 
 Three Months Ended March 31,
 20242023
Interest Rate Swaps in Cash Flow Hedging Relationships:  
Amount of gain (loss) recognized in AOCI on derivatives$10,361 $(4,206)
Amount of gain reclassified from AOCI into earnings under “Interest expense”(1)
$3,382 $1,136 
Total interest expense presented in the Consolidated Statement of Operations in which the effects of cash flow hedges are recorded (line item “Interest expense”)$14,671 $13,701 
(1)Includes losses that have been reclassified from AOCI into interest expense related to (i) the treasury rate lock agreements that were settled in August 2021 and March 2023 and for which amounts will continue to be reclassified over the ten-year and five-year terms of the hedged transactions, and (ii) the interest rate swap that was terminated in May 2022 and for which amounts will continue to be reclassified into interest expense through its original maturity date (November 2024).
As of March 31, 2024, we estimate that approximately $10.2 million of net unrealized gains will be reclassified from AOCI into earnings as a net decrease to interest expense over the next 12 months.
Credit-risk-related Contingent Features
    Certain of our agreements with our derivative counterparties contain a provision where if we default on any of our indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender within a specified time period, then we could also be declared in default on its derivative obligations.
    Certain of our agreements with our derivative counterparties contain provisions where if a merger or acquisition occurs that materially changes our creditworthiness in an adverse manner, we may be required to fully collateralize our obligations under the derivative instrument.

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9.    Fair Value Measurements
    ASC Topic 820: Fair Value Measurement (“ASC 820”) defines fair value and establishes a framework for measuring fair value. ASC 820 emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).
    Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
    Recurring Measurements – Interest Rate Swaps
    We use interest rate swap agreements to manage our interest rate risk. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves.
    To comply with the provisions of ASC 820, we incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.
    Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by ourselves and our counterparties. However, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, we have determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.
    The table below sets forth the estimated fair value of our interest rate swaps as of March 31, 2024 and December 31, 2023, which we measured on a recurring basis by level within the fair value hierarchy (in thousands).
 
 Fair Value Measurement Using
Total Fair ValueQuoted Price in Active Markets for Identical Assets and Liabilities
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
March 31, 2024
Interest rate swap asset
$16,737 $ $16,737 $ 
December 31, 2023
Interest rate swap asset
$9,896 $ $9,896 $