Leases (Notes)

12 Months Ended

Dec. 31, 2020

Lease Income

Our leases generally include scheduled rent increases, but do not include variable payments based on indexes. Our rental revenue is primarily based on fixed, non-cancelable leases. Our variable rental revenue primarily consists of amounts recovered from lessees for property tax, insurance and CAM.

All revenues related to lease and lease-related services are included in, and comprise substantially all of, the caption "Rental and Related Revenue" on the Consolidated Statements of Operations and Comprehensive Income. The components of Rental and Related Revenue are as follows (in thousands):


	Twelve Months Ended December 31,
	2020		2019		2018
Rental revenue - fixed payments	$	692,753	$	645,759	$	587,187
Rental revenue - variable payments (1)	236,441		210,074		198,249
Rental and related revenue	$	929,194	$	855,833	$	785,436

(1) Primarily includes tenant recoveries for real estate taxes, insurance and CAM.

The future minimum rents due to us under non-cancelable operating leases are as follows (in thousands):


Year	December 31, 2020
2021	$	724,044
2022	696,757
2023	630,830
2024	564,468
2025	488,175
Thereafter	2,042,940
	$	5,147,214

Lessee Accounting

As of December 31, 2020, our lease arrangements, where we are the lessee, primarily consisted of office and ground leases. For these lease arrangements, we recognized ROU assets and the corresponding lease liabilities representing the discounted value of future lease payments required under ASC 842. In determining these amounts, we elected an available practical expedient that allows us, as a lessee, to not separate lease and non-lease components. Expenses recognized on these leases for the year ended December 31, 2020 were not material.

All of our office leases are classified as operating leases under ASC 842. Ground leases that were classified as operating leases prior to adoption of ASC 842 continue to be accounted for as operating leases by electing the practical expedient under ASC 842. In July 2020, we entered into a long-term ground lease which met the criteria to be classified as a finance lease. In December 2020, we entered into another long-term ground lease, for which a ROU asset and associated liability will be recognized when our construction commences in early 2021.

As of December 31, 2020, a $38.9 million ROU asset associated with operating leases was included within Other Escrow Deposits and Other Assets and a corresponding lease liability of $42.9 million was included in Other Liabilities on our Consolidated Balance Sheets. As of December 31, 2019, total ROU assets and liabilities for operating leases were $40.5 million and $46.9 million, respectively. The following table summarizes the future lease payments (in thousands) to be made under non-cancellable operating lease arrangements:


Year	December 31, 2020
2021	$	4,605
2022	4,470
2023	4,128
2024	3,111
2025	1,427
Thereafter	82,760
Total undiscounted operating lease payments	$	100,501
Less: imputed interest	57,627
Present value of operating lease payments	$	42,874

The weighted average remaining lease term for our operating lease arrangements, on a combined basis as of December 31, 2020, was 33.7 years. The weighted average discount rate for our operating lease arrangements as of December 31, 2020 was 4.43%. As the discount rates implied in our operating lease arrangements were not readily determinable, we utilized our current credit ratings and credit yields observed from market traded securities with similar credit ratings to form a reasonable basis to establish secured borrowing rates when determining the present value of future operating lease payments.

As of December 31, 2020, a $19.2 million ROU asset associated with the finance lease was included within Other Escrow Deposits and Other Assets and a corresponding $19.4 million lease liability was included within Other Liabilities on our Consolidated Balance Sheets. The future lease payments (in thousands) under our finance lease as of December 31, 2020 for five years and thereafter are as follows:


Year	December 31, 2020
2021	$	245
2022	847
2023	864
2024	881
2025	899
Thereafter	64,989
Total undiscounted finance lease payments	$	68,725
Less: imputed interest	49,295
Present value of finance lease payments	$	19,430

The ground lease payment obligation is subject to an annual consumer price index increase limited within a minimum 2% and a maximum 3% increase. The contractual obligations for this lease included above assume the minimum annual increase for the remainder of the lease term since we cannot predict future adjustments. The remaining lease term on this finance lease as of December 31, 2020 was 49.6 years prior to any impact of lease extension options or purchase options. The discount rate in the finance lease agreement was determined to be 5.30%, which was the lessor's implicit rate in the lease that was readily determinable when the lease commenced.