Leases

3 Months Ended

Mar. 31, 2022

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 common area maintenance ("CAM").

If we conclude that collection of lease payments is not probable, any difference between the revenue that would have been recognized under the straight-line method and the lease payments that have been collected is recognized as a current period adjustment to rental revenues. Any other changes in collectability reserves for leases not subject to the collectability constraint are also recorded as a current period adjustment to rental revenues.

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):


	Three Months Ended March 31,
	2022		2021
Rental revenue - fixed payments	$	202,696	$	187,387
Rental revenue - variable payments (1)	72,518		70,792
Rental and related revenue	$	275,214	$	258,179

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

Lessee Accounting

As of March 31, 2022, our lease arrangements, where we are the lessee, primarily consisted of office and ground leases. For these lease arrangements, as required by Accounting Standards Codification Topic 842, Leases ("ASC 842"), we recognized right-of-use ("ROU") assets and the corresponding lease liabilities representing the discounted value of future lease payments. In determining these amounts, we elected an available practical expedient that allows us, as a lessee, to not separate lease and non-lease components.

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. Two ground leases that were entered into subsequent to the adoption of ASC 842 are classified as finance leases. For our operating leases, we recognized ROU assets and related lease liabilities as follows (in thousands):


	March 31, 2022		December 31, 2021
ROU assets	$	36,268	$	36,774
Lease liabilities	41,006		41,363

For our finance leases, we recognized ROU assets and related lease liabilities as follows (in thousands):


	March 31, 2022		December 31, 2021
ROU assets	$	37,365	$	37,540
Lease liabilities	39,489		39,194

ROU assets were included within Other Escrow Deposits and Other Assets and lease liabilities were included within Other Liabilities on our Consolidated Balance Sheets.