Commitments and Contingencies

3 Months Ended

Mar. 31, 2020

Commitments and Contingencies Disclosure [Abstract]

Legal Proceedings

As of March 31, 2020, the Company and the Operating Partnership were not involved in any material litigation nor, to management's knowledge, was any material litigation threatened against us or our portfolio which if adversely determined could have a material adverse impact on us.

Environmental Matters

Our management believes that the properties are in compliance in all material respects with applicable Federal, state and local ordinances and regulations regarding environmental issues. Management is not aware of any environmental liability that it believes would have a materially adverse impact on our financial position, results of operations or cash flows. Management is unaware of any instances in which it would incur significant environmental cost if any of our properties were sold.

Ground Lease Arrangements

We are a tenant under ground leases for certain properties. These leases have expirations from 2022 to 2114, or 2043 to 2114 as fully extended. Certain leases offer extension options which we assess against relevant economic factors to determine whether we are reasonably certain of exercising or not exercising the option. Lease payments associated with renewal periods that we are reasonably certain will be exercised, if any, are included in the measurement of the corresponding lease liability and right of use asset.

Certain of our ground leases are subject to rent resets, generally based on a percentage of the then fair market value, a fixed amount, or a percentage of the preceding rent at specified future dates. Rent resets will be recognized in the periods in which they are incurred.

The table below summarizes our current ground lease arrangements as of March 31, 2020:



Property ⁽¹⁾	Year of Current Expiration	Year of Final Expiration ⁽²⁾
1185 Avenue of the Americas	2043	2043
625 Madison Avenue	2022	2054
420 Lexington Avenue	2050	2080
711 Third Avenue ⁽³⁾	2033	2083
461 Fifth Avenue ⁽⁴⁾	2027	2084
1055 Washington Blvd, Stamford, Connecticut	2090	2090
1080 Amsterdam Avenue ⁽⁵⁾	2111	2111
30 East 40th Street ⁽⁵⁾	2114	2114
126 Nassau Street ⁽⁴⁾	2119	2119
Other	Various	Various


(1)	All leases are classified as operating leases unless otherwise specified.


(2)	Reflects exercise of all available renewal options.


(3)	The Company owns 50% of the fee interest.


(4)	The Company has an option to purchase the ground lease for a fixed price on a specific date. The lease is classified as a financing lease.


(5)	A portion of the lease is classified as a financing lease.

The following is a schedule of future minimum lease payments as evaluated in accordance with ASC 842 for our financing leases and operating leases with initial terms in excess of one year as of March 31, 2020 (in thousands):



	Financing leases			Operating leases ⁽¹⁾
Remaining 2020	$	5,812		$	22,077
2021	34,885			29,452
2022	5,881			27,148
2023	5,927			24,844
2024	5,999			24,863
2025	6,266			24,962
Thereafter	1,018,013			618,326
Total minimum lease payments	$	1,082,783		$	771,672
Amount representing interest	(920,484		)
Amount discounted using incremental borrowing rate				(407,682		)
Lease liabilities	$	162,299		$	363,990


(1)	As of March 31, 2020, the total minimum sublease rentals to be received in the future under non-cancelable subleases is $1.6 billion.

During the three months ended March 31, 2020, we recognized $2.0 million of financing lease costs, of which $1.7 million represented interest and $0.3 million represented amortization of the right-of-use assets. During the three months ended March 31, 2019, we recognized $1.1 million of financing lease costs, of which $0.8 million represented interest and $0.3 million represented amortization of the right-of-use assets. These amounts are included in interest expense, net of interest income and depreciation and amortization in our consolidated statements of operations, respectively.

During the three months ended March 31, 2020 and 2019, we recognized $7.4 million and $8.3 million of operating lease costs, respectively, which is calculated on a straight-line basis over the remaining lease terms. This amount is included in operating lease rent in our consolidated statements of operations.

As of March 31, 2020, the weighted-average discount rate used to calculate the lease liabilities was 8.01%. As of March 31, 2020, the weighted-average remaining lease term was 70 years.