Investments In Direct Financing Lease

9 Months Ended

Sep. 30, 2019

Capital Leases, Net Investment in Direct Financing Leases [Abstract]

Investments in a Direct Financing Lease

Investment in Direct Financing Leases

The Company’s investment in direct financing leases relates to the Company’s leases of two public charter school properties as of September 30, 2019 and December 31, 2018, with affiliates of Imagine Schools, Inc. (Imagine). As described in Note 2, the Company adopted Topic 842 on January 1, 2019 and elected to not reassess its prior conclusions about lease classification, therefore these lease arrangements continue to be classified as direct financing leases. Investment in direct financing leases, net represents estimated unguaranteed residual values of leased assets and net unpaid rentals, less related deferred income. The following table summarizes the carrying amounts of investment in direct financing leases, net as of September 30, 2019 and December 31, 2018 (in thousands):

 

	September 30, 2019			December 31, 2018
Total minimum lease payments receivable	$	34,659		$	36,352
Estimated unguaranteed residual value of leased assets	16,509			16,509
Less deferred income (1)	(30,441		)	(32,303		)
Investment in direct financing leases, net	$	20,727		$	20,558

⁽¹⁾ Deferred income is net of $0.3 million of initial direct costs at September 30, 2019 and December 31, 2018.

During the year ended December 31, 2018, the Company completed the sale of four public charter school properties leased to Imagine, located in Arizona, Ohio and Washington D.C. for net proceeds of $43.4 million. Accordingly, the Company reduced its investment in direct financing leases, net, by $37.9 million, which included $31.6 million in original acquisition costs. A gain of $5.5 million was recognized during the year ended December 31, 2018.

The Company’s direct financing leases have expiration dates ranging from approximately 12 to 13 years. Future minimum rentals receivable on these direct financing leases at September 30, 2019 are as follows (in thousands): 

	Amount
Year:
2019	$	572
2020	2,333
2021	2,403
2022	2,475
2023	2,550
Thereafter	24,326
Total	$	34,659