Commitments and Contingencies

9 Months Ended

Sep. 30, 2019

Commitments and Contingencies.

Commitments and Contingencies

10. Commitments and Contingencies

Litigation

We are involved from time-to-time in various legal and regulatory proceedings that arise in the ordinary course of our business, including, but not limited to, commercial disputes, environmental matters, and litigation in connection with transactions such as acquisitions and divestitures. We believe that current proceedings will not have a material adverse effect on our financial condition, liquidity, or results of operations. We record a liability when a loss is considered probable and the amount can be reasonably estimated.

During the first quarter of 2019, we settled a lawsuit with our former insurance broker, Aon Risk Services Central Inc., related to the significant flood damage sustained at Opry Mills in May 2010. In accordance with a previous agreement with the prior co-investor in Opry Mills, a portion of the settlement was remitted to the co-investor. Our share of the settlement was approximately $68.0 million, which was recorded as other income in the accompanying consolidated statement of operations and comprehensive income.

Lease Commitments

As of September 30, 2019, a total of 23 of our consolidated properties are subject to ground leases.  The termination dates of these ground leases range from 2019 to 2090, including periods for which exercising an extension option is reasonably assured.  These ground leases generally require us to make fixed annual rental payments, or a fixed annual rental payment plus a percentage rent component based upon the revenues or total sales of the property.  In addition, we have several regional office locations that are subject to leases with termination dates ranging from 2019 to 2028.  These office leases generally require us to make fixed annual rental payments plus pay our share of common area, real estate, and utility expenses.  Some of our ground and office leases include escalation clauses.  All of our lease arrangements are classified as operating leases.  We incurred ground lease

expense and office lease expense, which are included in other expense and home office and regional expense, respectively, as follows:

	For the Three Months Ended		For the Nine Months Ended
	September 30, 2019		September 30, 2019
Lease Cost
Operating lease cost	$	7,937	$	23,045
Variable lease cost		4,183		12,513
Sublease income		(208)		(542)
Total lease cost	$	11,912	$	35,016

For the three and nine months ended September 30, 2018, we incurred $11,431 and $34,858 of lease expense, respectively.

	For the Nine Months Ended
	September 30, 2019
Other Information
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	36,268
Weighted-average remaining lease term - operating leases		35.8 years
Weighted-average discount rate - operating leases		4.87%

Minimum lease payments due under these leases for years ending December 31, excluding applicable extension options and renewal options unless reasonably certain of exercise and any sublease income, are as follows:

2019	$	32,444
2020		32,438
2021		32,440
2022		32,451
2023		32,583
Thereafter		941,418
	$	1,103,774
Impact of discounting		(585,162)
Operating lease liabilities	$	518,612

Lease liabilities are included within other liabilities in the consolidated balance sheet.  Right of use assets are included within deferred costs and other assets in the consolidated balance sheet.  

Guarantees of Indebtedness

Joint venture debt is the liability of the joint venture and is typically secured by the joint venture property, which is non-recourse to us. As of September 30, 2019 and December 31, 2018, the Operating Partnership guaranteed joint venture related mortgage indebtedness of $211.7 million and $216.1 million, respectively (of which we have a right of recovery from our venture partners of $10.8 million). Mortgages guaranteed by the Operating Partnership are secured by the property of the joint venture

which could be sold in order to satisfy the outstanding obligation and which has an estimated fair value in excess of the guaranteed amount.

Concentration of Credit Risk

Our U.S. Malls, Premium Outlets, and The Mills rely upon anchor tenants to attract customers; however, anchors do not contribute materially to our financial results as many anchors own their spaces. All material operations are within the United States and no customer or tenant accounts for 5% or more of our consolidated revenues.

Hurricane Impacts

During the third quarter of 2017, our two wholly-owned properties located in Puerto Rico sustained significant damage as a result of Hurricane Maria. Since the date of the loss, we have received $70.7 million of insurance proceeds from third-party carriers related to the two properties located in Puerto Rico, of which $43.6 million was used for property restoration and remediation and to reduce the insurance recovery receivable.  During the three and nine months ended September 30, 2019, we recorded $1.6 million and $9.2 million, respectively, as business interruption income.  During the three and nine months ended September 30, 2018, we recorded $17.0 million as business interruption income.  These amounts were recorded in other income in the accompanying consolidated statements of operations and comprehensive income.