LEASES

3 Months Ended

Mar. 31, 2020

The Company adopted ASU 2016-02 on January 1, 2019 using the modified retrospective adoption method. The adoption resulted in an increase of the ROU assets of approximately $2.7 million and lease liabilities of $2.9 million. The difference of $0.2 million relates to straight-line rent accruals and lease incentive liabilities that were reclassified to ROU assets for operating leases.

Lessee Leases

Operating lease costs and variable lease costs included in selling and administrative costs for the three months ended March 31, 2020 were $0.2 million and de minimis, respectively.

The annual maturities of lease liabilities as of March 31, 2020 were as follows:



(in thousands)	Lease Commitments
2020	$	549
2021	802
2022	824
2023	624
2024	550
2025 and thereafter	546
Total undiscounted lease payments	3,895
Imputed interest	503
Total lease liabilities	$	3,392

The weighted-average remaining lease term for our operating leases was 5.46 years as of March 31, 2020. The weighted average discount rate of our operating leases was 5.32% as of March 31, 2020. Cash paid for amounts included in the measurement of lease liabilities was $0.2 million and $0.3 million for the three months ended March 31, 2020 and 2019, respectively.

Lessor Leases

The Company owns a parcel of real property consisting of approximately 192 acres located in the State of Texas (the "Real Property") that is subject to a long-term triple net lease agreement with an unrelated third-party. The lease provides for future rent escalations and renewal options. The initial lease term ends in May 2034. The lessee bears the cost of maintenance and property taxes. Rental income from operating leases is recognized on a straight-line basis, based on contractual lease terms with fixed and determinable increases over the non-cancellable term of the related lease when collectability is reasonably assured. Rental income includes a de minimus amount of amortization of below market lease liabilities for the March 31, 2020 and March 31, 2019. The estimated aggregate future amortization of below market lease liabilities is $0.1 million for 2020, $0.1 million for 2021, $0.1 million for 2022, $0.1 million for 2023 and $0.1 million for 2024. Realization of the residual values of the assets under lease is dependent on the future ability to market the assets under prevailing market conditions. The lease is classified as an operating lease and the underlying leased assets are included in Property and Equipment (Note 10, "Property and Equipment").

Lease income related to operating leases for the three months ended March 31, 2020 and March 31, 2019 was $3.3 million and $3.3 million, respectively.

The following table provides the net book value of operating lease property included in property and equipment in the consolidated balance sheets at March 31, 2020 and December 31, 2019:



(in thousands)	March 31, 2020			December 31, 2019

Land	$	21,120			$21,120
Site improvements	91,308			91,308
Buildings	580			580
Gross property and equipment leased	113,008			113,008
Accumulation depreciation	(15,382		)	(14,345		)
Net property and equipment leased	$	97,626		$	98,663

As of March 31, 2020, future undiscounted cash flows to be received in each of the next five years and thereafter, on non-cancelable operating leases are as follows:



(in thousands)
2020	$	8,913
2021	12,099
2022	12,371
2023	12,649
2024	12,934
Thereafter	136,963

LEASES