Leases

6 Months Ended

Jun. 30, 2021

Leases [Abstract]

Leases

Leases

Significant Lease Transactions

The following table summarizes the significant lease transactions during the six months ended June 30, 2021 (in thousands):

			Renewal/Termination Options Excluded (1)		Net Incremental (2)
Lease	Quarter	Transaction		Lease Classification	ROU assets		ROU liabilities
Silicon Valley 8 ("SV8") data center lease extended (3)	Q1	Extended lease term by 16 years	Two 10-year renewal options	Finance Lease	$	98,141	$	100,043
				Operating Lease	(13,685)		(15,586)
Hong Kong 3 ("HK3") data center lease extended (3)	Q1	Extended lease by 10 years, which included a 5-year renewal option	N/A	Finance Lease - Building	37,987		37,987
				Operating Lease - Land	6,592		6,592
Osaka 3 ("OS3") new data center and office lease	Q2	New lease-15 year term	2-year renewal option on a rolling basis	Finance Lease	144,122		144,122

(1) These renewal/termination options are not included in determining the lease terms as we are not reasonably certain to exercise them at this time.

(2) The net incremental amounts represent the adjustments to the right of use ("ROU") assets and liabilities recorded during the quarter that the transactions were entered.

(3) These leases had components previously classified as operating leases.

Lease Expenses

The components of lease expenses are as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Finance lease cost
Amortization of ROU assets (1)	$	37,110	$	28,897	$	73,238	$	54,062
Interest on lease liabilities	29,823		28,438		60,016		56,263
Total finance lease cost	66,933		57,335		133,254		110,325
Operating lease cost	57,045		52,556		113,499		106,347
Variable lease cost	7,630		2,884		15,670		5,466
Total lease cost	$	131,608	$	112,775	$	262,423	$	222,138

(1) Amortization of ROU assets is included with depreciation expense, and is recorded within cost of revenues, sales and marketing and general and administrative expenses in the condensed consolidated statements of operations.

Other Information

Other information related to leases is as follows (in thousands):

	Six Months Ended June 30, 2021			Six Months Ended June 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	57,084		$	54,417
Operating cash flows from operating leases	152,052			102,146
Financing cash flows from finance leases	98,877			42,681
ROU assets obtained in exchange for lease obligations: (1)
Finance leases	$	339,486		$	311,951
Operating leases	50			14,114
	As of June 30, 2021			As of December 31, 2020
Weighted-average remaining lease term - finance leases (2)	14 years			14 years
Weighted-average remaining lease term - operating leases (2)	12 years			12 years
Weighted-average discount rate - finance leases	7		%	7		%
Weighted-average discount rate - operating leases	4		%	4		%
Finance lease assets (3)	$	1,912,014		$	1,688,032

(1) Represents all non-cash changes in ROU assets.

(2) Includes lease renewal options that are reasonably certain to be exercised.

(3) As of June 30, 2021 and December 31, 2020, we recorded accumulated amortization of finance lease assets of $651.5 million and $604.1 million, respectively. Finance lease assets are recorded within property, plant and equipment, net on the condensed consolidated balance sheets.

Maturities of Lease Liabilities

Maturities of lease liabilities as of June 30, 2021 are as follows (in thousands):

	Operating Leases		Finance Leases		Total
2021 (6 months remaining)	$	91,036	$	123,694	$	214,730
2022	194,169		240,595		434,764
2023	179,406		233,830		413,236
2024	166,529		232,142		398,671
2025	157,801		228,757		386,558
Thereafter	1,012,325		2,153,595		3,165,920
Total lease payments	1,801,266		3,212,613		5,013,879
Plus amount representing residual property value	—		16,268		16,268
Less imputed interest	(460,487)		(1,080,555)		(1,541,042)
Total	$	1,340,779	$	2,148,326	$	3,489,105

We entered into agreements with various landlords primarily to lease data center spaces and ground leases which have not yet commenced as of June 30, 2021. These leases will commence between year 2021 and 2023, with lease terms of 12 to 20 years and total lease commitments of approximately $360.5 million.

Leases

Leases

Significant Lease Transactions

The following table summarizes the significant lease transactions during the six months ended June 30, 2021 (in thousands):

			Renewal/Termination Options Excluded (1)		Net Incremental (2)
Lease	Quarter	Transaction		Lease Classification	ROU assets		ROU liabilities
Silicon Valley 8 ("SV8") data center lease extended (3)	Q1	Extended lease term by 16 years	Two 10-year renewal options	Finance Lease	$	98,141	$	100,043
				Operating Lease	(13,685)		(15,586)
Hong Kong 3 ("HK3") data center lease extended (3)	Q1	Extended lease by 10 years, which included a 5-year renewal option	N/A	Finance Lease - Building	37,987		37,987
				Operating Lease - Land	6,592		6,592
Osaka 3 ("OS3") new data center and office lease	Q2	New lease-15 year term	2-year renewal option on a rolling basis	Finance Lease	144,122		144,122

(1) These renewal/termination options are not included in determining the lease terms as we are not reasonably certain to exercise them at this time.

(2) The net incremental amounts represent the adjustments to the right of use ("ROU") assets and liabilities recorded during the quarter that the transactions were entered.

(3) These leases had components previously classified as operating leases.

Lease Expenses

The components of lease expenses are as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Finance lease cost
Amortization of ROU assets (1)	$	37,110	$	28,897	$	73,238	$	54,062
Interest on lease liabilities	29,823		28,438		60,016		56,263
Total finance lease cost	66,933		57,335		133,254		110,325
Operating lease cost	57,045		52,556		113,499		106,347
Variable lease cost	7,630		2,884		15,670		5,466
Total lease cost	$	131,608	$	112,775	$	262,423	$	222,138

(1) Amortization of ROU assets is included with depreciation expense, and is recorded within cost of revenues, sales and marketing and general and administrative expenses in the condensed consolidated statements of operations.

Other Information

Other information related to leases is as follows (in thousands):

	Six Months Ended June 30, 2021			Six Months Ended June 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	57,084		$	54,417
Operating cash flows from operating leases	152,052			102,146
Financing cash flows from finance leases	98,877			42,681
ROU assets obtained in exchange for lease obligations: (1)
Finance leases	$	339,486		$	311,951
Operating leases	50			14,114
	As of June 30, 2021			As of December 31, 2020
Weighted-average remaining lease term - finance leases (2)	14 years			14 years
Weighted-average remaining lease term - operating leases (2)	12 years			12 years
Weighted-average discount rate - finance leases	7		%	7		%
Weighted-average discount rate - operating leases	4		%	4		%
Finance lease assets (3)	$	1,912,014		$	1,688,032

(1) Represents all non-cash changes in ROU assets.

(2) Includes lease renewal options that are reasonably certain to be exercised.

(3) As of June 30, 2021 and December 31, 2020, we recorded accumulated amortization of finance lease assets of $651.5 million and $604.1 million, respectively. Finance lease assets are recorded within property, plant and equipment, net on the condensed consolidated balance sheets.

Maturities of Lease Liabilities

Maturities of lease liabilities as of June 30, 2021 are as follows (in thousands):

	Operating Leases		Finance Leases		Total
2021 (6 months remaining)	$	91,036	$	123,694	$	214,730
2022	194,169		240,595		434,764
2023	179,406		233,830		413,236
2024	166,529		232,142		398,671
2025	157,801		228,757		386,558
Thereafter	1,012,325		2,153,595		3,165,920
Total lease payments	1,801,266		3,212,613		5,013,879
Plus amount representing residual property value	—		16,268		16,268
Less imputed interest	(460,487)		(1,080,555)		(1,541,042)
Total	$	1,340,779	$	2,148,326	$	3,489,105

We entered into agreements with various landlords primarily to lease data center spaces and ground leases which have not yet commenced as of June 30, 2021. These leases will commence between year 2021 and 2023, with lease terms of 12 to 20 years and total lease commitments of approximately $360.5 million.