Leases

3 Months Ended

Mar. 31, 2023


15. Leases

Lessee Arrangements The Company determines whether an arrangement is a lease at inception. Operating leases are included in Operating lease right-of-use assets, net and Operating lease obligations on the Condensed Consolidated Balance Sheets. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of future minimum lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses an estimate of the incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future lease payments. The Operating lease right-of-use asset also includes any lease payments made, less any lease incentives and initial direct costs incurred. The Company does not have any finance leases as of March 31, 2023, or December 31, 2022.

The Company’s lessee agreements consist of operating leases primarily for ground leases and other real estate. The Company’s leases have remaining lease terms of less than one year to approximately 50 years, excluding extension options. The Company considers its strategic plan and the life of associated agreements in determining when options to extend or terminate lease terms are reasonably certain of being exercised. Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. Certain of the Company’s lease agreements include variable lease payments based on a percentage of income generated through subleases, changes in price indices and market rates, and other costs arising from operating, maintenance, and taxes. The Company’s lease agreements do not contain residual value guarantees or restrictive covenants. The Company leases certain buildings and office space constructed on its ground leases to third parties.

In June 2022, the Company sold the Outlet Collection at Riverwalk, which was subject to a ground lease, resulting in a reduction in the Company’s operating lease right-of-use assets and obligations as well as future minimum lease payments. The Company’s operating leases primarily relate to the Seaport ground leases.

The Company’s leased assets and liabilities are as follows:


thousands	March 31, 2023		December 31, 2022
Operating lease right-of-use assets, net	$	46,220	$	46,926
Operating lease obligations	51,350		51,321

The components of lease expense are as follows:


	Three Months Ended March 31,
thousands		2023		2022
Operating lease cost		$	1,708	$	2,069
Variable lease costs		392		374

Total lease cost		$	2,100	$	2,443

Future minimum lease payments as of March 31, 2023, are as follows:


thousands	Operating Leases
Remainder of 2023	$	3,744
2024	4,880
2025	3,491
2026	3,263
2027	3,326
Thereafter	242,419
Total lease payments	261,123
Less: imputed interest	(209,773)
Present value of lease liabilities	$	51,350

Other information related to the Company’s lessee agreements is as follows:


Supplemental Condensed Consolidated Statements of Cash Flows Information	Three Months Ended March 31,
thousands	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows on operating leases	$	1,097	$	1,741


Other Information	March 31, 2023		March 31, 2022
Weighted-average remaining lease term (years)
Operating leases	43.9		38.8
Weighted-average discount rate
Operating leases	7.8	%	7.7	%

Lessor Arrangements The Company receives rental income from the leasing of retail, office, multi-family, and other space under operating leases, as well as certain variable tenant recoveries. Such operating leases are with a variety of tenants and have a remaining average term of approximately five years. Lease terms generally vary among tenants and may include early termination options, extension options, and fixed rental rate increases or rental rate increases based on an index. The minimum rentals based on operating leases of the consolidated properties held as of March 31, 2023, are as follows:


	Three Months Ended March 31,
thousands		2023		2022
Total minimum rent payments		$	57,797	$	57,429

Total future minimum rents associated with operating leases are as follows as of March 31, 2023:


thousands	Total Minimum Rent
Remainder of 2023	$	181,052
2024	245,777
2025	225,960
2026	205,113
2027	192,265
Thereafter	841,082
Total	$	1,891,249

Minimum rent revenues are recognized on a straight‑line basis over the terms of the related leases when collectability is reasonably assured and the tenant has taken possession of, or controls, the physical use of the leased asset. Percentage rent in lieu of fixed minimum rent is recognized as sales are reported from tenants. Minimum rent revenues reported on the Condensed Consolidated Statements of Operations also include amortization related to above and below‑market tenant leases on acquired properties.