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Leases
3 Months Ended
Mar. 31, 2020
Leases [Abstract]  
Leases Leases
Lessor
The Company is the lessor for its 3,853 retail, restaurant, office and industrial properties. The Company’s operating and direct financing leases have non-cancelable lease terms of 0.02 years to 24.8 years. Certain leases with tenants include options to extend or terminate the lease agreements or to purchase the underlying asset. Lease agreements may also contain rent increases that are based on an index or rate (e.g., the consumer price index (“CPI”) or LIBOR). The Company believes the residual value risk is not a primary risk because of the long-lived nature of the assets.
The components of rental revenue from the Company’s operating and direct financing leases were as follows (in thousands):
 
 
Three Months Ended March 31,
 
 
2020
 
2019
Fixed:
 
 
 
 
Cash rent
 
$
269,583

 
$
282,575

Straight-line rent
 
2,055

 
7,412

Lease intangible amortization
 
(748
)
 
(731
)
Property operating cost reimbursements
 
1,428

 
1,464

Sub-lease (1)
 
5,263

 
5,489

Total fixed

277,581

 
296,209

 
 
 
 
 
Variable (2)

20,815


20,417

Income from direct financing leases
 
190

 
217

Total rental revenue

$
298,586


$
316,843

____________________________________
(1)
The Company’s tenants are generally sub-tenants under certain ground leases and are responsible for paying the rent under these leases.
(2)
Includes costs reimbursed related to property operating expenses, common area maintenance and percentage rent, including these costs reimbursed by ground lease sub-tenants.
The following table presents future minimum operating lease payments due to the Company over the next five years and thereafter as of March 31, 2020 (in thousands). These amounts exclude contingent rent payments, as applicable, that may be collected from certain tenants based on provisions related to sales thresholds and increases in annual rent based on exceeding certain economic indexes.
 
 
Future Minimum Operating Lease Payments
 
Future Minimum
Direct Financing Lease Payments
(1)
April 1, 2020 - December 31, 2020
 
$
795,563

 
$
1,601

2021
 
1,043,693

 
2,014

2022
 
974,602

 
1,925

2023
 
906,989

 
1,565

2024
 
829,484

 
510

Thereafter
 
4,900,832

 
824

Total
 
$
9,451,163

 
$
8,439

____________________________________
(1)
Related to 19 properties which are subject to direct financing leases and, therefore, revenue is recognized as rental income on the discounted cash flows of the lease payments. Amounts reflect undiscounted cash flows to be received by the Company under the lease agreements on these respective properties.
Lessee
The Company is the lessee under ground lease arrangements and corporate office leases. All leases for which the Company is the lessee meet the criteria of an operating lease. The Company’s leases have remaining lease terms of 0.1 years to 79.4 years, some of which include options to extend. The weighted average remaining lease term for the Company’s operating leases was 16.2 years as of March 31, 2020. Under certain ground lease arrangements, the Company pays variable costs, including property operating expenses and common area maintenance, which are generally reimbursed by the ground lease sub-tenants. The weighted average discount rate for the Company’s operating leases was 4.92% as of March 31, 2020. As the Company’s leases do not provide an implicit rate, the Company used an estimated incremental borrowing rate based on the information available at the adoption date in determining the present value of lease payments.
The Company incorporated renewal periods in the calculation of the majority of ground lease right-of-use assets and lease liabilities. Pursuant to certain leases, the Company is required to execute renewal options available under the ground lease through the building lease term. No renewals were incorporated in the calculation of the corporate lease right-of-use assets and liabilities, as it is not reasonably certain that the Company will exercise the options. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The following table presents the lease expense components for the three months ended March 31, 2020 and 2019 (in thousands):
 
 
Three Months Ended March 31,
 
 
2020
 
2019
Operating lease cost (1)
 
$
7,575

 
$
6,978

Sublease income (2)
 
$
(5,263
)
 
$
(5,489
)
___________________________________
(1)
No cash paid for operating lease liabilities was capitalized.
(2)
The Company’s tenants are generally sub-tenants under certain ground leases and are responsible for paying the rent under these leases.
Subsequent to initial measurement of $233.3 million and $236.3 million, respectively, the Company reduced the right-of-use assets by $3.4 million and operating lease liabilities by $3.6 million, for non-cash activity related to dispositions and lease modifications during the three months ended March 31, 2019. During the three months ended March 31, 2020, the Company reduced the right-of-use assets and operating lease liabilities each by $0.6 million.
The following table reflects the future minimum lease payments due from the Company over the next five years and thereafter for ground lease obligations, which are substantially reimbursable by our tenants, and office lease obligations as of March 31, 2020 (in thousands).
 
 
Future Minimum Lease Payments
April 1, 2020 - December 31, 2020
 
$
16,568

2021
 
22,099

2022
 
21,938

2023
 
21,591

2024
 
21,037

Thereafter
 
225,460

Total
 
328,693

Less: imputed interest
 
111,126

Total
 
$
217,567


Leases Leases
Lessor
The Company is the lessor for its 3,853 retail, restaurant, office and industrial properties. The Company’s operating and direct financing leases have non-cancelable lease terms of 0.02 years to 24.8 years. Certain leases with tenants include options to extend or terminate the lease agreements or to purchase the underlying asset. Lease agreements may also contain rent increases that are based on an index or rate (e.g., the consumer price index (“CPI”) or LIBOR). The Company believes the residual value risk is not a primary risk because of the long-lived nature of the assets.
The components of rental revenue from the Company’s operating and direct financing leases were as follows (in thousands):
 
 
Three Months Ended March 31,
 
 
2020
 
2019
Fixed:
 
 
 
 
Cash rent
 
$
269,583

 
$
282,575

Straight-line rent
 
2,055

 
7,412

Lease intangible amortization
 
(748
)
 
(731
)
Property operating cost reimbursements
 
1,428

 
1,464

Sub-lease (1)
 
5,263

 
5,489

Total fixed

277,581

 
296,209

 
 
 
 
 
Variable (2)

20,815


20,417

Income from direct financing leases
 
190

 
217

Total rental revenue

$
298,586


$
316,843

____________________________________
(1)
The Company’s tenants are generally sub-tenants under certain ground leases and are responsible for paying the rent under these leases.
(2)
Includes costs reimbursed related to property operating expenses, common area maintenance and percentage rent, including these costs reimbursed by ground lease sub-tenants.
The following table presents future minimum operating lease payments due to the Company over the next five years and thereafter as of March 31, 2020 (in thousands). These amounts exclude contingent rent payments, as applicable, that may be collected from certain tenants based on provisions related to sales thresholds and increases in annual rent based on exceeding certain economic indexes.
 
 
Future Minimum Operating Lease Payments
 
Future Minimum
Direct Financing Lease Payments
(1)
April 1, 2020 - December 31, 2020
 
$
795,563

 
$
1,601

2021
 
1,043,693

 
2,014

2022
 
974,602

 
1,925

2023
 
906,989

 
1,565

2024
 
829,484

 
510

Thereafter
 
4,900,832

 
824

Total
 
$
9,451,163

 
$
8,439

____________________________________
(1)
Related to 19 properties which are subject to direct financing leases and, therefore, revenue is recognized as rental income on the discounted cash flows of the lease payments. Amounts reflect undiscounted cash flows to be received by the Company under the lease agreements on these respective properties.
Lessee
The Company is the lessee under ground lease arrangements and corporate office leases. All leases for which the Company is the lessee meet the criteria of an operating lease. The Company’s leases have remaining lease terms of 0.1 years to 79.4 years, some of which include options to extend. The weighted average remaining lease term for the Company’s operating leases was 16.2 years as of March 31, 2020. Under certain ground lease arrangements, the Company pays variable costs, including property operating expenses and common area maintenance, which are generally reimbursed by the ground lease sub-tenants. The weighted average discount rate for the Company’s operating leases was 4.92% as of March 31, 2020. As the Company’s leases do not provide an implicit rate, the Company used an estimated incremental borrowing rate based on the information available at the adoption date in determining the present value of lease payments.
The Company incorporated renewal periods in the calculation of the majority of ground lease right-of-use assets and lease liabilities. Pursuant to certain leases, the Company is required to execute renewal options available under the ground lease through the building lease term. No renewals were incorporated in the calculation of the corporate lease right-of-use assets and liabilities, as it is not reasonably certain that the Company will exercise the options. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The following table presents the lease expense components for the three months ended March 31, 2020 and 2019 (in thousands):
 
 
Three Months Ended March 31,
 
 
2020
 
2019
Operating lease cost (1)
 
$
7,575

 
$
6,978

Sublease income (2)
 
$
(5,263
)
 
$
(5,489
)
___________________________________
(1)
No cash paid for operating lease liabilities was capitalized.
(2)
The Company’s tenants are generally sub-tenants under certain ground leases and are responsible for paying the rent under these leases.
Subsequent to initial measurement of $233.3 million and $236.3 million, respectively, the Company reduced the right-of-use assets by $3.4 million and operating lease liabilities by $3.6 million, for non-cash activity related to dispositions and lease modifications during the three months ended March 31, 2019. During the three months ended March 31, 2020, the Company reduced the right-of-use assets and operating lease liabilities each by $0.6 million.
The following table reflects the future minimum lease payments due from the Company over the next five years and thereafter for ground lease obligations, which are substantially reimbursable by our tenants, and office lease obligations as of March 31, 2020 (in thousands).
 
 
Future Minimum Lease Payments
April 1, 2020 - December 31, 2020
 
$
16,568

2021
 
22,099

2022
 
21,938

2023
 
21,591

2024
 
21,037

Thereafter
 
225,460

Total
 
328,693

Less: imputed interest
 
111,126

Total
 
$
217,567


Leases Leases
Lessor
The Company is the lessor for its 3,853 retail, restaurant, office and industrial properties. The Company’s operating and direct financing leases have non-cancelable lease terms of 0.02 years to 24.8 years. Certain leases with tenants include options to extend or terminate the lease agreements or to purchase the underlying asset. Lease agreements may also contain rent increases that are based on an index or rate (e.g., the consumer price index (“CPI”) or LIBOR). The Company believes the residual value risk is not a primary risk because of the long-lived nature of the assets.
The components of rental revenue from the Company’s operating and direct financing leases were as follows (in thousands):
 
 
Three Months Ended March 31,
 
 
2020
 
2019
Fixed:
 
 
 
 
Cash rent
 
$
269,583

 
$
282,575

Straight-line rent
 
2,055

 
7,412

Lease intangible amortization
 
(748
)
 
(731
)
Property operating cost reimbursements
 
1,428

 
1,464

Sub-lease (1)
 
5,263

 
5,489

Total fixed

277,581

 
296,209

 
 
 
 
 
Variable (2)

20,815


20,417

Income from direct financing leases
 
190

 
217

Total rental revenue

$
298,586


$
316,843

____________________________________
(1)
The Company’s tenants are generally sub-tenants under certain ground leases and are responsible for paying the rent under these leases.
(2)
Includes costs reimbursed related to property operating expenses, common area maintenance and percentage rent, including these costs reimbursed by ground lease sub-tenants.
The following table presents future minimum operating lease payments due to the Company over the next five years and thereafter as of March 31, 2020 (in thousands). These amounts exclude contingent rent payments, as applicable, that may be collected from certain tenants based on provisions related to sales thresholds and increases in annual rent based on exceeding certain economic indexes.
 
 
Future Minimum Operating Lease Payments
 
Future Minimum
Direct Financing Lease Payments
(1)
April 1, 2020 - December 31, 2020
 
$
795,563

 
$
1,601

2021
 
1,043,693

 
2,014

2022
 
974,602

 
1,925

2023
 
906,989

 
1,565

2024
 
829,484

 
510

Thereafter
 
4,900,832

 
824

Total
 
$
9,451,163

 
$
8,439

____________________________________
(1)
Related to 19 properties which are subject to direct financing leases and, therefore, revenue is recognized as rental income on the discounted cash flows of the lease payments. Amounts reflect undiscounted cash flows to be received by the Company under the lease agreements on these respective properties.
Lessee
The Company is the lessee under ground lease arrangements and corporate office leases. All leases for which the Company is the lessee meet the criteria of an operating lease. The Company’s leases have remaining lease terms of 0.1 years to 79.4 years, some of which include options to extend. The weighted average remaining lease term for the Company’s operating leases was 16.2 years as of March 31, 2020. Under certain ground lease arrangements, the Company pays variable costs, including property operating expenses and common area maintenance, which are generally reimbursed by the ground lease sub-tenants. The weighted average discount rate for the Company’s operating leases was 4.92% as of March 31, 2020. As the Company’s leases do not provide an implicit rate, the Company used an estimated incremental borrowing rate based on the information available at the adoption date in determining the present value of lease payments.
The Company incorporated renewal periods in the calculation of the majority of ground lease right-of-use assets and lease liabilities. Pursuant to certain leases, the Company is required to execute renewal options available under the ground lease through the building lease term. No renewals were incorporated in the calculation of the corporate lease right-of-use assets and liabilities, as it is not reasonably certain that the Company will exercise the options. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The following table presents the lease expense components for the three months ended March 31, 2020 and 2019 (in thousands):
 
 
Three Months Ended March 31,
 
 
2020
 
2019
Operating lease cost (1)
 
$
7,575

 
$
6,978

Sublease income (2)
 
$
(5,263
)
 
$
(5,489
)
___________________________________
(1)
No cash paid for operating lease liabilities was capitalized.
(2)
The Company’s tenants are generally sub-tenants under certain ground leases and are responsible for paying the rent under these leases.
Subsequent to initial measurement of $233.3 million and $236.3 million, respectively, the Company reduced the right-of-use assets by $3.4 million and operating lease liabilities by $3.6 million, for non-cash activity related to dispositions and lease modifications during the three months ended March 31, 2019. During the three months ended March 31, 2020, the Company reduced the right-of-use assets and operating lease liabilities each by $0.6 million.
The following table reflects the future minimum lease payments due from the Company over the next five years and thereafter for ground lease obligations, which are substantially reimbursable by our tenants, and office lease obligations as of March 31, 2020 (in thousands).
 
 
Future Minimum Lease Payments
April 1, 2020 - December 31, 2020
 
$
16,568

2021
 
22,099

2022
 
21,938

2023
 
21,591

2024
 
21,037

Thereafter
 
225,460

Total
 
328,693

Less: imputed interest
 
111,126

Total
 
$
217,567