Leases

3 Months Ended

Mar. 31, 2021

Leases [Abstract]

Leases

Leases

Lessor

The Company is the lessor for its 3,855 retail, restaurant, office and industrial properties. The Company’s operating and direct financing leases have non-cancelable lease terms of 0.03 years to 25.0 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,
	2021		2020
Fixed:
Cash rent	$	263,342	$	269,583
Straight-line rent	4,219		2,055
Lease intangible amortization	(1,547)		(748)
Property operating cost reimbursements	1,387		1,428
Sub-lease (1)	4,969		5,263
Total fixed	272,370		277,581
Variable (2)	17,806		20,815
Income from direct financing leases	133		190
Total rental revenue	$	290,309	$	298,586

____________________________________

(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, 2021 (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, 2021 - December 31, 2021	$	772,883	$	1,501
2022	990,905		1,925
2023	929,394		1,565
2024	860,798		510
2025	756,324		169
2026	694,793		171
Thereafter	4,177,260		484
Total	$	9,182,357	$	6,325

____________________________________

(1)Related to 18 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 0.4 years to 78.4 years, some of which include options to extend. The weighted average remaining lease term for the Company’s operating leases was 15.9 years as of March 31, 2021. 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, 2021. 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, 2021 and 2020 (in thousands):

	Three Months Ended March 31,
	2021		2020
Operating lease cost (1)	$	5,750	$	7,575
Sublease income (2)	$	(4,969)	$	(5,263)

___________________________________

(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.

During the three months ended March 31, 2021, the Company reduced the right-of-use assets and operating lease liabilities by $0.9 million and $4.4 million, respectively. The Company reduced the right-of-use assets and operating lease liabilities each by $0.6 million, for non-cash activity related to dispositions and lease modifications during the three months ended March 31, 2020.

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, 2021 (in thousands).

	Future Minimum Lease Payments
April 1, 2021 - December 31, 2021	$	16,140
2022	21,016
2023	20,601
2024	19,973
2025	19,659
2026	18,229
Thereafter	187,189
Total	302,807
Less: imputed interest	100,783
Total	$	202,024

Leases

Leases

Lessor

The Company is the lessor for its 3,855 retail, restaurant, office and industrial properties. The Company’s operating and direct financing leases have non-cancelable lease terms of 0.03 years to 25.0 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,
	2021		2020
Fixed:
Cash rent	$	263,342	$	269,583
Straight-line rent	4,219		2,055
Lease intangible amortization	(1,547)		(748)
Property operating cost reimbursements	1,387		1,428
Sub-lease (1)	4,969		5,263
Total fixed	272,370		277,581
Variable (2)	17,806		20,815
Income from direct financing leases	133		190
Total rental revenue	$	290,309	$	298,586

____________________________________

(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, 2021 (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, 2021 - December 31, 2021	$	772,883	$	1,501
2022	990,905		1,925
2023	929,394		1,565
2024	860,798		510
2025	756,324		169
2026	694,793		171
Thereafter	4,177,260		484
Total	$	9,182,357	$	6,325

____________________________________

(1)Related to 18 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 0.4 years to 78.4 years, some of which include options to extend. The weighted average remaining lease term for the Company’s operating leases was 15.9 years as of March 31, 2021. 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, 2021. 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, 2021 and 2020 (in thousands):

	Three Months Ended March 31,
	2021		2020
Operating lease cost (1)	$	5,750	$	7,575
Sublease income (2)	$	(4,969)	$	(5,263)

___________________________________

(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.

During the three months ended March 31, 2021, the Company reduced the right-of-use assets and operating lease liabilities by $0.9 million and $4.4 million, respectively. The Company reduced the right-of-use assets and operating lease liabilities each by $0.6 million, for non-cash activity related to dispositions and lease modifications during the three months ended March 31, 2020.

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, 2021 (in thousands).

	Future Minimum Lease Payments
April 1, 2021 - December 31, 2021	$	16,140
2022	21,016
2023	20,601
2024	19,973
2025	19,659
2026	18,229
Thereafter	187,189
Total	302,807
Less: imputed interest	100,783
Total	$	202,024

Leases

Leases

Lessor

The Company is the lessor for its 3,855 retail, restaurant, office and industrial properties. The Company’s operating and direct financing leases have non-cancelable lease terms of 0.03 years to 25.0 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,
	2021		2020
Fixed:
Cash rent	$	263,342	$	269,583
Straight-line rent	4,219		2,055
Lease intangible amortization	(1,547)		(748)
Property operating cost reimbursements	1,387		1,428
Sub-lease (1)	4,969		5,263
Total fixed	272,370		277,581
Variable (2)	17,806		20,815
Income from direct financing leases	133		190
Total rental revenue	$	290,309	$	298,586

____________________________________

(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, 2021 (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, 2021 - December 31, 2021	$	772,883	$	1,501
2022	990,905		1,925
2023	929,394		1,565
2024	860,798		510
2025	756,324		169
2026	694,793		171
Thereafter	4,177,260		484
Total	$	9,182,357	$	6,325

____________________________________

(1)Related to 18 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 0.4 years to 78.4 years, some of which include options to extend. The weighted average remaining lease term for the Company’s operating leases was 15.9 years as of March 31, 2021. 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, 2021. 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, 2021 and 2020 (in thousands):

	Three Months Ended March 31,
	2021		2020
Operating lease cost (1)	$	5,750	$	7,575
Sublease income (2)	$	(4,969)	$	(5,263)

___________________________________

(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.

During the three months ended March 31, 2021, the Company reduced the right-of-use assets and operating lease liabilities by $0.9 million and $4.4 million, respectively. The Company reduced the right-of-use assets and operating lease liabilities each by $0.6 million, for non-cash activity related to dispositions and lease modifications during the three months ended March 31, 2020.

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, 2021 (in thousands).

	Future Minimum Lease Payments
April 1, 2021 - December 31, 2021	$	16,140
2022	21,016
2023	20,601
2024	19,973
2025	19,659
2026	18,229
Thereafter	187,189
Total	302,807
Less: imputed interest	100,783
Total	$	202,024