Leases

6 Months Ended

Jun. 30, 2021

Leases [Abstract]

Leases

Leases

Lessor

The Company is the lessor for its 3,885 retail, restaurant, office and industrial properties. The Company’s operating and direct financing leases have non-cancelable lease terms of 0.04 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 June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Fixed:
Cash rent	$	272,136	$	253,117	$	535,477	$	522,702
Straight-line rent	4,613		3,404		8,832		5,458
Lease intangible amortization	(1,830)		(788)		(3,377)		(1,536)
Property operating cost reimbursements	1,285		1,363		2,672		2,791
Sub-lease (1)	4,755		5,279		9,724		10,543
Total fixed	280,959		262,375		553,328		539,958
Variable (2)	9,483		16,039		27,290		36,852
Income from direct financing leases	125		162		258		352
Total rental revenue	$	290,567	$	278,576	$	580,876	$	577,162

____________________________________

(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 June 30, 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)
July 1, 2021 - December 31, 2021	$	516,726	$	1,002
2022	1,003,660		1,925
2023	941,664		1,565
2024	875,621		510
2025	775,240		169
2026	714,932		171
Thereafter	4,410,979		484
Total	$	9,238,822	$	5,826

____________________________________

(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 0.2 years to 78.1 years, some of which include options to extend. The weighted average remaining lease term for the Company’s operating leases was 15.7 years as of June 30, 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 4.91% as of June 30, 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 and six months ended June 30, 2021 and 2020 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Operating lease cost (1)	$	5,479	$	6,135	$	11,227	$	13,710
Sublease income (2)	$	(4,755)	$	(5,279)	$	(9,724)	$	(10,543)

___________________________________

(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 six months ended June 30, 2021, the Company reduced the right-of-use assets and operating lease liabilities by $0.6 million and $4.1 million, respectively, for non-cash activity related to dispositions and lease modifications. The Company increased the right-of-use assets and operating lease liabilities each by less than $0.1 million during the six months ended June 30, 2020.

The following table reflects the maturity analysis of 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 June 30, 2021 (in thousands).

	Future Minimum Lease Payments
July 1, 2021 - December 31, 2021	$	10,950
2022	21,115
2023	20,617
2024	19,988
2025	19,674
2026	18,241
Thereafter	187,269
Total	297,854
Less: imputed interest	98,293
Total	$	199,561

Leases

Leases

Lessor

The Company is the lessor for its 3,885 retail, restaurant, office and industrial properties. The Company’s operating and direct financing leases have non-cancelable lease terms of 0.04 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 June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Fixed:
Cash rent	$	272,136	$	253,117	$	535,477	$	522,702
Straight-line rent	4,613		3,404		8,832		5,458
Lease intangible amortization	(1,830)		(788)		(3,377)		(1,536)
Property operating cost reimbursements	1,285		1,363		2,672		2,791
Sub-lease (1)	4,755		5,279		9,724		10,543
Total fixed	280,959		262,375		553,328		539,958
Variable (2)	9,483		16,039		27,290		36,852
Income from direct financing leases	125		162		258		352
Total rental revenue	$	290,567	$	278,576	$	580,876	$	577,162

____________________________________

(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 June 30, 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)
July 1, 2021 - December 31, 2021	$	516,726	$	1,002
2022	1,003,660		1,925
2023	941,664		1,565
2024	875,621		510
2025	775,240		169
2026	714,932		171
Thereafter	4,410,979		484
Total	$	9,238,822	$	5,826

____________________________________

(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 0.2 years to 78.1 years, some of which include options to extend. The weighted average remaining lease term for the Company’s operating leases was 15.7 years as of June 30, 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 4.91% as of June 30, 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 and six months ended June 30, 2021 and 2020 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Operating lease cost (1)	$	5,479	$	6,135	$	11,227	$	13,710
Sublease income (2)	$	(4,755)	$	(5,279)	$	(9,724)	$	(10,543)

___________________________________

(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 six months ended June 30, 2021, the Company reduced the right-of-use assets and operating lease liabilities by $0.6 million and $4.1 million, respectively, for non-cash activity related to dispositions and lease modifications. The Company increased the right-of-use assets and operating lease liabilities each by less than $0.1 million during the six months ended June 30, 2020.

The following table reflects the maturity analysis of 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 June 30, 2021 (in thousands).

	Future Minimum Lease Payments
July 1, 2021 - December 31, 2021	$	10,950
2022	21,115
2023	20,617
2024	19,988
2025	19,674
2026	18,241
Thereafter	187,269
Total	297,854
Less: imputed interest	98,293
Total	$	199,561

Leases

Leases

Lessor

The Company is the lessor for its 3,885 retail, restaurant, office and industrial properties. The Company’s operating and direct financing leases have non-cancelable lease terms of 0.04 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 June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Fixed:
Cash rent	$	272,136	$	253,117	$	535,477	$	522,702
Straight-line rent	4,613		3,404		8,832		5,458
Lease intangible amortization	(1,830)		(788)		(3,377)		(1,536)
Property operating cost reimbursements	1,285		1,363		2,672		2,791
Sub-lease (1)	4,755		5,279		9,724		10,543
Total fixed	280,959		262,375		553,328		539,958
Variable (2)	9,483		16,039		27,290		36,852
Income from direct financing leases	125		162		258		352
Total rental revenue	$	290,567	$	278,576	$	580,876	$	577,162

____________________________________

(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 June 30, 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)
July 1, 2021 - December 31, 2021	$	516,726	$	1,002
2022	1,003,660		1,925
2023	941,664		1,565
2024	875,621		510
2025	775,240		169
2026	714,932		171
Thereafter	4,410,979		484
Total	$	9,238,822	$	5,826

____________________________________

(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 0.2 years to 78.1 years, some of which include options to extend. The weighted average remaining lease term for the Company’s operating leases was 15.7 years as of June 30, 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 4.91% as of June 30, 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 and six months ended June 30, 2021 and 2020 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Operating lease cost (1)	$	5,479	$	6,135	$	11,227	$	13,710
Sublease income (2)	$	(4,755)	$	(5,279)	$	(9,724)	$	(10,543)

___________________________________

(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 six months ended June 30, 2021, the Company reduced the right-of-use assets and operating lease liabilities by $0.6 million and $4.1 million, respectively, for non-cash activity related to dispositions and lease modifications. The Company increased the right-of-use assets and operating lease liabilities each by less than $0.1 million during the six months ended June 30, 2020.

The following table reflects the maturity analysis of 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 June 30, 2021 (in thousands).

	Future Minimum Lease Payments
July 1, 2021 - December 31, 2021	$	10,950
2022	21,115
2023	20,617
2024	19,988
2025	19,674
2026	18,241
Thereafter	187,269
Total	297,854
Less: imputed interest	98,293
Total	$	199,561