Leases |
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Leases | 11. Leases Lessor We lease commercial space to the U.S. Government through the GSA or other federal agencies or nongovernmental tenants. These leases may contain extension options that are predominately at the sole discretion of the tenant. Certain of our leases contain a “soft-term” period of the lease, meaning that the U.S. Government tenant agency has the right to terminate the lease prior to its stated lease end date. While certain of our leases are contractually subject to early termination, we do not believe that our tenant agencies are likely to terminate these leases early given the build-to-suit features at the properties subject to the leases, the weighted average age of these properties based on the date the property was built or renovated-to-suit, where applicable (approximately 18.7 years as of December 31, 2022), the mission-critical focus of the properties subject to the leases and the current level of operations at such properties. Certain lease agreements include variable lease payments that, in the future, will vary based on changes in inflationary measures, real estate tax rates, usage, or share of expenditures of the leased premises. On September 25, 2020, the FDA – Lenexa development project was substantially completed and a 20-year lease commenced with the GSA for the beneficial use of the FDA. Upon completion and their acceptance of work, the U.S. Government was obligated to pay a $41.7 million lump sum reimbursement to us for landlord improvements in excess of the U.S. Government’s tenant improvement allowance. We recorded the payment as Deferred revenue on the Consolidated Balance Sheet and began amortizing the amount over the life of the lease through Rental income. The following table summarizes the maturity of fixed lease payments under our leases as of December 31, 2022 (amounts in thousands):
The table below sets forth our composition of lease revenue recognized between fixed and variable components (amounts in thousands):
Information about our leases for our development property as of December 31, 2022 is set forth in the table below:
(1) L=Laboratory Lessee We lease corporate office space under operating lease arrangements in Washington, D.C. and San Diego, CA. The San Diego, CA operating lease terminated on October 31, 2022. In April 2022, we entered into a lease agreement for new office space in San Diego, CA. This lease has a seven year term and a commencement date of October 26, 2022. The leases include variable lease payments that, in the future, will vary based on changes in real estate tax rates, usage, or share of expenditures of the leased premises. We have elected not to separate lease and non-lease components for its corporate office leases. As of December 31, 2022, the unamortized balances associated with our right-of-use operating lease asset and operating lease liability were $3.5 million and $3.5 million, respectively. As of December 31, 2021, the unamortized balance associated with our right-of-use operating lease asset and operating lease liability for our two commenced office leases was $1.5 million and $1.6 million, respectively. Our right-of-use operating lease asset and operating lease liability were included in “” and “Accounts payable, accrued expenses and other liabilities” on the Consolidated Balance Sheets, respectively as of December 31, 2022, and 2021. We used our incremental borrowing rate, which was arrived at utilizing prevailing market rates and the spread on our revolving credit facility, in order to determine the net present value of the minimum lease payments. The following table provides quantitative information for our commenced operating leases for the year ended December 31, 2022 and 2021 (amounts in thousands):
In addition, the maturity of future minimum lease payments under our commenced corporate office leases as of December 31, 2022 is summarized in the table below (amounts in thousands):
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