Leases

Capital Leases

The Company leases the land and building for one of its data centers from an entity in which a member of its Board of Directors has a beneficial ownership interest, under which the building portion of the lease has been capitalized. The lease attributable to the land is accounted for as an operating lease. The lease expires in 2033 with two subsequent 10-year and one five-year renewal option periods.

As of December 31, 2018, minimum payment obligations for this capital lease are as follows (in thousands):



2019	$	2,064
2020	2,124
2021	2,243
2022	2,306
2023	2,432
Thereafter	28,898
	40,067
Less: amount representing interest	(20,601		)
Present value of minimum capital lease payments⁽¹⁾	$	19,466

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(1)	Until 2023, capital lease payments are applied only to accrued interest; thus, there is no current portion.

In February 2016, a wholly-owned subsidiary of Switch, Ltd. acquired rights and interests to manage, construct and use the Nevada Broadband Telemedicine Initiative (“NBTI”) fiber network. The right to use the NBTI fiber network is accounted for as a capital lease. As of December 31, 2018 and 2017, capital lease assets related to the NBTI fiber network, net of accumulated amortization, were $12.3 million and $15.2 million, respectively. During the year ended December 31, 2018, the Company entered into an agreement that reduced related future minimum payment obligations for this capital lease from $2.3 million to $0.3 million, for which payment was made prior to December 31, 2018. The capital lease expires 25 years from the date the network is accepted by the Nevada Hospital Association, the entity that holds title to the network, and has a 25-year renewal option. Acceptance occurred in September 2017.

The Company is the sole consumer of output from four feeders related to a substation owned by NV Energy (Note 4). The Company accounts for this arrangement as a capital lease. As of December 31, 2018 and 2017, capital lease assets related to the feeders were $0.1 million and $0.5 million, respectively. There are no future minimum payment obligations related to this capital lease. The capital lease will expire 39 years from the date the substation was placed into service, which was April 2016.

In December 2018, the Company purchased a taxable industrial development revenue bond (the “Bond”) issued by a local government agency (the “Agency”) in order to reduce certain tax expenditures for data center facilities under construction. The Bond matures in December 2031. Pursuant to the terms of the Bond, the Company transferred title to certain of its property and equipment with total costs of $6.1 million as of December 31, 2018 to the Agency. The Company leases the property and equipment from the Agency subject to an option to purchase for nominal consideration, which the Company may exercise at any time, upon tendering the Bond to the Agency. The title to these assets will revert to the Company upon retirement or cancellation of the Bond. As the Company is both the bondholder and the lessee for the property and equipment, the Company exercised its right to offset the amounts invested in and the obligations for this Bond on the consolidated balance sheet. The underlying assets remain in property and equipment, net on the consolidated balance sheet as all risks and rewards remain with the Company.

Operating Leases

The Company leases land, warehouse storage space, and data center buildings under operating leases (including the land portion of the capitalized building lease) that have non-cancellable terms expiring through 2066 with entities in which a member of its Board of Directors has a beneficial ownership interest.

In addition, the Company leases warehouse storage space, storage yards for fiber, an aircraft, and construction materials and equipment under operating leases that have non-cancellable terms expiring through 2055.

As of December 31, 2018, future minimum lease payments for all operating leases with remaining terms in excess of one year are as follows:



	Related Parties		Other		Total
	(in thousands)
2019	$	4,824	$	2,482	$	7,306
2020	4,872		2,487		7,359
2021	4,260		625		4,885
2022	2,863		197		3,060
2023	2,051		20		2,071
Thereafter	54,603		623		55,226
	$	73,473	$	6,434	$	79,907

During the years ended December 31, 2018, 2017, and 2016, rent expense related to operating leases was approximately $7.7 million, $7.4 million, and $8.7 million, respectively. Related party rent included in these amounts was approximately $5.0 million, $4.8 million, and $4.2 million during the years ended December 31, 2018, 2017, and 2016, respectively.