Leases

12 Months Ended

Dec. 31, 2023

Leases [Abstract]

Leases

Leases

As Lessor

The Company’s investment properties are leased to tenants under long-term operating leases that typically include one or more tenant renewal options. The Company’s leases provide for annual base rental payments (generally payable in monthly installments), and generally provide for increases in rent based on fixed contractual terms or as a result of increases in the Consumer Price Index.

Substantially all of the leases are triple-net, which means that the lessees are responsible for paying all property operating expenses, including maintenance, insurance, utilities, property taxes and, if applicable, ground rent expense; therefore, the Company is generally not responsible for repairs or other capital expenditures related to the properties while the triple-net leases are in effect and, at the end of the lease term, the lessees are responsible for returning the property to the Company in a substantially similar condition as when they took possession. Some of the Company’s leases provide that in the event the Company wishes to sell the property subject to that lease, it first must offer the lessee the right to purchase the property on the same terms and conditions as any offer which it intends to accept for the sale of the property.

Scheduled future minimum base rental payments due to be received under the remaining non-cancelable term of the operating leases in place as of December 31, 2023 were as follows:

(in thousands)	Future Minimum Base Rental Receipts
2024	$	367,658
2025	372,511
2026	375,862
2027	377,320
2028	378,407
Thereafter	4,031,616
Total	$	5,903,374

Since lease renewal periods are exercisable at the option of the lessee, the preceding table presents future minimum base rental payments to be received during the initial non-cancelable lease term only. In addition, the future minimum lease payments exclude contingent rent payments, as applicable, that may be collected from certain tenants based on provisions related to performance thresholds and exclude increases in annual rent based on future changes in the Consumer Price Index, among other items.

The fixed and variable components of lease revenues for the years ended December 31, 2023, 2022, and 2021 were as follows:

	Year ended December 31,
(in thousands)	2023		2022		2021
Fixed lease revenues	$	338,720	$	270,694	$	210,441
Variable lease revenues (1)	3,610		1,632		1,708
Total lease revenues (2)	$	342,330	$	272,326	$	212,149

_____________________________________

(1)Includes contingent rent based on a percentage of the tenant’s gross sales and costs paid by the Company for which it is reimbursed by its tenants.

(2)Excludes the amortization and accretion of above- and below-market lease intangible assets and liabilities and lease incentives and the adjustment to rental revenue for tenant credit.

As Lessee

The Company has a number of ground leases, office leases and other equipment leases which are classified as operating leases. As of December 31, 2023, the Company's ROU assets and lease liabilities were $8.9 million and $9.8 million, respectively. As of December 31, 2022, the Company's ROU assets and lease liabilities were $7.3 million and $9.0 million, respectively. These amounts are included in rent receivables, prepaid expenses and other assets, net and accrued liabilities and other payables on the Company's consolidated balance sheets.

The discount rate applied to measure each ROU asset and lease liability is based on the Company's incremental borrowing rate ("IBR"). The Company considers the general economic environment and its historical borrowing activity and factors in various financing and asset specific adjustments to ensure the IBR is appropriate to the intended use of the underlying lease. As the Company did not elect to apply hindsight, lease term assumptions determined under ASC 840 were carried forward and applied in calculating the lease liabilities recorded under ASC 842. Certain of the Company's ground leases offer renewal options which it assesses against relevant economic factors to determine whether it is reasonably certain of exercising or not exercising the option. Lease payments associated with renewal periods that the Company is reasonably certain will be exercised, if any, are included in the measurement of the corresponding lease liability and ROU asset.

The following table sets forth information related to the measurement of the Company's lease liabilities as of the dates presented:

	December 31, 2023	December 31, 2022
Weighted average remaining lease term (in years)	22.8	22.9
Weighted average discount rate	6.75%	6.09%

The following table sets forth the details of rent expense for the years ended December 31, 2023, 2022 and 2021:

	Year ended December 31,
(in thousands)	2023		2022		2021
Fixed rent expense - Ground Rent	$	970	$	981	$	957
Fixed rent expense - Office Rent	606		511		510
Variable rent expense	—		—		—
Total rent expense	$	1,576	$	1,492	$	1,467

As of December 31, 2023, future lease payments due from the Company under the ground, office and equipment operating leases where the Company is directly responsible for payment and the future lease payments due under the ground operating leases where the Company's tenants are directly responsible for payment over the next five years and thereafter were as follows:

(in thousands)	Office and Equipment Leases		Ground Leases to be Paid by the Company		Ground Leases to be Paid Directly by the Company’s Tenants		Total Future Minimum Base Rental Payments
2024	$	704	$	28	$	909	$	1,641
2025	733		—		834		1,567
2026	217		—		840		1,057
2027	219		—		854		1,073
2028	224		—		738		962
Thereafter	57		—		18,002		18,059
Total	$	2,154	$	28	$	22,177	24,359
Present value discount							(14,582)
Lease liabilities							$	9,777

The Company has adopted the short-term lease policy election and accordingly, the table above excludes future minimum base cash rental payments by the Company or its tenants on leases that have a term of less than 12 months at lease inception. The total of such future obligations is not material.

Leases

Leases

As Lessor

The Company’s investment properties are leased to tenants under long-term operating leases that typically include one or more tenant renewal options. The Company’s leases provide for annual base rental payments (generally payable in monthly installments), and generally provide for increases in rent based on fixed contractual terms or as a result of increases in the Consumer Price Index.

Substantially all of the leases are triple-net, which means that the lessees are responsible for paying all property operating expenses, including maintenance, insurance, utilities, property taxes and, if applicable, ground rent expense; therefore, the Company is generally not responsible for repairs or other capital expenditures related to the properties while the triple-net leases are in effect and, at the end of the lease term, the lessees are responsible for returning the property to the Company in a substantially similar condition as when they took possession. Some of the Company’s leases provide that in the event the Company wishes to sell the property subject to that lease, it first must offer the lessee the right to purchase the property on the same terms and conditions as any offer which it intends to accept for the sale of the property.

Scheduled future minimum base rental payments due to be received under the remaining non-cancelable term of the operating leases in place as of December 31, 2023 were as follows:

(in thousands)	Future Minimum Base Rental Receipts
2024	$	367,658
2025	372,511
2026	375,862
2027	377,320
2028	378,407
Thereafter	4,031,616
Total	$	5,903,374

Since lease renewal periods are exercisable at the option of the lessee, the preceding table presents future minimum base rental payments to be received during the initial non-cancelable lease term only. In addition, the future minimum lease payments exclude contingent rent payments, as applicable, that may be collected from certain tenants based on provisions related to performance thresholds and exclude increases in annual rent based on future changes in the Consumer Price Index, among other items.

The fixed and variable components of lease revenues for the years ended December 31, 2023, 2022, and 2021 were as follows:

	Year ended December 31,
(in thousands)	2023		2022		2021
Fixed lease revenues	$	338,720	$	270,694	$	210,441
Variable lease revenues (1)	3,610		1,632		1,708
Total lease revenues (2)	$	342,330	$	272,326	$	212,149

_____________________________________

(1)Includes contingent rent based on a percentage of the tenant’s gross sales and costs paid by the Company for which it is reimbursed by its tenants.

(2)Excludes the amortization and accretion of above- and below-market lease intangible assets and liabilities and lease incentives and the adjustment to rental revenue for tenant credit.

As Lessee

The Company has a number of ground leases, office leases and other equipment leases which are classified as operating leases. As of December 31, 2023, the Company's ROU assets and lease liabilities were $8.9 million and $9.8 million, respectively. As of December 31, 2022, the Company's ROU assets and lease liabilities were $7.3 million and $9.0 million, respectively. These amounts are included in rent receivables, prepaid expenses and other assets, net and accrued liabilities and other payables on the Company's consolidated balance sheets.

The discount rate applied to measure each ROU asset and lease liability is based on the Company's incremental borrowing rate ("IBR"). The Company considers the general economic environment and its historical borrowing activity and factors in various financing and asset specific adjustments to ensure the IBR is appropriate to the intended use of the underlying lease. As the Company did not elect to apply hindsight, lease term assumptions determined under ASC 840 were carried forward and applied in calculating the lease liabilities recorded under ASC 842. Certain of the Company's ground leases offer renewal options which it assesses against relevant economic factors to determine whether it is reasonably certain of exercising or not exercising the option. Lease payments associated with renewal periods that the Company is reasonably certain will be exercised, if any, are included in the measurement of the corresponding lease liability and ROU asset.

The following table sets forth information related to the measurement of the Company's lease liabilities as of the dates presented:

	December 31, 2023	December 31, 2022
Weighted average remaining lease term (in years)	22.8	22.9
Weighted average discount rate	6.75%	6.09%

The following table sets forth the details of rent expense for the years ended December 31, 2023, 2022 and 2021:

	Year ended December 31,
(in thousands)	2023		2022		2021
Fixed rent expense - Ground Rent	$	970	$	981	$	957
Fixed rent expense - Office Rent	606		511		510
Variable rent expense	—		—		—
Total rent expense	$	1,576	$	1,492	$	1,467

As of December 31, 2023, future lease payments due from the Company under the ground, office and equipment operating leases where the Company is directly responsible for payment and the future lease payments due under the ground operating leases where the Company's tenants are directly responsible for payment over the next five years and thereafter were as follows:

(in thousands)	Office and Equipment Leases		Ground Leases to be Paid by the Company		Ground Leases to be Paid Directly by the Company’s Tenants		Total Future Minimum Base Rental Payments
2024	$	704	$	28	$	909	$	1,641
2025	733		—		834		1,567
2026	217		—		840		1,057
2027	219		—		854		1,073
2028	224		—		738		962
Thereafter	57		—		18,002		18,059
Total	$	2,154	$	28	$	22,177	24,359
Present value discount							(14,582)
Lease liabilities							$	9,777

The Company has adopted the short-term lease policy election and accordingly, the table above excludes future minimum base cash rental payments by the Company or its tenants on leases that have a term of less than 12 months at lease inception. The total of such future obligations is not material.