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Revenue Recognition
9 Months Ended
Sep. 30, 2023
Revenue from Contract with Customer [Abstract]  
REVENUE RECOGNITION REVENUE RECOGNITION
The Company categorizes its primary sources of revenue into revenue from contracts with customers and other revenue accounted for as leases under ASC 842 as follows:
Rental property revenues consist of (1) contractual revenues from leases recognized on a straight-line basis over the term of the respective lease; (2) percentage rents recognized once a specified sales target is achieved; (3) parking revenues; (4) termination fees; and (5) the reimbursement of the tenants' share of real estate taxes, insurance, and other operating expenses. The Company's leases typically include renewal options and are classified and accounted for as operating leases. Rental property revenues are accounted for in accordance with the guidance set forth in ASC 842.
Fee income consists of development fees, management fees, and leasing fees earned from unconsolidated joint ventures and from third parties. Fee income is accounted for in accordance with the guidance set forth in ASC 606.
For the three and nine months ended September 30, 2023, the Company recognized rental property revenues of $198.4 million and $602.5 million, respectively, of which $52.9 million and $174.3 million, respectively, represented variable rental revenue. For the three and nine months ended September 30, 2022, the Company recognized rental property revenues of $193.5 million and $559.9 million, respectively, of which $54.7 million and $157.7 million, respectively, represented variable rental revenue.
For the three and nine months ended September 30, 2023, the Company recognized fee and other revenue of $419,000 and $3.4 million, respectively. For the three and nine months ended September 30, 2022, the Company recognized fee and other revenue of $1.7 million and $7.9 million, respectively. For the three and nine months ended September 30, 2022, fee and other revenue includes $1.0 million and $3.2 million, respectively, related to the Company's consulting and development contracts with Norfolk Southern Railway Company, as discussed in note 3 of the notes to consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2022. For the three and nine months ended September 30, 2023, none of the fee and other revenue related to Norfolk Southern Railway Company.
The Company had a lease with SVB Financial Group ("SVB Financial") at its Hayden Ferry property in Phoenix, Arizona. SVB Financial’s primary subsidiary, Silicon Valley Bank ("SVB"), was placed in receivership by the Federal Deposit Insurance Corporation ("FDIC") on March 10, 2023; and on March 17, 2023, SVB Financial filed a voluntary petition for a court-supervised reorganization under Chapter 11 of the US Bankruptcy Code. On March 27, 2023, First Citizen's BancShares, Inc. ("FCB") announced it had purchased SVB Financial's subsidiary, SVB, the primary user of the leased space. In June 2023, the Bankruptcy court approved SVB Financial's request for an order rejecting the lease, with an effective date no later than September 30, 2023. In June 2023, the Company recorded a reduction of revenue of $1.6 million related to the write-down of net assets associated with this lease at the time that the collection of rents for the term of the lease no longer remained probable. During the three months ended September 30, 2023, the Company recognized $2.3 million of rental revenue on a cash basis related to base rent lease payments made through September 30, 2023, the effective date of the termination.
On August 8, 2023, WeWork Inc. ("WeWork"), disclosed in its Quarterly Report filed on Form 10-Q for the period ending June 30, 2023 that substantial doubt exists as to its ability to continue as a going concern. The Company, through wholly owned subsidiaries, is the landlord under leases totaling approximately 162,000 square feet with subsidiaries of WeWork at three of the Company's properties, two in the Atlanta market and one in the Charlotte market. These WeWork leases comprised $6.5 million of the Company's annual rental property revenue in the accompanying statements of operations for the nine months ended September 30, 2023. The Company also has a 20% interest in an unconsolidated joint venture that is the landlord under a lease for approximately 33,000 square feet with a subsidiary of WeWork at one property in the Atlanta market. The Company's income from unconsolidated joint ventures related to that lease is not significant. Currently, the Company does not expect any potential bankruptcy filing by WeWork to have a material impact on the Company's 2023 financial results. As of October 26, 2023, the Company has not received the October 2023 rent payments at two of the four properties, one wholly owned and the other unconsolidated, but has letter of credit enhancements that substantially support the Company's current balance sheet exposure and revenue for the remainder of 2023 for those two leases. For the other two properties, both wholly owned, the Company has received the October 2023 rent payments and
does not expect that these leases will be rejected during any bankruptcy proceedings. If the Company subsequently determines that lease rejection at these two properties is probable, the net balance sheet exposure and related revenue reduction would be $1.2 million (as of the date of this filing, which reflects the October 2023 payments). The timing of recognizing this $1.2 million is subject to when the respective lease rejections become probable as well as the date on which WeWork vacates its leased space at each respective property. The Company's total projected November and December 2023 WeWork revenue at these two properties is $902,000.