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Leases

12 Months Ended

Dec. 31, 2019

LEASES

As Lessor

We lease space to tenants under operating leases in an office building and in retail centers. The rental terms range from approximately 5 to 25 years. The leases provide for the payment of fixed base rents payable monthly in advance as well as reimbursements of real estate taxes, insurance and maintenance costs. Retail leases may also provide for the payment by the lessee of additional rents based on a percentage of their sales. We also lease residential space at The Alexander apartment tower with 1 or 2 year lease terms. We have elected to account for lease revenues (including fixed and variable rent) and the reimbursement of common area maintenance expenses as a single lease component presented as “rental revenues” in our consolidated statements of income.

Under ASC 842, we must assess on an individual lease basis whether it is probable that we will collect the future lease payments. We consider the tenant’s payment history and current credit status when assessing collectability. When collectability is not deemed probable, we write-off the tenant’s receivables, including straight-line rent receivable, and limit lease income to cash received. Changes to the collectability of our operating leases are recorded as adjustments to “rental revenues” on our consolidated statements of income, which resulted in a decrease in income of $209,000 for the year ended December 31, 2019. As a result, there is no allowance for doubtful accounts as of December 31, 2019. The table below summarizes our allowance for doubtful accounts as of December 31, 2018 and 2017.



(Amounts in thousands)	Balance at Beginning of Year		Additions: Charged Against Operations		Deductions: Uncollectible Accounts Written Off			Balance at End of Year
Allowance for doubtful accounts:
Year Ended December 31, 2018	$	1,501	$	4,459	$	(5,289	)	$	671

Year Ended December 31, 2017	$	1,473	$	53	$	(25	)	$	1,501

Future undiscounted cash flows under our non-cancelable operating leases are as follows:



	Under ASC 842
(Amounts in thousands)	As of December 31, 2019
For the year ending December 31,
2020	$	141,875
2021	134,877
2022	127,691
2023	129,054
2024	137,234
Thereafter	624,239



	Under ASC 840
(Amounts in thousands)	As of December 31, 2018
For the year ending December 31,
2019	$	138,784
2020	131,647
2021	120,450
2022	111,532
2023	111,962
Thereafter	671,111

These amounts do not include reimbursements or additional rents based on a percentage of retail tenants’ sales.

ALEXANDER’S, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. LEASES - continued

Bloomberg accounted for revenue of $109,113,000, $107,356,000, and $105,224,000 in the years ended December 31, 2019, 2018 and 2017, respectively, representing approximately 48%, 46% and 46% of our total revenues in each year, respectively. No other tenant accounted for more than 10% of our total revenues. If we were to lose Bloomberg as a tenant, or if Bloomberg were to be unable to fulfill its obligations under its lease, it would adversely affect our results of operations and financial condition. In order to assist us in our continuing assessment of Bloomberg’s creditworthiness, we receive certain confidential financial information and metrics from Bloomberg. In addition, we access and evaluate financial information regarding Bloomberg from other private sources, as well as publicly available data.

On June 28, 2019, we entered into a lease agreement with Bloomberg for an additional 49,000 square feet at our 731 Lexington Avenue property

As Lessee

We are the lessee under a ground lease at our Flushing property, classified as an operating lease, which expires in 2027 and has one 10-year extension option. On January 1, 2019, we recorded a right-of-use asset and lease liability related to this ground lease equal to the present value of the remaining minimum lease payments. As of December 31, 2019, the right-of-use asset of $4,529,000 and the lease liability of $4,845,000, are included in “other assets” and “other liabilities,” respectively, on our consolidated balance sheet. The discount rate applied to measure the right-of-use asset and lease liability is based on the incremental borrowing rate (“IBR”) for the property of 4.53%. We initially consider the general economic environment and factor in various financing and asset specific adjustments so that the IBR is appropriate to the intended use of the underlying lease. As we did not elect to apply hindsight, the lease term assumption determined under ASC 840 was carried forward and applied in calculating our lease liability recorded under ASC 842.

Future lease payments under this operating lease, excluding the extension option, are as follows:



	Under ASC 842
(Amounts in thousands)	As of December 31, 2019
For the year ending December 31,
2020	$	800
2021	800
2022	800
2023	800
2024	800
Thereafter	1,600
Total undiscounted cash flows	5,600
Present value discount	(755		)
Lease liability as of December 31, 2019	$	4,845



	Under ASC 840
(Amounts in thousands)	As of December 31, 2018
For the year ending December 31,
2019	$	800
2020	800
2021	800
2022	800
2023	800
Thereafter	2,467

We recognize rent expense as a component of “operating” expenses on our consolidated statements of income on a straight-line basis. Rent expense was $746,000 in each of the years ended December 31, 2019, 2018 and 2017, respectively. Cash paid for rent expense was $800,000, $800,000 and $792,000 in the years ended December 31, 2019, 2018 and 2017, respectively.

Leases