5. Leases

A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. On January 1, 2019, the Company adopted ASU 2016-02, Leases (Topic 842) and all subsequent ASUs that modified Topic 842. For the Company, Topic 842 affected the accounting treatment for operating lease agreements in which the Company is the lessee.

As of September 30, 2019, the Company rents office space under operating leases expiring in 2019 through 2024, and the Company has no financing leases. The leases call for base rent plus escalations as well as other operating expenses. The following table represents the Company’s lease right-of-use assets and lease liabilities on the condensed consolidated statements of financial condition. The Company elected not to include short-term leases (i.e., leases with initial terms of twelve months or less), or equipment leases (deemed immaterial) on the condensed consolidated statements of financial condition.

	As of September 30, 2019 (unaudited)		As of December 31, 2018
Assets
Lease right-of-use assets	$	2,501,000		—
Liabilities
Lease liabilities	$	2,817,000		—

The calculated amounts of the lease right-of-use assets and lease liabilities in the table above are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. As of September 30, 2019, the Company does not believe that any of the renewal options under the existing leases are reasonably certain to be exercised; however, the Company will continue to assess and monitor the lease renewal options on an ongoing basis. The Company also leases some miscellaneous office equipment, but they are immaterial and therefore the Company records the costs associated with this office equipment on the statement of operations rather than capitalizing them as lease right-of-use assets. The Company determined a discount rate of 5.0% would approximate the Company’s cost to obtain financing given its size, growth, and risk profile.

Lease Term and Discount Rate
Weighted average remaining lease term – operating leases (in years)	3.5
Weighted average discount rate – operating leases	5.0%

The following table represents lease costs and other lease information. The Company has elected the practical expedient to not separate lease and non-lease components, and as such, the variable lease cost primarily represents variable payments such as common area maintenance and utilities which are determined by the leased square footage in proportion to the overall office building.

	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Operating lease cost	$	294,000	$	624,000
Short-term lease cost		81,000		321,000
Variable lease cost		5,000		50,000
Sublease income		—		—
Total lease cost	$	380,000	$	995,000

Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	275,000	$	632,000

Lease right-of-use assets obtained in exchange for new lease liabilities
Operating leases	$	813,000	$	3,028,000

Lease Commitments

Future annual minimum payments for operating leases with initial terms of greater than one year as of September 30, 2019 were as follows:

Year	Amount
2019	$	259,000
2020		992,000
2021		759,000
2022		513,000
2023		493,000
2024		56,000
Thereafter		—
Remaining balance of lease payments		3,072,000
Difference between undiscounted cash flows and discounted cash flows		255,000
Lease liabilities	$	2,817,000

Rent and related operating expenses were $380,000 and $248,000 for the three months ended September 30, 2019 and 2018, respectively. Rent and related operating expenses were $995,000 and $737,000 for the nine months ended September 30, 2019 and 2018, respectively.