Commitments and Contingencies

12 Months Ended

Dec. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

In the ordinary course of business, we are party to various legal actions which we believe are routine in nature and incidental to the operation of our business. We believe that the outcome of the proceedings will not have a material adverse effect upon our consolidated financial position or results of operations.

At December 31, 2019, we had commitments of $6.5 million for re-leasing costs, recurring capital expenditures, and non-recurring building improvements. In addition, as of December 31, 2019, we had committed $16.0 million under construction contracts, which is expected to be paid in the next twelve months.

We have certain properties that are subject to ground leases which are accounted for as operating leases.

At December 31, 2019, minimum future rental payments for the next five years and thereafter are as follows (dollars in millions):



	Ground Leases Paid by Realty Income ⁽¹⁾		Ground Leases Paid by Our Tenants ⁽²⁾		Total
2020	$	1.6	$	13.5	$	15.1
2021	1.4		13.3		14.7
2022	1.4		13.2		14.6
2023	1.3		13.2		14.5
2024	1.3		13.3		14.6
Thereafter	18.9		68.9		87.8
Total	$	25.9	$	135.4	$	161.3
Present value adjustment for remaining lease payments ⁽³⁾					(39.0		)
Lease liability - operating leases, net					$	122.3


⁽¹⁾	Realty Income currently pays the ground lessors directly for the rent under the ground leases.


⁽²⁾	Our tenants, who are generally sub-tenants under the ground leases, are responsible for paying the rent under these ground leases. In the event a tenant fails to pay the ground lease rent, we are primarily responsible.

⁽³⁾The range of discount rates used to calculate the present value of the lease payments is 2.42% to 5.50%. At December 31, 2019, the weighted average discount rate is 4.29% and the weighted average remaining lease term is 12.3 years. The discount rates are derived using a hypothetical corporate credit curve for the ground leases based on our outstanding senior notes and relevant market data. The discount rates are specific for individual leases primarily based on the lease term.

On January 1, 2019, we adopted Topic 842, Leases using the effective date method and elected the practical expedients available for implementation under the standard. As a result, on December 31, 2018 we do not have a lease liability for operating leases.

At December 31, 2018, minimum future rental payments for the next five years and thereafter were as follows (dollars in millions):



	Ground Leases Paid by Realty Income ⁽¹⁾		Ground Leases Paid by Our Tenants ⁽²⁾		Total
2019	$	1.5	$	13.5	$	15.0
2020	1.4		13.5		14.9
2021	1.2		13.2		14.4
2022	1.2		13.1		14.3
2023	1.2		13.1		14.3
Thereafter	19.8		82.0		101.8
Total	$	26.3	$	148.4	$	174.7


⁽¹⁾	Realty Income currently pays the ground lessors directly for the rent under the ground leases.

⁽²⁾

Our tenants, who are generally sub-tenants under the ground leases, are responsible for paying the rent under these ground leases. In the event a tenant fails to pay the ground lease rent, we are primarily responsible.