Lease Obligaitons

3 Months Ended

Mar. 31, 2019

We are engaged in the operation of shopping centers, which are either owned or, with respect to certain shopping centers, operated under operating ground leases. These ground leases expire at various dates through 2069 with renewal options ranging from five years to 20 years, which have been predominantly excluded from our lease liabilities, and in some cases, include options to purchase the underlying asset by either the lessor or lessee. Generally, our ground lease variable payments for real estate taxes, insurance and utilities are paid directly by us and are not a component of rental expense. Most of our leases have increasing minimum rental rates during the terms of the leases through escalation provisions and also may include an amount based on a percentage of operating revenues or sublease tenant revenue. Space in our shopping centers is leased to tenants pursuant to agreements that generally provide for terms of 10 years or less and may include multiple options to extend the lease term in increments up to five years, for annual rentals subject to upward adjustments based on operating expense levels, sales volume, or contractual increases as defined in the lease agreements.

Also, we have two properties under a finance lease that consists of variable lease payments with a purchase option. The right-of-use asset associated with this finance lease at March 31, 2019 was $1.7 million. At December 31, 2018, the related assets associated with a capital lease in buildings and improvements total $15.7 million, and the balance of accumulated depreciation was $14.1 million. Amortization of property under the finance lease is included in depreciation and amortization expense. Note that amounts prior to January 1, 2019 were accounted for under ASC No. 840 “Leases.”

A schedule of lease costs including weighted average lease terms and weighted-average discount rates is as follows (in thousands, except as noted):



	Three Months Ended March 31,
	2019
Lease cost:
Operating lease cost:
Included in Operating expense	$	761
Included in General and administrative expense	61
Finance cost:
Amortization of right-of-use asset (included in Depreciation and Amortization expense)	45
Interest on lease liability (included in Interest expense)	410
Short-term lease cost	27
Variable lease cost	73
Sublease income (included in Rentals, net)	(6,703		)
Total lease cost	$	(5,326	)

Weighted-average remaining lease term (in years):
Operating leases	42.6
Finance lease	4.8

Weighted-average discount rate (percentage):
Operating leases	4.9		%
Finance lease	7.5		%

A reconciliation of our lease liabilities on an undiscounted cash flow basis, which primarily represents shopping center ground leases, for the subsequent five years and thereafter ending December 31, as calculated as of March 31, 2019, is as follows (in thousands):



	Operating		Finance
Lease payments:
2019 remaining	$	1,733	$	1,302
2020	2,545		1,744
2021	2,334		1,751
2022	2,318		1,759
2023	2,283		23,037
2024	2,115
Thereafter	97,187
Total	$	110,515	$	29,593

Lease liabilities⁽¹⁾	42,425		21,875
Undiscounted excess amount	$	68,090	$	7,718

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(1)	Operating lease liabilities are included in Other Liabilities, and finance lease liabilities are included in Debt, net in our Condensed Consolidated Balance Sheet.

Scheduled minimum rental payments as defined under ASC No. 840, "Leases" under the terms of all non-cancelable operating leases in which we are the lessee, principally for shopping center ground leases, for the subsequent five years and thereafter ending December 31, as calculated as of December 31, 2018, were as follows (in thousands):



	Operating		Finance
Lease payments:
2019	$	2,779	$	1,642
2020	2,536		1,635
2021	2,334		1,627
2022	2,318		1,618
2023	2,283		22,878
Thereafter	99,302
Total	$	111,552	$	29,400

Future undiscounted, sublease payments, applicable to the ground lease rentals, under the terms of all non-cancelable tenant leases, excluding estimated variable payments for the subsequent five years and thereafter ending December 31, as calculated as of March 31, 2019 and December 31, 2018, were as follows (in thousands):



	March 31, 2019		December 31, 2018
Sublease payments:
Finance lease⁽¹⁾	$	13,887	$	14,382
Operating leases:
2019 remaining	$	17,318	$	22,528
2020	21,766		20,903
2021	19,708		18,886
2022	17,970		17,245
2023	15,839		15,128
2024	10,733
Thereafter	33,922		43,439
Total	$	137,256	$	138,129

___________________


(1)	The sublease payments related to our finance lease represents cumulative payments through the lease term ending in 2023.

Lease Obligations

A schedule of lease costs including weighted average lease terms and weighted-average discount rates is as follows (in thousands, except as noted):



	Three Months Ended March 31,
	2019
Lease cost:
Operating lease cost:
Included in Operating expense	$	761
Included in General and administrative expense	61
Finance cost:
Amortization of right-of-use asset (included in Depreciation and Amortization expense)	45
Interest on lease liability (included in Interest expense)	410
Short-term lease cost	27
Variable lease cost	73
Sublease income (included in Rentals, net)	(6,703		)
Total lease cost	$	(5,326	)

Weighted-average remaining lease term (in years):
Operating leases	42.6
Finance lease	4.8

Weighted-average discount rate (percentage):
Operating leases	4.9		%
Finance lease	7.5		%



	Operating		Finance
Lease payments:
2019 remaining	$	1,733	$	1,302
2020	2,545		1,744
2021	2,334		1,751
2022	2,318		1,759
2023	2,283		23,037
2024	2,115
Thereafter	97,187
Total	$	110,515	$	29,593

Lease liabilities⁽¹⁾	42,425		21,875
Undiscounted excess amount	$	68,090	$	7,718

___________________


(1)	Operating lease liabilities are included in Other Liabilities, and finance lease liabilities are included in Debt, net in our Condensed Consolidated Balance Sheet.



	Operating		Finance
Lease payments:
2019	$	2,779	$	1,642
2020	2,536		1,635
2021	2,334		1,627
2022	2,318		1,618
2023	2,283		22,878
Thereafter	99,302
Total	$	111,552	$	29,400



	March 31, 2019		December 31, 2018
Sublease payments:
Finance lease⁽¹⁾	$	13,887	$	14,382
Operating leases:
2019 remaining	$	17,318	$	22,528
2020	21,766		20,903
2021	19,708		18,886
2022	17,970		17,245
2023	15,839		15,128
2024	10,733
Thereafter	33,922		43,439
Total	$	137,256	$	138,129

___________________


(1)	The sublease payments related to our finance lease represents cumulative payments through the lease term ending in 2023.