Lease Obligations

12 Months Ended

Dec. 31, 2020

Leases [Abstract]

Lease Obligations

Note 7.     Lease Obligations

Certain of our shopping centers are subject to operating ground leases that cover either partially or the entire center. These ground leases expire at various dates through 2069 with renewal options ranging from five years to 20 years 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. As of December 31, 2020 and 2019, we were the lessee under ground lease agreements associated with 10 and 12 centers, respectively. Additionally, we were the lessee under administrative lease agreements with four offices as of both December 31, 2020 and 2019. Our right-of-use assets associated with our operating leases totaled $42.8 million and $43.8 million at December 31, 2020 and 2019, respectively.

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 December 31, 2020 and 2019 was $8.7 million and $8.9 million, respectively. Amortization of property under the finance lease is included in depreciation and amortization expense.

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

	Year Ended December 31,
	2020			2019
Lease cost:
Operating lease cost:
Included in Operating expense	$	2,977		$	3,044
Included in General and administrative expense		370			302
Finance cost:
Amortization of right-of-use asset (included in Depreciation and Amortization)		182			174
Interest on lease liability (included in Interest expense, net)		1,635			1,642
Short-term lease cost		—			44
Variable lease cost		244			309
Sublease income (included in Rentals, net)		(26,539)			(27,400)
Total lease cost	$	(21,131)		$	(21,885)
	December 31,
	2020			2019
Weighted-average remaining lease term (in years):
Operating leases		40.7			41.5
Finance lease		3.0			4.0
Weighted-average discount rate (percentage):
Operating leases		4.9	%		4.9	%
Finance lease		7.5	%		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, as calculated as of December 31, 2020, is as follows (in thousands):

	Operating		Finance
Lease payments:
2021	$	2,717	$	1,751
2022		2,698		1,759
2023		2,582		23,037
2024		2,222		—
2025		2,082		—
Thereafter		95,105		—
Total	$	107,406	$	26,547
Lease liabilities (1)		42,888		21,696
Undiscounted excess amount	$	64,518	$	4,851

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

Rental expense for operating leases as defined under ASC No. 840 was $3.1 million in 2018 and was recognized in Operating expense. Minimum revenues under subleases, applicable to the ground lease rentals, under the terms of all non-cancelable tenant leases was $22.8 million in 2018.

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 December 31, 2020, were as follows (in thousands):

Sublease payments:
Finance lease(1)	$	10,286
Operating leases:
2021	$	23,110
2022		21,351
2023		19,813
2024		15,668
2025		11,273
Thereafter		36,826
Total	$	128,041

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