Note 7 - Leases

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

7. Leases

The Company adopted Topic 842, on January 1, 2019, and as a result, recorded a ROU asset of $106.0 million and a corresponding lease liability of $98.7 million (see Footnote 2 to the Notes to the Company’s Condensed Consolidated Financial Statements for further discussion on the adoption of Topic 842). As the lessee, the Company currently leases real estate space under noncancelable operating lease agreements for ground leases and administrative office leases. The Company’s leases have remaining lease terms ranging from less than one year to 52 years, some of which include options to extend the terms for up to an additional 75 years. The Company does not include any of its renewal options in its lease terms for calculating its lease liability as the renewal options allow the Company to maintain operational flexibility, and the Company is not reasonably certain it will exercise these renewal options at this time. The weighted-average remaining non-cancelable lease term for the Company’s operating leases was 21.5 years at September 30, 2019. The weighted-average discount rate was 6.63% at September 30, 2019. The Company’s operating lease liabilities are determined based on the estimated present value of the Company’s minimum lease payments under its lease agreements. The discount rate used to determine the lease liabilities is based on the estimated incremental borrowing rate on a lease by lease basis. When calculating the incremental borrowing rates, the Company utilized data from (i) its recent debt issuances, (ii) publicly available data for instruments with similar characteristics, (iii) observable mortgage rates and (iv) unlevered property yields and discount rates. The Company then applied adjustments to account for considerations related to term and security that may not be fully incorporated by the data sets.

The components of the Company’s lease expense, which are included in rent expense and general and administrative expense on the Company’s Condensed Consolidated Statements of Income, were as follows (in thousands):

	Nine Months Ended September 30, 2019
Lease cost:
Operating lease cost	$	9,592
Variable lease cost		1,408
Total lease cost	$	11,000

The future minimum lease payments to be paid under noncancelable operating leases in effect at September 30, 2019 and December 31, 2018, are as follows (in thousands):

Year Ending December 31,	As of September 30, 2019			As of December 31, 2018
2019	$	3,091		$	12,206
2020		10,375			9,901
2021		9,858			9,716
2022		9,237			9,236
2023		9,250			8,936
Thereafter		136,608			115,788
Total minimum lease payments	$	178,419		$	165,783
Less imputed interest		(86,798	)
Total operating lease liabilities	$	91,621

The future minimum revenues from rental properties under the terms of all noncancelable tenant operating leases in effect, assuming no new or renegotiated leases are executed for such premises, at September 30, 2019 and December 31, 2018, are as follows (in thousands):

Year Ending December 31,	As of September 30, 2019		As of December 31, 2018
2019	$	210,376	$	816,409
2020		826,361		769,074
2021		762,245		690,678
2022		666,605		594,638
2023		566,171		492,631
Thereafter		2,927,901		2,540,231
Total minimum revenues	$	5,959,659	$	5,903,661