Note 8 - Leases

3 Months Ended

Mar. 31, 2021

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

8. Leases

Lessor Leases

The Company’s primary source of revenues is derived from lease agreements, which includes rental income and expense reimbursement. The Company’s lease income is comprised of minimum base rent, expense reimbursements, percentage rent, lease termination fee income, ancillary income, amortization of above-market and below-market rent adjustments and straight-line rent adjustments.

The disaggregation of the Company’s lease income, which is included in Revenues from rental properties on the Company’s Condensed Consolidated Statements of Income, as either fixed or variable lease income based on the criteria specified in ASC 842, for the three months ended March 31, 2021 and 2020, is as follows (in thousands):

	Three Months Ended March 31,
	2021		2020
Lease income:
Fixed lease income (1)	$	212,393	$	218,873
Variable lease income (2)		60,776		57,189
Above-market and below-market leases amortization, net		5,702		9,942
Total lease income	$	278,871	$	286,004

(1) Includes minimum base rents, expense reimbursements, ancillary income and straight-line rent adjustments.

(2) Includes minimum base rents, expense reimbursements, percentage rent, lease termination fee income and ancillary income.

Lessee Leases

The Company currently leases real estate space under non-cancelable 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 64.8 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. At March 31, 2021, the weighted average remaining non-cancelable lease term for the Company’s operating leases was 20.5 years and the weighted average discount rate was 6.54%. 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 for the three months ended March 31, 2021 and 2020, were as follows (in thousands):

	Three Months Ended March 31,
	2021		2020
Lease cost:
Operating lease cost	$	2,830	$	2,598
Variable lease cost		683		727
Total lease cost	$	3,513	$	3,325