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Leases
 3 Months Ended
Mar. 31, 2021
Leases [Abstract]  
Leases
Note 8. Leases
Operating leases
Our operating leases primarily relate to preferred berthing arrangements, real estate and shipboard equipment and are included within Operating lease right-of-use assets, and Long-term operating lease liabilities with the current portion of the liability included within Current portion of operating lease liabilities in our consolidated balance sheets as of March 31, 2021 and December 31, 2020. Leases with an initial term of 12 months or less are not recorded on our consolidated balance sheet. We recognize lease expense for these leases on a straight-line basis over the lease term. Our operating leases include Silver Explorer, operated by Silversea Cruises. The operating lease for Silver Explorer will expire in 2023.
For some of our real estate leases and berthing agreements, we have the option to extend our current lease term. For those lease agreements with renewal options, the renewal periods for real estate leases range from one to 10 years and the renewal periods for berthing agreements range from one to 20 years. Generally, we do not include renewal options as a component of our present value calculation for berthing agreements. However, for certain real estate leases, we include them.
We have a residual value guarantee associated with our Port of Miami Terminal "A" operating lease agreement ("Port of Miami terminal lease") that approximates a percentage of the cost of the asset as of the inception of the lease. We consider the possibility of incurring costs associated with the residual value guarantee to be remote.
Also in connection with the Port of Miami terminal lease, we are required to deliver on or before July 18, 2021, cash collateral in an amount equal to the lesser of our residual value guarantee or the aggregate balance of the lenders' terminal construction debt, estimated at $181.1 million as of March 31, 2021. The collateral is to be returned when all amounts due by us under the lease have been paid in full.
As most of our leases do not provide an implicit rate, we use our incremental borrowing rate in determining the present value of lease payments. We estimate our incremental borrowing rates based on LIBOR and U.S. Treasury note rates corresponding to lease terms increased by the Company’s credit risk spread and reduced by the estimated impact of collateral. In addition, we have lease agreements with lease and non-lease components, which are generally accounted for separately. However, for berthing agreements, we account for the lease and non-lease components as a single lease component.
Finance Leases
Silversea Cruises operates the Silver Whisper under a finance lease. The finance lease for the Silver Whisper will expire in 2022, subject to an option to purchase the ship. The total aggregate amount of the finance lease liabilities recorded for this ship was $31.5 million at March 31, 2021 and December 31, 2020. The lease payments on the Silver Whisper are subject to adjustments based on the LIBOR rate.
The components of lease expense were as follows (in thousands):
Consolidated Statement of Comprehensive Loss ClassificationQuarter Ended March 31, 2021Quarter Ended March 31, 2020
Lease costs:
Operating lease costsCommission, transportation and other$— $14,745 
Operating lease costsOther operating expenses5,130 7,001 
Operating lease costsMarketing, selling and administrative expenses6,035 5,368 
Financial lease costs:
Amortization of right-of-use-assetsDepreciation and amortization expenses3,744 4,881 
Interest on lease liabilitiesInterest expense, net of interest capitalized310 1,933 
Total lease costs$15,219 $33,928 
In addition, certain of our berthing agreements include variable lease costs based on the number of passengers berthed. During the quarter ended March 31, 2021, we had no variable lease costs recorded within Commission, transportation and other in our consolidated statement of comprehensive loss.
Weighted average of the remaining lease terms and weighted average discount rates are as follows:
As of March 31, 2021As of December 31, 2020
Weighted average of the remaining lease term
Operating leases9.97.8
Finance leases42.141.2
Weighted average discount rate
Operating leases5.25 %4.59 %
Finance leases7.02 %6.89 %
Supplemental cash flow information related to leases is as follows (in thousands):
Quarter Ended March 31, 2021Quarter Ended March 31, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$5,531 $27,841 
Operating cash flows from finance leases$310 $1,933 
Financing cash flows from finance leases$4,305 $3,823 
As of March 31, 2021, maturities related to lease liabilities were as follows (in thousands):
YearOperating LeasesFinance Leases
Remainder of 2021$96,266 $55,831 
2022119,321 23,822 
2023112,718 12,789 
202484,696 12,529 
202577,323 12,566 
Thereafter386,342 395,460 
Total lease payments876,666 512,997 
Less: Interest(231,908)(303,249)
Present value of lease liabilities$644,758 $209,748 
Leases
Note 8. Leases
Operating leases
Our operating leases primarily relate to preferred berthing arrangements, real estate and shipboard equipment and are included within Operating lease right-of-use assets, and Long-term operating lease liabilities with the current portion of the liability included within Current portion of operating lease liabilities in our consolidated balance sheets as of March 31, 2021 and December 31, 2020. Leases with an initial term of 12 months or less are not recorded on our consolidated balance sheet. We recognize lease expense for these leases on a straight-line basis over the lease term. Our operating leases include Silver Explorer, operated by Silversea Cruises. The operating lease for Silver Explorer will expire in 2023.
For some of our real estate leases and berthing agreements, we have the option to extend our current lease term. For those lease agreements with renewal options, the renewal periods for real estate leases range from one to 10 years and the renewal periods for berthing agreements range from one to 20 years. Generally, we do not include renewal options as a component of our present value calculation for berthing agreements. However, for certain real estate leases, we include them.
We have a residual value guarantee associated with our Port of Miami Terminal "A" operating lease agreement ("Port of Miami terminal lease") that approximates a percentage of the cost of the asset as of the inception of the lease. We consider the possibility of incurring costs associated with the residual value guarantee to be remote.
Also in connection with the Port of Miami terminal lease, we are required to deliver on or before July 18, 2021, cash collateral in an amount equal to the lesser of our residual value guarantee or the aggregate balance of the lenders' terminal construction debt, estimated at $181.1 million as of March 31, 2021. The collateral is to be returned when all amounts due by us under the lease have been paid in full.
As most of our leases do not provide an implicit rate, we use our incremental borrowing rate in determining the present value of lease payments. We estimate our incremental borrowing rates based on LIBOR and U.S. Treasury note rates corresponding to lease terms increased by the Company’s credit risk spread and reduced by the estimated impact of collateral. In addition, we have lease agreements with lease and non-lease components, which are generally accounted for separately. However, for berthing agreements, we account for the lease and non-lease components as a single lease component.
Finance Leases
Silversea Cruises operates the Silver Whisper under a finance lease. The finance lease for the Silver Whisper will expire in 2022, subject to an option to purchase the ship. The total aggregate amount of the finance lease liabilities recorded for this ship was $31.5 million at March 31, 2021 and December 31, 2020. The lease payments on the Silver Whisper are subject to adjustments based on the LIBOR rate.
The components of lease expense were as follows (in thousands):
Consolidated Statement of Comprehensive Loss ClassificationQuarter Ended March 31, 2021Quarter Ended March 31, 2020
Lease costs:
Operating lease costsCommission, transportation and other$— $14,745 
Operating lease costsOther operating expenses5,130 7,001 
Operating lease costsMarketing, selling and administrative expenses6,035 5,368 
Financial lease costs:
Amortization of right-of-use-assetsDepreciation and amortization expenses3,744 4,881 
Interest on lease liabilitiesInterest expense, net of interest capitalized310 1,933 
Total lease costs$15,219 $33,928 
In addition, certain of our berthing agreements include variable lease costs based on the number of passengers berthed. During the quarter ended March 31, 2021, we had no variable lease costs recorded within Commission, transportation and other in our consolidated statement of comprehensive loss.
Weighted average of the remaining lease terms and weighted average discount rates are as follows:
As of March 31, 2021As of December 31, 2020
Weighted average of the remaining lease term
Operating leases9.97.8
Finance leases42.141.2
Weighted average discount rate
Operating leases5.25 %4.59 %
Finance leases7.02 %6.89 %
Supplemental cash flow information related to leases is as follows (in thousands):
Quarter Ended March 31, 2021Quarter Ended March 31, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$5,531 $27,841 
Operating cash flows from finance leases$310 $1,933 
Financing cash flows from finance leases$4,305 $3,823 
As of March 31, 2021, maturities related to lease liabilities were as follows (in thousands):
YearOperating LeasesFinance Leases
Remainder of 2021$96,266 $55,831 
2022119,321 23,822 
2023112,718 12,789 
202484,696 12,529 
202577,323 12,566 
Thereafter386,342 395,460 
Total lease payments876,666 512,997 
Less: Interest(231,908)(303,249)
Present value of lease liabilities$644,758 $209,748