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Leases

6 Months Ended

Jun. 30, 2021

11. Leases

As Lessor

The Company is engaged in the operation of shopping centers and other retail properties that are either owned or, with respect to certain shopping centers, operated under long-term ground leases that expire at various dates through June 20, 2066, with renewal options (as discussed further below). Space in the shopping centers is leased to tenants pursuant to agreements that provide for terms ranging generally from one month to sixty years and generally provide for additional rents based on certain operating expenses as well as tenants’ sales volumes. During the six months ended June 30, 2021 and 2020, the Company earned $29.3 million and $27.3 million, respectively in variable lease revenues, primarily for real estate taxes and common area maintenance charges, which are included in rental income in the consolidated statements of income.

The activity for the reserves related to billed rents and straight-line rents (including those under specific operating leases where the collection of rents is assessed to be not probable) is as follows:


	Six Months Ended June 30, 2021
	Balance at Beginning of Period		Provision (Recovery)		Adjustments to Valuation Accounts		Deductions			Balance at End of Period

Allowance for credit loss - billed rents	$	30,366	$	1,238	$	—	$	(2,639	)	$	28,965
Straight-line rent reserves		15,042		586		—		(2,329	)		13,299
Total - rents receivable	$	45,408	$	1,824	$	—	$	(4,968	)	$	42,264

As Lessee

During the six months ended June 30, 2021, the Company:



modified its Rye, New York corporate office lease during the first quarter of 2021. As a result, of the modification, the lease was remeasured and the lease liability and right-of-use asset were each reduced by $0.4 million.



terminated its Fund IV lease at 110 University Place in New York City during the second quarter of 2021 (which was previously impaired in 2020, Note 8) for $3.6 million, and de-recognized the related right-of-use asset of $31.4 million, lease liability of $46.0 million and building improvements and other assets totaling $10.3 million, resulting in a gain on lease termination of $0.7 million, or $0.2 million at the Company's share, which is reflected within Gain on disposition of properties in the consolidated statement of income.

During the year ended December 31, 2020, the Company:



entered into one new office lease as lessee for which the lease commenced in the third quarter of 2020. The Company recorded a right-of-use asset and corresponding lease liability of $1.7 million;



modified its 991 Madison master lease by converting the 49-year fixed term to a 15-year term. As a result of the modification, the lease was reclassified from a finance lease to an operating lease during the second quarter of 2020;



consolidated one property within the BSP II portfolio, 102 E. Broughton, (Note 2), which was subject to a ground lease classified as an operating lease, during the second quarter of 2020;



recorded an impairment charge of $12.3 million on a right-of-use asset for a Fund IV property, 110 University Place (Note 8) during the fourth quarter of 2020;



renewed one ground lease for Branch Plaza, an operating lease, for 22 years during the second quarter of 2020; and



modified its 1238 Wisconsin lease agreement in the fourth quarter of 2020 for a reduced purchase price from $14.5 million to $11.5 million and, as a result, remeasured and reduced its right-of-use asset and lease liability by $1.9 million .

Additional disclosures regarding the Company’s leases as lessee are as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021			2020
Lease Cost
Finance lease cost:
Amortization of right-of-use assets	$	225		487	$	451		$	1,144
Interest on lease liabilities		97		599		192			1,449
Subtotal		322		1,086		643			2,593
Operating lease cost		2,230		1,725		4,516			3,119
Variable lease cost		19		6		34			22
Total lease cost	$	2,571	$	2,817	$	5,193		$	5,734

Other Information
Weighted-average remaining lease term - finance leases (years)						33.0			33.7
Weighted-average remaining lease term - operating leases (years)						14.4			26.9
Weighted-average discount rate - finance leases						6.3	%		6.2	%
Weighted-average discount rate - operating leases						5.1	%		5.4	%

Right-of-use assets – finance leases are included in Operating real estate (Note 2) in the consolidated balance sheets. Lease liabilities – finance leases are included in Accounts payable and other liabilities in the consolidated balance sheets (Note 5). Operating lease cost comprises amortization of right-of-use assets for operating properties (related to ground rents) or amortization of right-of-use assets for office and corporate assets and is included in Property operating expense or General and administrative expense, respectively, in the consolidated statements of income. Finance lease cost comprises amortization of right-of-use assets for certain ground leases, which is included in Property operating expense, as well as interest on lease liabilities, which is included in Interest expense in the consolidated statements of income.

Lease Obligations

The scheduled future minimum (i) rental revenues from rental properties under the terms of non-cancelable tenant leases greater than one year (assuming no new or renegotiated leases or option extensions for such premises) and (ii) rental payments under the terms of all non-cancelable operating and finance leases in which the Company is the lessee, principally for office space, land and equipment, as of June 30, 2021, are summarized as follows (in thousands):


			Minimum Rental Payments
Year Ending December 31,	Minimum Rental Revenues (a)		Operating Leases (b)			Finance Leases (b)
2021 (Remainder)	$	100,375	$	3,010		$	69
2022		205,934		5,368			28
2023		190,196		5,389			—
2024		163,851		5,414			—
2025		133,093		5,329			—
Thereafter		528,888		29,711			12,515
		1,322,337		54,221			12,612
Interest		—		(13,360	)		(6,133	)
Total	$	1,322,337	$	40,861		$	6,479

Amount represents contractual lease maturities at June 30, 2021 including any extension options that management determined were reasonably certain of exercise. During 2020, numerous tenants were forced to suspend operations by government mandate as a result of the COVID-19 Pandemic. The Company has negotiated payment agreements with selected tenants which resulted in rent concessions or deferral of rents as discussed further below.

Minimum rental payments exclude options or renewals not reasonably certain of exercise.

During the three and six months ended June 30, 2021 and 2020, no single tenant or property collectively comprised more than 10% of the Company’s consolidated total revenues.

COVID-19 Pandemic Impacts

Beginning in March 2020, the COVID-19 Pandemic has had a material adverse impact on economic and market conditions, and consumer activity, and triggered a period of global and domestic economic slowdown. The COVID-19 Pandemic and government responses created disruption in global supply chains and has been adversely impacting many industries, including the domestic retail sectors in which the Company’s tenants operate. Under governmental restrictions and guidance, certain retailers were considered “essential businesses” and were permitted to remain fully operating during the COVID-19 Pandemic, while other “non-essential businesses” were ordered to decrease or close operations for an indeterminate period of time to protect their employees and customers from the spread of the virus. These disruptions, which have substantially ceased as of the date of this Report, have impacted the collectability of rent from the Company’s affected tenants primarily in 2020 and to a lesser extent in 2021. While the Company considers disruptions related to the COVID-19 Pandemic to be substantially over, if such government mandated closures are reinstated, they may have a material, adverse effect on the Company’s revenues, results of operations, financial condition, and liquidity in future periods.

Rent Collections – The Company collected or negotiated payment agreements of approximately 95.6% and 92.1% of its second quarter pre-COVID billings (original contract rents without regard to deferral or abatement agreements) for its Core Portfolio and the Funds, respectively.

Earnings Impact (Amounts Reflect the Company's Share) – The Company incurred aggregate credit losses and rent abatements totaling approximately $0 and $3.7 million for the three and six months ended June 30, 2021, respectively, compared to $9.4 million and $13.7 million for the three and six months ended June 30, 2020, respectively, primarily related to the COVID-19 Pandemic. In addition, the Company incurred impairment charges of $12.4 million (Note 8) for the six months ended June 30, 2020 primarily related to the COVID-19 Pandemic.

Other Impacts



Rent Concession Agreements – During the six months ended June 30, 2021, the Company executed 74 rent concession arrangements with tenants comprised of 17 agreements for rent deferral and 57 agreements for rent abatements. Of these deferral agreements, 15 were accounted for as if no changes to the contract were made and therefore there were no changes to the current or future recognition of revenue and $7.7 million of deferred receivables are included in Rents receivable in the consolidated balance sheet at June 30, 2021. Consolidated rent abatements represented a $2.4 million reduction in revenues at the Company's share for the six months ended June 30, 2021.



Occupancy – At June 30, 2021, the Company’s pro rata Core and Fund leased occupancy rates were 92.4% and 89.0%, respectively, compared to 93.3% and 91.1% respectively, at June 30, 2020 reflecting primarily leases terminated as a result of the COVID-19 Pandemic including leases discharged in bankruptcy proceedings during 2020.