Leases

12 Months Ended

Dec. 31, 2020

Leases [Abstract]

Leases

11. Leases

Operating 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 (see below) that expire at various dates through June 20, 2066, with renewal options. 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 year ended December 31, 2020, the Company earned $57.7 million 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 operations.

As Lessee

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, Note 4), 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)

• renewed one ground lease for Branch Plaza, an operating lease, for 22 years; and

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

During the year ended December 31, 2019, the Company:

• recorded right-of-use assets and corresponding lease liabilities as lessee of $11.9 million and $12.8 million, respectively, for nine existing operating leases (for ground, office and equipment leases) and $82.6 million and $76.6 million, respectively, for four finance leases related to ground rentals including an existing capital lease which represented $77.0 million and $71.1 million, respectively, upon implementation of ASC Topic 842;

• recorded three new finance leases effective January 1, 2019 upon the implementation of ASC 842. An assessment of triggering events whereby the Company’s cumulative leasehold investment made it reasonably certain that the Company would exercise its purchase options;

• entered into a prepaid master lease on December 9, 2019 comprised of an operating lease component related to the land and a finance lease component related to the building. The property is referred to as “565 Broadway” within the Core Portfolio. The Company recorded a Right-of-use-asset-operating-lease of $4.9 million and a Right-of-use-asset-finance lease of $19.4 million; and

• entered into a ground lease on May 1, 2019 which is an operating lease. The property is referred to as “110 University Place” and is within the Fund IV portfolio. The Company recorded a Right of use asset–operating lease of $45.3 million and a corresponding Lease liability–operating-lease of $45.3 million.

The Company recorded the following assets and liabilities in connection with acquisitions of leasehold interests:

	Year Ended December 31, 2020		Year Ended December 31, 2019
Amounts recorded upon acquisition of leasehold interests:
Right of use asset - operating lease	$	—	$	50,147
Right of use asset - finance lease		—		19,422
Leasehold improvements		—		13,354
Lease intangibles (Note 6)		—		1,760
Lease liability - operating lease		—		(45,293	)
Acquisition-related intangible liabilities (Note 6)		—		(359	)
Cash paid upon acquisition of leasehold interests	$	—	$	39,031

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

	Year Ended December 31,
	2020			2019
Lease Cost
Finance lease cost:
Amortization of right-of-use assets	$	1,595		$	1,603
Interest on lease liabilities		1,635			2,755
Subtotal		3,230			4,358
Operating lease cost		7,661			3,037
Variable lease cost		143			119
Total lease cost	$	11,034		$	7,514
Other Information
Weighted-average remaining lease term - finance leases (years)		33.4			42.5
Weighted-average remaining lease term - operating leases (years)		26.4			34.1
Weighted-average discount rate - finance leases		6.2	%		4.5	%
Weighted-average discount rate - operating leases		5.6	%		5.8	%

Right-of-use assets are included in Operating real estate (Note 2) in the consolidated balance sheet. Lease liabilities are included in Accounts payable and other liabilities in the consolidated balance sheet (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 operations. 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 operations.

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 December 31, 2020, are summarized as follows (in thousands):

			Minimum Rental Payments
Year Ending December 31,	Minimum Rental Revenues (a)		Operating Leases (b)		Finance Leases (b)
2021	$	206,451	$	8,531	$	134
2022		196,633		7,779		95
2023		174,947		7,801		69
2024		149,532		7,983		47
2025		119,738		8,020		—
Thereafter		525,288		150,435		12,289
Total	$	1,372,589	$	190,549	$	12,634

(a) Amount represents contractual lease maturities at December 31, 2020 including any extension options that management determined were reasonably certain of exercise. During the end of March 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 in Note 1.

(b) Minimum rental payments include $101.8 million of interest related to operating leases and $6.4 million related to finance leases and exclude options or renewals not reasonably certain of exercise.

During the years ended December 31, 2020, 2019 and 2018, no single tenant or property collectively comprised more than 10% of the Company’s consolidated total revenues.