Commitments and Contingencies

3 Months Ended

Mar. 31, 2019

Leases [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Lease Obligations

The Company owns 11 apartment communities, one community under development, and two commercial properties, located on land subject to land leases expiring between October 2026 and March 2142. All of the ground leases, except for one of the apartment communities, are accounted for as operating leases, for which the Company recognizes rental expense on a straight-line basis over the lease term. These operating leases have varying rental escalation terms, primarily based on variables determined at future dates such as changes in the Consumer Price Index, and five of these leases have purchase options exercisable through 2095. In addition, the Company is party to 14 leases for its corporate and regional offices with varying terms through 2031, all of which are accounted for as operating leases. Further, the Company has one corporate office lease that has been executed that does not commence until 2020.

As of March 31, 2019, the Company has total operating lease assets of $102,312,000 and lease obligations of $120,202,000, reported as components of right of use lease assets and lease liabilities, respectively, on the accompanying Condensed Consolidated Balance Sheets. The Company incurred costs of $3,537,000 for the three months ended March 31, 2019 related to operating leases.

One apartment community is located on land subject to a land lease which is accounted for as a financing lease and has the option for the Company to purchase the land at some point during the lease term which expires in 2046. In addition to the leases described above, the Company is party to a lease for a portion of the parking garage adjacent to an apartment community, accounted for as a financing lease and subject to the Company's lease accounting policies discussed in Note 1, “Organization, Basis of Presentation and Significant Accounting Policies.” The Company has total financing lease assets of $22,057,000 and lease obligations of $20,234,000, reported as components of right of use lease assets and lease liabilities, respectively, on the accompanying Condensed Consolidated Balance Sheets.

The following table details the weighted average remaining lease term and discount rates for the Company’s ground and office leases:

Weighted-average remaining lease term - financing leases	27 years
Weighted-average remaining lease term - operating leases	53 years
Weighted-average discount rate - financing leases	4.63	%
Weighted-average discount rate - operating leases	4.97	%

The following tables details the future minimum lease payments under the Company's current leases and a reconciliation of undiscounted and discounted cash flows for operating and financing leases (dollars in thousands):

	Payments due by period
	2019		2020		2021		2022		2023		Thereafter
Operating Lease Obligations	$	10,283	$	11,433	$	13,015	$	12,936	$	12,385	$	369,954
Financing Lease Obligations	806		1,077		1,080		1,082		1,084		41,220
	$	11,089	$	12,510	$	14,095	$	14,018	$	13,469	$	411,174

	Total undiscounted cash flows		Total lease liabilities		Difference between discounted and undiscounted cash flows
Operating Lease Obligations	$	430,006	$	120,202	$	309,804
Financing Lease Obligations	46,349		20,234		26,115
	$	476,355	$	140,436	$	335,919

Commitments and Contingencies

Commitments and Contingencies

Lease Obligations

The Company owns 11 apartment communities, one community under development, and two commercial properties, located on land subject to land leases expiring between October 2026 and March 2142. All of the ground leases, except for one of the apartment communities, are accounted for as operating leases, for which the Company recognizes rental expense on a straight-line basis over the lease term. These operating leases have varying rental escalation terms, primarily based on variables determined at future dates such as changes in the Consumer Price Index, and five of these leases have purchase options exercisable through 2095. In addition, the Company is party to 14 leases for its corporate and regional offices with varying terms through 2031, all of which are accounted for as operating leases. Further, the Company has one corporate office lease that has been executed that does not commence until 2020.

As of March 31, 2019, the Company has total operating lease assets of $102,312,000 and lease obligations of $120,202,000, reported as components of right of use lease assets and lease liabilities, respectively, on the accompanying Condensed Consolidated Balance Sheets. The Company incurred costs of $3,537,000 for the three months ended March 31, 2019 related to operating leases.

One apartment community is located on land subject to a land lease which is accounted for as a financing lease and has the option for the Company to purchase the land at some point during the lease term which expires in 2046. In addition to the leases described above, the Company is party to a lease for a portion of the parking garage adjacent to an apartment community, accounted for as a financing lease and subject to the Company's lease accounting policies discussed in Note 1, “Organization, Basis of Presentation and Significant Accounting Policies.” The Company has total financing lease assets of $22,057,000 and lease obligations of $20,234,000, reported as components of right of use lease assets and lease liabilities, respectively, on the accompanying Condensed Consolidated Balance Sheets.

The following table details the weighted average remaining lease term and discount rates for the Company’s ground and office leases:

Weighted-average remaining lease term - financing leases	27 years
Weighted-average remaining lease term - operating leases	53 years
Weighted-average discount rate - financing leases	4.63	%
Weighted-average discount rate - operating leases	4.97	%

The following tables details the future minimum lease payments under the Company's current leases and a reconciliation of undiscounted and discounted cash flows for operating and financing leases (dollars in thousands):

	Payments due by period
	2019		2020		2021		2022		2023		Thereafter
Operating Lease Obligations	$	10,283	$	11,433	$	13,015	$	12,936	$	12,385	$	369,954
Financing Lease Obligations	806		1,077		1,080		1,082		1,084		41,220
	$	11,089	$	12,510	$	14,095	$	14,018	$	13,469	$	411,174

	Total undiscounted cash flows		Total lease liabilities		Difference between discounted and undiscounted cash flows
Operating Lease Obligations	$	430,006	$	120,202	$	309,804
Financing Lease Obligations	46,349		20,234		26,115
	$	476,355	$	140,436	$	335,919