Lease Agreements - Company as Lessee

9 Months Ended

Sep. 30, 2019

As of September 30, 2019, the Company is a lessee of corporate office space, ground leases and a parking lease associated with various consolidated properties, and equipment. Lease terms for the Company's office leases, in general, range between five to 10 years while ground leases and the parking lease have terms typically ranging from 20 to 85 years. The corporate office leases occasionally contain renewal options of approximately five years while certain ground leases contain renewal options that can extend the lease term from approximately 10 to 39 years.

A majority of the Company’s ground leases and the parking lease are subject to changes in the Consumer Price Index ("CPI"). Furthermore, certain of the Company’s ground leases include rental payments based on a percentage of gross or net income. While lease liabilities are not remeasured as a result of changes in the CPI or percentage of gross or net income, such changes are treated as variable lease payments and recognized in the period in which the obligation for those payments was incurred.

The Company’s lease agreements do not contain any residual value guarantees or restrictive covenants.

Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. Because most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

As of September 30, 2019 and December 31, 2018, the Company had no material finance leases.

Supplemental condensed consolidated balance sheet information related to leases as of September 30, 2019 is as follows ($ in thousands):



	Classification	September 30, 2019
Assets
Operating lease right-of-use assets	Operating lease right-of-use assets	$	75,478
Total leased assets		$	75,478

Liabilities
Operating lease liabilities	Operating lease liabilities	77,495
Total lease liabilities		$	77,495

The components of lease expense for the three and nine months ended September 30, 2019 were as follows ($ in thousands):



	Three Months Ended September 30, 2019			Nine Months Ended September 30, 2019
Operating lease cost	$	1,686		$	5,059
Variable lease cost	109			622
Short-term lease cost	171			455
Sublease income	(109		)	(326		)
Total lease cost	$	1,857		$	5,810

A maturity analysis of lease liabilities as of September 30, 2019 are as follows ($ in thousands):



	Operating Leases
Remaining in 2019	$	1,717
2020	6,855
2021	6,877
2022	6,888
2023	6,860
Thereafter	153,258
Total lease payments	$	182,455
Less: Imputed interest	(104,960		)
Present Value of lease liabilities	$	77,495

Lease term and discount rate information for leases at September 30, 2019 are as follows:



Weighted-average of remaining lease terms (years)
Operating Leases	39
Weighted-average of discount rates
Operating Leases	4.99	%

As of December 31, 2018, in accordance with previously applicable lease accounting guidance, ASC 840, the total minimum lease commitments under operating leases was as follows ($ in thousands):



	Future Minimum Rent
2019	$	6,811
2020	6,855
2021	6,877
2022	6,888
2023	6,860
Thereafter	153,258
	$	187,549

Practical Expedients

As part of the transition to ASC 842, the Company elected to use the modified retrospective transition method with the new standard being applied as of the January 1, 2019 adoption date. Additionally, the Company has elected, as of the adoption date, not to reassess whether expired or existing contracts contain leases under the new definition of a lease, not to reassess the lease classification for expired or existing leases, not to reassess whether previously capitalized initial direct costs would qualify for capitalization under ASC 842, and not to reassess whether existing or expired land easements meet the definition of a lease.

Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company recognizes the lease expense for such leases on a straight-line basis over the lease term.

The Company has elected to account for lease components (e.g., fixed payments including rent) and non-lease components (e.g., common-area maintenance costs) as a single combined lease component as the lease components are the predominant elements of the combined components.