Leases

3 Months Ended

Mar. 31, 2019

Leases [Abstract]

Leases

Leases

The majority of payments that we receive for our residential and commercial leases are fixed. We receive variable payments from our residents and commercial tenants primarily for utility and other expense reimbursements. For the three months ended March 31, 2019, our total lease income was comprised of the following amounts for all operating leases (in thousands):

Fixed lease income	$	215,581
Variable lease income	14,144
Total lease income	$	229,725

In general, our leases have options to extend for a certain period of time at the lessee’s option. Future minimum annual rental payments we will receive under commercial operating leases are as follows (in thousands). We do not include our residential operating leases due to their shorter duration.

April 1, 2019 to December 31, 2019	$	13,431
2020	16,103
2021	13,736
2022	13,246
2023	12,394
Thereafter	57,942
Total	$	126,852

Beginning in 2019, we are required to recognize right of use assets and related lease liabilities on our consolidated balance sheets when we are the lessee. Upon adoption of the standard, we recognized right of use assets of $87.5 million, which is presented in the Other assets line item on our condensed consolidated balance sheets, net of accumulated amortization. We also recognized the related lease liabilities of $79.7 million, which are presented in the Accrued liabilities and other line item on our condensed consolidated balance sheets. We estimated the value of the lease liabilities using a discount rate equivalent to an incremental borrowing rate, or the rate Aimco would pay on a secured borrowing with similar terms to the lease, based on Aimco’s borrowing profile and the term of the underlying lease.

Substantially all of the payments under our ground and office leases are fixed. Rents for extension periods, when provided for in the lease, are generally determined based on a fair value factor at the time the option is exercised; therefore, these extension periods are not included in our determination of the right of use asset and lease liability. For the three months ended March 31, 2019, our total lease cost for ground and office leases was $3.2 million and $0.7 million, respectively.

The ground and office leases have weighted average remaining terms of 79.4 years and 9.5 years, respectively, and weighted average discount rates of 4.12% and 3.65%, respectively. Minimum annual rental payments under operating leases, reconciled to the lease liabilities recognized on our condensed consolidated balance sheets are as follows (in thousands):

	Office Lease Obligations			Ground Lease Obligations			Total Operating Lease Obligations
April 1, 2019 to December 31, 2019	$	1,957		$	1,586		$	3,543
2020	2,806			2,350			5,156
2021	2,704			2,439			5,143
2022	2,561			2,492			5,053
2023	1,871			2,492			4,363
Thereafter	10,644			422,169			432,813
Total	$	22,543		$	433,528		$	456,071
Less: Discount	(17,891		)	(357,386		)
Total lease liability	$	4,652		$	76,142

Leases

Leases

The majority of payments that we receive for our residential and commercial leases are fixed. We receive variable payments from our residents and commercial tenants primarily for utility and other expense reimbursements. For the three months ended March 31, 2019, our total lease income was comprised of the following amounts for all operating leases (in thousands):

Fixed lease income	$	215,581
Variable lease income	14,144
Total lease income	$	229,725

In general, our leases have options to extend for a certain period of time at the lessee’s option. Future minimum annual rental payments we will receive under commercial operating leases are as follows (in thousands). We do not include our residential operating leases due to their shorter duration.

April 1, 2019 to December 31, 2019	$	13,431
2020	16,103
2021	13,736
2022	13,246
2023	12,394
Thereafter	57,942
Total	$	126,852

Beginning in 2019, we are required to recognize right of use assets and related lease liabilities on our consolidated balance sheets when we are the lessee. Upon adoption of the standard, we recognized right of use assets of $87.5 million, which is presented in the Other assets line item on our condensed consolidated balance sheets, net of accumulated amortization. We also recognized the related lease liabilities of $79.7 million, which are presented in the Accrued liabilities and other line item on our condensed consolidated balance sheets. We estimated the value of the lease liabilities using a discount rate equivalent to an incremental borrowing rate, or the rate Aimco would pay on a secured borrowing with similar terms to the lease, based on Aimco’s borrowing profile and the term of the underlying lease.

Substantially all of the payments under our ground and office leases are fixed. Rents for extension periods, when provided for in the lease, are generally determined based on a fair value factor at the time the option is exercised; therefore, these extension periods are not included in our determination of the right of use asset and lease liability. For the three months ended March 31, 2019, our total lease cost for ground and office leases was $3.2 million and $0.7 million, respectively.

The ground and office leases have weighted average remaining terms of 79.4 years and 9.5 years, respectively, and weighted average discount rates of 4.12% and 3.65%, respectively. Minimum annual rental payments under operating leases, reconciled to the lease liabilities recognized on our condensed consolidated balance sheets are as follows (in thousands):

	Office Lease Obligations			Ground Lease Obligations			Total Operating Lease Obligations
April 1, 2019 to December 31, 2019	$	1,957		$	1,586		$	3,543
2020	2,806			2,350			5,156
2021	2,704			2,439			5,143
2022	2,561			2,492			5,053
2023	1,871			2,492			4,363
Thereafter	10,644			422,169			432,813
Total	$	22,543		$	433,528		$	456,071
Less: Discount	(17,891		)	(357,386		)
Total lease liability	$	4,652		$	76,142