Leases

6 Months Ended

Jun. 30, 2020

Leases [Abstract]

Leases

LEASES

        Effective January 1, 2019, we adopted the new accounting guidance in Topic 842. As the lessee and lessor, we have elected the package of practical expedients in Topic 842. See Note 1 for additional disclosure on Topic 842.

        As a Lessor. All leases on our properties are classified as noncancelable operating leases, and the related rental income is recognized on a straight-line basis over the terms of the related leases. Differences between rental income earned and amounts due per the respective lease agreements are capitalized or charged, as applicable, to accrued rents and accounts receivable. Percentage rents, if applicable, are recognized as rental income when the thresholds upon which they are based have been met.  Recoveries from tenants for taxes, insurance, and other operating expenses are recognized as revenues in the period the corresponding costs are incurred. We combine lease and nonlease components in lease contracts, which includes combining base rent, recoveries, and percentage rents into a single line item, Rental, within the condensed consolidated statements of operations.

         A summary of minimum future rents to be received (exclusive of renewals, tenant reimbursements, contingent rents, and collectability adjustments under Topic 842 under noncancelable operating leases in existence as of June 30, 2020 is as follows (in thousands): 

Years Ended December 31,	Minimum Future Rents(1)
2020 (remaining)	$	3,846
2021	5,941
2022	4,096
2023	2,846
2024	1,751
Thereafter	1,511
Total	$	19,991

⁽¹⁾ These amounts do not reflect future rental revenues from the renewal or replacement of existing leases and exclude reimbursements of operating expenses and rental increases that are not fixed.

        As a Lessee. On February 1, 2017, Pillarstone signed a lease with Whitestone for the premises located at 2600 S. Gessner Road, Suite 555 Houston, Texas 77063. The lease term is three years, five months. The rentable area of the premises is approximately 678 square feet. Total rent expense for the three and six months ended June 30, 2020 was $3,633 and $9,808, respectively, compared to $3,597 and $7,194 for the three and six months ended June 30, 2019, respectively. The weighted average incremental borrowing rate was 4.5% at June 30, 2020. The current lease term expired on June 30, 2020 and a renewal lease was signed on June 8, 2020 extending the term through June 30, 2021.

        The following table summarizes the fixed, future minimum rental payment, excluding variable costs, which are discounted by our weighted average incremental borrowing rates to calculate the lease liability for our operating lease in which we are the lessee as of June 30, 2020 (in thousands):

Years Ended December 31,	Minimum Future Rents
2020 (remaining)	$	7
2021	7
Total undiscounted rental payments	14
Total lease liabilities (2)	$	14

⁽²⁾ Imputed interest is immaterial and therefore not disclosed in the above table

Leases

LEASES

        Effective January 1, 2019, we adopted the new accounting guidance in Topic 842. As the lessee and lessor, we have elected the package of practical expedients in Topic 842. See Note 1 for additional disclosure on Topic 842.

        As a Lessor. All leases on our properties are classified as noncancelable operating leases, and the related rental income is recognized on a straight-line basis over the terms of the related leases. Differences between rental income earned and amounts due per the respective lease agreements are capitalized or charged, as applicable, to accrued rents and accounts receivable. Percentage rents, if applicable, are recognized as rental income when the thresholds upon which they are based have been met.  Recoveries from tenants for taxes, insurance, and other operating expenses are recognized as revenues in the period the corresponding costs are incurred. We combine lease and nonlease components in lease contracts, which includes combining base rent, recoveries, and percentage rents into a single line item, Rental, within the condensed consolidated statements of operations.

         A summary of minimum future rents to be received (exclusive of renewals, tenant reimbursements, contingent rents, and collectability adjustments under Topic 842 under noncancelable operating leases in existence as of June 30, 2020 is as follows (in thousands): 

Years Ended December 31,	Minimum Future Rents(1)
2020 (remaining)	$	3,846
2021	5,941
2022	4,096
2023	2,846
2024	1,751
Thereafter	1,511
Total	$	19,991

⁽¹⁾ These amounts do not reflect future rental revenues from the renewal or replacement of existing leases and exclude reimbursements of operating expenses and rental increases that are not fixed.

        As a Lessee. On February 1, 2017, Pillarstone signed a lease with Whitestone for the premises located at 2600 S. Gessner Road, Suite 555 Houston, Texas 77063. The lease term is three years, five months. The rentable area of the premises is approximately 678 square feet. Total rent expense for the three and six months ended June 30, 2020 was $3,633 and $9,808, respectively, compared to $3,597 and $7,194 for the three and six months ended June 30, 2019, respectively. The weighted average incremental borrowing rate was 4.5% at June 30, 2020. The current lease term expired on June 30, 2020 and a renewal lease was signed on June 8, 2020 extending the term through June 30, 2021.

        The following table summarizes the fixed, future minimum rental payment, excluding variable costs, which are discounted by our weighted average incremental borrowing rates to calculate the lease liability for our operating lease in which we are the lessee as of June 30, 2020 (in thousands):

Years Ended December 31,	Minimum Future Rents
2020 (remaining)	$	7
2021	7
Total undiscounted rental payments	14
Total lease liabilities (2)	$	14

⁽²⁾ Imputed interest is immaterial and therefore not disclosed in the above table