Leases

12 Months Ended

Dec. 31, 2019

Note 11. Leases

On September 19, 2019 MEDITECH sold property including a building, land, furniture, fixtures and equipment for $120 million and recorded a gain of $88.9 million within the Statement of Income. Note that the terms of the sale allow MEDITECH to hold a small short term lease until its staff can be relocated. Prior to the sale, the property was a mixed use facility with the majority of space available for lease. Accordingly, the following disclosures have been updated to reflect the sale.

MEDITECH follows the provisions of ASC 842, Leases, which requires improved disclosure on timing and uncertainties of cash flow arising from leases. MEDITECH owns all 8 facilities it occupies, containing 1.1 million square feet of office space. MEDITECH occupies 87% of the space and the remainder is leased to various tenants. All are operating leases. Related operating expense are allocated based on square footage ratio of leased to MEDITECH space. The length of MEDITECH's lease agreements vary and may include a rent-free period, extension options, or escalated lease payment. There are no agreements with termination options or variable payments dependent on outside variables. MEDITECH recognizes lease income and related brokerage fees on a straight-line basis for all agreements. MEDITECH will not consider a lease extended until an amendment is signed by both parties, at which point it is accounted for as a new lease.

When a lease agreement is entered into between MEDITECH (lessor) and another party (lessee), the agreement may include non-lease components, being services such as cleaning, utilities, security and grounds maintenance. The company does not separate the lease and non-lease components and treats all as a single lease component. In all cases there is a provision that requires the lessee to pay a proportional share of real estate taxes on a quarterly basis over and above the base year of the lease. Such costs are considered variable and a reimbursement of costs MEDITECH has paid, which are expensed as incurred.

MEDITECH does not lease other property and equipment in its operations. All contracts the company has with vendors are reviewed annually for identification of lease components and none exist.

Lease income was $7.0 million, $8.5 million and $5.0 million for the years ended on December 31, 2017, 2018 and 2019 respectively. Such income is included within Other Income for financial reporting purpose. Cash Flow projections through the end of all outstanding lease terms for properties currently under lease commitment at December 31, 2019 is as follows:

Year	Cash Flow

2020	4,018,000
2021	1,454,000
2022	222,000
2023	44,000
After	0

Investments in Operating leases are as follows at December 31, 2019:

Building and Office Space, at cost	$28,951,486
Lease Origination Costs	216,273
Accumulated Depreciation	(9,376,903)

Net Investment in Operating Leases	$19,790,856