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Commitments and Contingencies
 12 Months Ended
Dec. 31, 2020
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies Commitments and Contingencies
Legal Proceedings
As of December 31, 2020, the Company and the Operating Partnership were not involved in any material litigation nor, to management's knowledge, was any material litigation threatened against us or our portfolio which if adversely determined could have a material adverse impact on us.
Environmental Matters
Our management believes that the properties are in compliance in all material respects with applicable Federal, state and local ordinances and regulations regarding environmental issues. Management is not aware of any environmental liability that it believes would have a materially adverse impact on our financial position, results of operations or cash flows. Management is unaware of any instances in which it would incur significant environmental cost if any of our properties were sold.
Employment Agreements
We have entered into employment agreements with certain executives, which expire between December 2021 and December 2022. The minimum cash-based compensation, including base salary and guaranteed bonus payments, associated with these employment agreements total $3.4 million for 2021.
Insurance
We maintain “all-risk” property and rental value coverage (including coverage regarding the perils of flood, earthquake and terrorism, excluding nuclear, biological, chemical, and radiological terrorism ("NBCR"), within three property insurance programs and liability insurance. Separate property and liability coverage may be purchased on a stand-alone basis for certain assets, such as the development of One Vanderbilt. Additionally, one of our captive insurance companies, Belmont Insurance Company, or Belmont, provides coverage for NBCR terrorist acts above a specified trigger. Belmont's retention is reinsured by our other captive insurance company, Ticonderoga Insurance Company ("Ticonderoga"). If Belmont or Ticonderoga are required to pay a claim under our insurance policies, we would ultimately record the loss to the extent of required payments. However, there is no assurance that in the future we will be able to procure coverage at a reasonable cost. Further, if we experience losses that are uninsured or that exceed policy limits, we could lose the capital invested in the damaged properties as well as the anticipated future cash flows from those properties. Additionally, our debt instruments contain customary covenants requiring us to maintain insurance and we could default under our debt instruments if the cost and/or availability of certain types of insurance make it impractical or impossible to comply with such covenants relating to insurance. Belmont and Ticonderoga provide coverage solely on properties owned by the Company or its affiliates.
Furthermore, with respect to certain of our properties, including properties held by joint ventures or subject to triple net leases, insurance coverage is obtained by a third-party and we do not control the coverage. While we may have agreements with such third parties to maintain adequate coverage and we monitor these policies, such coverage ultimately may not be maintained or adequately cover our risk of loss.
Belmont had loss reserves of $2.9 million and $3.3 million as of December 31, 2020 and 2019, respectively. Ticonderoga had no loss reserves as of December 31, 2020.
Ground Lease Arrangements
We are a tenant under ground leases for certain properties. These leases have expirations from 2022 to 2119, or 2043 to 2119 as fully extended. Certain leases offer extension options which we assess against relevant economic factors to determine whether we are reasonably certain of exercising or not exercising the option. Lease payments associated with renewal periods that we are reasonably certain will be exercised, if any, are included in the measurement of the corresponding lease liability and right of use asset.
Certain of our ground leases are subject to rent resets, generally based on a percentage of the then fair market value, a fixed amount, or a percentage of the preceding rent at specified future dates. Rent resets will be recognized in the periods in which they are incurred.
The table below summarizes our current ground lease arrangements as of December 31, 2020:
Property (1)
Year of Current Expiration
Year of Final Expiration (2)
1185 Avenue of the Americas20432043
625 Madison Avenue20222054
420 Lexington Avenue20502080
711 Third Avenue (3)
20332083
461 Fifth Avenue (4)
20272084
1080 Amsterdam Avenue (5)
21112111
15 Beekman (4)(6)
21192119
(1)All leases are classified as operating leases unless otherwise specified.
(2)Reflects exercise of all available renewal options.
(3)The Company owns 50% of the fee interest.
(4)The Company has an option to purchase the ground lease for a fixed price on a specific date. The lease is classified as a financing lease.
(5)A portion of the lease is classified as a financing lease.
(6)In August 2020, the Company entered into a long-term sublease with an unconsolidated joint venture as part of the capitalization of the 15 Beekman development project. See Note 6, "Investments in Unconsolidated Joint Ventures."
The following is a schedule of future minimum lease payments as evaluated in accordance with ASC 842 for our financing leases and operating leases with initial terms in excess of one year as of December 31, 2020 (in thousands):
Financing leases
Operating leases (1)
2021$32,527 $28,534 
20223,523 26,228 
20233,570 23,921 
20243,641 23,939 
20253,810 24,026 
Thereafter260,550 504,360 
Total minimum lease payments$307,621 $631,008 
Amount representing interest(155,100)
Amount discounted using incremental borrowing rate(291,550)
Lease liabilities$152,521 $339,458 
(1)As of December 31, 2020, the total future minimum payments to be received under non-cancelable subleases is $1.7 billion.
The following table provides lease cost information for the Company's operating leases for the twelve months ended December 31, 2020 and 2019 (in thousands):
Twelve Months Ended December 31,
Operating Lease Costs20202019
Operating lease costs before capitalized operating lease costs$32,169 $33,235 
Operating lease costs capitalized(3,127)(47)
Operating lease costs, net (1)
$29,043 $33,188 
(1)This amount is included in operating lease rent in our consolidated statements of operations.
The following table provides lease cost information for the Company's financing leases for the twelve months ended December 31, 2020 and 2019 (in thousands):
Twelve Months Ended December 31,
Financing Lease Costs20202019
Interest on financing leases before capitalized interest$8,091 $3,243 
Interest on financing leases capitalized(2,378)— 
Interest on financing leases, net (1)
5,713 3,243 
Amortization of right-of-use assets (2)
1,200 1,219 
Financing lease costs, net$6,913 $4,462 
(1)These amounts are included in interest expense, net of interest income in our consolidated statements of operations.
(2)These amounts are included in depreciation and amortization in our consolidated statements of operations.
As of December 31, 2020, the weighted-average discount rate used to calculate the lease liabilities was 4.71%. As of December 31, 2020, the weighted-average remaining lease term was 27 years, inclusive of purchase options expected to be exercised.