Leases

9 Months Ended

Sep. 30, 2021

Leases [Abstract]

Leases

Leases

Significant Lease Transactions

The following table summarizes the significant lease transactions during the nine months ended September 30, 2021 (in thousands):

			Renewal/Termination Options Excluded (1)		Net Incremental (2)
Lease	Quarter	Transaction		Lease Classification	ROU assets		ROU liabilities
Silicon Valley 8 ("SV8") data center lease extended (3)	Q1	Extended lease term by 16 years	Two 10-year renewal options	Finance Lease	$	98,141	$	100,043
				Operating Lease	(13,685)		(15,586)
Hong Kong 3 ("HK3") data center lease extended (3)	Q1	Extended lease by 10 years, which included a 5-year renewal option	N/A	Finance Lease - Building	37,987		37,987
				Operating Lease - Land	6,592		6,592
Osaka 3 ("OS3") new data center and office lease	Q2	New lease-15 year term	2-year renewal option on a rolling basis	Finance Lease	144,122		144,122

(1) These renewal/termination options are not included in determining the lease terms as we are not reasonably certain to exercise them at this time.

(2) The net incremental amounts represent the adjustments to the right of use ("ROU") assets and liabilities recorded during the quarter that the transactions were entered.

(3) These leases had components previously classified as operating leases.

Lease Expenses

The components of lease expenses are as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Finance lease cost
Amortization of ROU assets (1)	$	41,983	$	31,900	$	115,221	$	85,962
Interest on lease liabilities	28,672		28,443		88,688		84,706
Total finance lease cost	70,655		60,343		203,909		170,668
Operating lease cost	54,340		55,135		167,839		161,482
Variable lease cost	8,323		3,363		23,993		8,829
Total lease cost	$	133,318	$	118,841	$	395,741	$	340,979

(1) Amortization of ROU assets is included with depreciation expense, and is recorded within cost of revenues, sales and marketing and general and administrative expenses in the condensed consolidated statements of operations.

Other Information

Other information related to leases is as follows (in thousands):

	Nine Months Ended September 30, 2021			Nine Months Ended September 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	85,141		$	81,827
Operating cash flows from operating leases	202,861			154,262
Financing cash flows from finance leases	130,129			74,446
ROU assets obtained in exchange for lease obligations: (1)
Finance leases	$	374,529		$	357,137
Operating leases	9,359			65,906
	As of September 30, 2021			As of December 31, 2020
Weighted-average remaining lease term - finance leases (2)	14 years			14 years
Weighted-average remaining lease term - operating leases (2)	12 years			12 years
Weighted-average discount rate - finance leases	7		%	7		%
Weighted-average discount rate - operating leases	4		%	4		%
Finance lease assets (3)	$	1,889,573		$	1,688,032

(1) Represents all non-cash changes in ROU assets.

(2) Includes lease renewal options that are reasonably certain to be exercised.

(3) As of September 30, 2021 and December 31, 2020, we recorded accumulated amortization of finance lease assets of $689.2 million and $604.1 million, respectively. Finance lease assets are recorded within property, plant and equipment, net on the condensed consolidated balance sheets.

Maturities of Lease Liabilities

Maturities of lease liabilities as of September 30, 2021 are as follows (in thousands):

	Operating Leases		Finance Leases		Total
2021 (3 months remaining)	$	41,573	$	66,721	$	108,294
2022	196,671		236,967		433,638
2023	181,865		235,093		416,958
2024	166,317		233,592		399,909
2025	156,285		230,231		386,516
Thereafter	995,474		2,177,517		3,172,991
Total lease payments	1,738,185		3,180,121		4,918,306
Plus amount representing residual property value	—		16,037		16,037
Less imputed interest	(440,205)		(1,061,370)		(1,501,575)
Total	$	1,297,980	$	2,134,788	$	3,432,768

We entered into agreements with various landlords primarily to lease data center spaces and ground leases which have not yet commenced as of September 30, 2021. These leases will commence between year 2021 and 2023, with lease terms of 8 to 30 years and total lease commitments of approximately $387.1 million.

Leases

Leases

Significant Lease Transactions

The following table summarizes the significant lease transactions during the nine months ended September 30, 2021 (in thousands):

			Renewal/Termination Options Excluded (1)		Net Incremental (2)
Lease	Quarter	Transaction		Lease Classification	ROU assets		ROU liabilities
Silicon Valley 8 ("SV8") data center lease extended (3)	Q1	Extended lease term by 16 years	Two 10-year renewal options	Finance Lease	$	98,141	$	100,043
				Operating Lease	(13,685)		(15,586)
Hong Kong 3 ("HK3") data center lease extended (3)	Q1	Extended lease by 10 years, which included a 5-year renewal option	N/A	Finance Lease - Building	37,987		37,987
				Operating Lease - Land	6,592		6,592
Osaka 3 ("OS3") new data center and office lease	Q2	New lease-15 year term	2-year renewal option on a rolling basis	Finance Lease	144,122		144,122

(1) These renewal/termination options are not included in determining the lease terms as we are not reasonably certain to exercise them at this time.

(2) The net incremental amounts represent the adjustments to the right of use ("ROU") assets and liabilities recorded during the quarter that the transactions were entered.

(3) These leases had components previously classified as operating leases.

Lease Expenses

The components of lease expenses are as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Finance lease cost
Amortization of ROU assets (1)	$	41,983	$	31,900	$	115,221	$	85,962
Interest on lease liabilities	28,672		28,443		88,688		84,706
Total finance lease cost	70,655		60,343		203,909		170,668
Operating lease cost	54,340		55,135		167,839		161,482
Variable lease cost	8,323		3,363		23,993		8,829
Total lease cost	$	133,318	$	118,841	$	395,741	$	340,979

(1) Amortization of ROU assets is included with depreciation expense, and is recorded within cost of revenues, sales and marketing and general and administrative expenses in the condensed consolidated statements of operations.

Other Information

Other information related to leases is as follows (in thousands):

	Nine Months Ended September 30, 2021			Nine Months Ended September 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	85,141		$	81,827
Operating cash flows from operating leases	202,861			154,262
Financing cash flows from finance leases	130,129			74,446
ROU assets obtained in exchange for lease obligations: (1)
Finance leases	$	374,529		$	357,137
Operating leases	9,359			65,906
	As of September 30, 2021			As of December 31, 2020
Weighted-average remaining lease term - finance leases (2)	14 years			14 years
Weighted-average remaining lease term - operating leases (2)	12 years			12 years
Weighted-average discount rate - finance leases	7		%	7		%
Weighted-average discount rate - operating leases	4		%	4		%
Finance lease assets (3)	$	1,889,573		$	1,688,032

(1) Represents all non-cash changes in ROU assets.

(2) Includes lease renewal options that are reasonably certain to be exercised.

(3) As of September 30, 2021 and December 31, 2020, we recorded accumulated amortization of finance lease assets of $689.2 million and $604.1 million, respectively. Finance lease assets are recorded within property, plant and equipment, net on the condensed consolidated balance sheets.

Maturities of Lease Liabilities

Maturities of lease liabilities as of September 30, 2021 are as follows (in thousands):

	Operating Leases		Finance Leases		Total
2021 (3 months remaining)	$	41,573	$	66,721	$	108,294
2022	196,671		236,967		433,638
2023	181,865		235,093		416,958
2024	166,317		233,592		399,909
2025	156,285		230,231		386,516
Thereafter	995,474		2,177,517		3,172,991
Total lease payments	1,738,185		3,180,121		4,918,306
Plus amount representing residual property value	—		16,037		16,037
Less imputed interest	(440,205)		(1,061,370)		(1,501,575)
Total	$	1,297,980	$	2,134,788	$	3,432,768

We entered into agreements with various landlords primarily to lease data center spaces and ground leases which have not yet commenced as of September 30, 2021. These leases will commence between year 2021 and 2023, with lease terms of 8 to 30 years and total lease commitments of approximately $387.1 million.