Leases

9 Months Ended

Sep. 30, 2022

Leases [Abstract]

Leases

Leases

Significant Lease Transactions

The following table summarizes the significant lease transactions during the nine months ended September 30, 2022 (in thousands):

			Renewal/Termination Options excluded		Net Incremental (1)
Lease	Quarter	Transaction		Lease Classification	ROU assets		ROU liabilities
Atlanta 1 ("AT1") data center lease extended & expansion (2)	Q1	Extended lease term by 12 years with additional three 10-year renewal options	Two 10-year renewal options	Finance Lease	$	71,994	$	72,549
				Operating Lease	(1,836)		(2,391)
Hong Kong 6 ("HK6") new land and building construct site	Q2	New lease-15 year term	5-year renewal option	Operating Lease	195,245		195,245
Hong Kong 2 ("HK2") data center lease renewal	Q2	Exercised the 3-year renewal option for Phase 1 & 2 (3)	Two 3-year renewal options	Operating Lease	81,504		81,504

(1)    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.

(2)    This lease had components previously classified as operating leases.

(3)    The incremental balance includes the impact of reassessing lease terms of complementary leases within HK2, resulting in new lease end dates ranging from June 2030 to October 2031 from including renewal options that are reasonably certain to be exercised.

Lease Expenses

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Finance lease cost
Amortization of ROU assets (1)	$	39,456	$	41,983	$	120,684	$	115,221
Interest on lease liabilities	27,742		28,672		84,986		88,688
Total finance lease cost	67,198		70,655		205,670		203,909
Operating lease cost	55,031		54,340		159,632		167,839
Variable lease cost	12,721		8,323		30,003		23,993
Total lease cost	$	134,950	$	133,318	$	395,305	$	395,741

(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, 2022			Nine Months Ended September 30, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	82,841		$	85,141
Operating cash flows from operating leases	144,954			202,861
Financing cash flows from finance leases	97,808			130,129
ROU assets obtained in exchange for lease obligations: (1)
Finance leases	$	78,432		$	374,529
Operating leases	318,882			9,359
	As of September 30, 2022			As of December 31, 2021
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	6		%	7		%
Weighted-average discount rate - operating leases	4		%	4		%
Finance lease ROU assets (3)	$	1,777,807		$	1,875,696

(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, 2022 and December 31, 2021, we recorded accumulated amortization of finance lease ROU assets of $783.7 million and $726.4 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, 2022 are as follows (in thousands):

	Operating Leases		Finance Leases		Total
2022 (3 months remaining)	$	37,716	$	64,070	$	101,786
2023	181,874		230,923		412,797
2024	178,703		231,316		410,019
2025	173,446		229,443		402,889
2026	171,270		218,926		390,196
Thereafter	1,090,190		2,046,538		3,136,728
Total lease payments	1,833,199		3,021,216		4,854,415
Plus amount representing residual property value	—		—		—
Less imputed interest	(468,808)		(979,144)		(1,447,952)
Total	$	1,364,391	$	2,042,072	$	3,406,463

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, 2022. These leases will commence between year 2022 and 2025, with lease terms of 2 to 26 years and total lease commitments of approximately $551.5 million.

Leases

Leases

Significant Lease Transactions

The following table summarizes the significant lease transactions during the nine months ended September 30, 2022 (in thousands):

			Renewal/Termination Options excluded		Net Incremental (1)
Lease	Quarter	Transaction		Lease Classification	ROU assets		ROU liabilities
Atlanta 1 ("AT1") data center lease extended & expansion (2)	Q1	Extended lease term by 12 years with additional three 10-year renewal options	Two 10-year renewal options	Finance Lease	$	71,994	$	72,549
				Operating Lease	(1,836)		(2,391)
Hong Kong 6 ("HK6") new land and building construct site	Q2	New lease-15 year term	5-year renewal option	Operating Lease	195,245		195,245
Hong Kong 2 ("HK2") data center lease renewal	Q2	Exercised the 3-year renewal option for Phase 1 & 2 (3)	Two 3-year renewal options	Operating Lease	81,504		81,504

(1)    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.

(2)    This lease had components previously classified as operating leases.

(3)    The incremental balance includes the impact of reassessing lease terms of complementary leases within HK2, resulting in new lease end dates ranging from June 2030 to October 2031 from including renewal options that are reasonably certain to be exercised.

Lease Expenses

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Finance lease cost
Amortization of ROU assets (1)	$	39,456	$	41,983	$	120,684	$	115,221
Interest on lease liabilities	27,742		28,672		84,986		88,688
Total finance lease cost	67,198		70,655		205,670		203,909
Operating lease cost	55,031		54,340		159,632		167,839
Variable lease cost	12,721		8,323		30,003		23,993
Total lease cost	$	134,950	$	133,318	$	395,305	$	395,741

(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, 2022			Nine Months Ended September 30, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	82,841		$	85,141
Operating cash flows from operating leases	144,954			202,861
Financing cash flows from finance leases	97,808			130,129
ROU assets obtained in exchange for lease obligations: (1)
Finance leases	$	78,432		$	374,529
Operating leases	318,882			9,359
	As of September 30, 2022			As of December 31, 2021
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	6		%	7		%
Weighted-average discount rate - operating leases	4		%	4		%
Finance lease ROU assets (3)	$	1,777,807		$	1,875,696

(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, 2022 and December 31, 2021, we recorded accumulated amortization of finance lease ROU assets of $783.7 million and $726.4 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, 2022 are as follows (in thousands):

	Operating Leases		Finance Leases		Total
2022 (3 months remaining)	$	37,716	$	64,070	$	101,786
2023	181,874		230,923		412,797
2024	178,703		231,316		410,019
2025	173,446		229,443		402,889
2026	171,270		218,926		390,196
Thereafter	1,090,190		2,046,538		3,136,728
Total lease payments	1,833,199		3,021,216		4,854,415
Plus amount representing residual property value	—		—		—
Less imputed interest	(468,808)		(979,144)		(1,447,952)
Total	$	1,364,391	$	2,042,072	$	3,406,463

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, 2022. These leases will commence between year 2022 and 2025, with lease terms of 2 to 26 years and total lease commitments of approximately $551.5 million.