Leases

6 Months Ended

Jun. 30, 2023

Leases [Abstract]

Leases

Leases

Significant Lease Transactions

The following table summarizes the significant lease transactions during the six months ended June 30, 2023 (in thousands):

			Renewal/Termination Options excluded (1)		Net Incremental (2)
Lease	Quarter	Transaction		Lease Classification	ROU assets		ROU liabilities
Chicago 1/2/4 ("CH1/2/4") data center lease expansion	Q2	Expanded CH1 to additional space within the building (3)	One 10-year renewal option	Operating Lease	$	150,990	$	176,316
				Finance Lease	78,073		52,747

(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. Certain complementary leases contain one additional 10-year renewal option.

(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)    The incremental balance includes the impact of reassessing lease terms of complementary leases of CH1, resulting in new lease end dates ranging from June 2037 to October 2040 from including renewal options that are reasonably certain to be exercised and in certain complementary leases changing classification.

Lease Expenses

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Finance lease cost
Amortization of right-of-use assets (1)	$	42,523	$	41,105	$	85,053	$	81,228
Interest on lease liabilities	28,456		28,357		56,678		57,244
Total finance lease cost	70,979		69,462		141,731		138,472
Operating lease cost	57,687		52,971		111,093		104,601
Variable lease cost	16,766		9,666		29,574		17,282
Total lease cost	$	145,432	$	132,099	$	282,398	$	260,355

(1)    Amortization of right-of-use assets is included within 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, except years and percent):

	Six Months Ended June 30, 2023			Six Months Ended June 30, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	55,175		$	55,929
Operating cash flows from operating leases	99,300			96,734
Financing cash flows from finance leases	66,462			69,556
Right-of-use assets obtained in exchange for lease obligations: (1)
Finance leases	$	157,376		$	74,954
Operating leases	209,133			313,034
	As of June 30, 2023			As of December 31, 2022
Weighted-average remaining lease term - finance leases (2)	15 years			15 years
Weighted-average remaining lease term - operating leases (2)	13 years			12 years
Weighted-average discount rate - finance leases	6		%	6		%
Weighted-average discount rate - operating leases	5		%	4		%
Finance lease right-of-use assets (3)	$	2,013,325		$	2,018,070

(1) Represents all non-cash changes in right-of-use assets.

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

(3) As of June 30, 2023 and December 31, 2022, we recorded accumulated amortization of finance lease right-of-use assets of $828.1 million and $840.0 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 June 30, 2023 are as follows (in thousands):

	Operating Leases		Finance Leases		Total
2023 (6 months remaining)	$	88,304	$	132,331	$	220,635
2024	201,938		252,911		454,849
2025	195,824		273,029		468,853
2026	191,409		242,209		433,618
2027	174,489		246,754		421,243
Thereafter	1,300,689		2,314,142		3,614,831
Total lease payments	2,152,653		3,461,376		5,614,029
Less imputed interest	(609,723)		(1,173,663)		(1,783,386)
Total	$	1,542,930	$	2,287,713	$	3,830,643

We entered into agreements with various landlords primarily to lease data center spaces and ground leases which have not yet commenced as of June 30, 2023. These leases will commence between year 2023 and 2026, with lease terms of 3 to 20 years and total lease commitments of approximately $567.4 million.

Leases

Leases

Significant Lease Transactions

The following table summarizes the significant lease transactions during the six months ended June 30, 2023 (in thousands):

			Renewal/Termination Options excluded (1)		Net Incremental (2)
Lease	Quarter	Transaction		Lease Classification	ROU assets		ROU liabilities
Chicago 1/2/4 ("CH1/2/4") data center lease expansion	Q2	Expanded CH1 to additional space within the building (3)	One 10-year renewal option	Operating Lease	$	150,990	$	176,316
				Finance Lease	78,073		52,747

(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. Certain complementary leases contain one additional 10-year renewal option.

(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)    The incremental balance includes the impact of reassessing lease terms of complementary leases of CH1, resulting in new lease end dates ranging from June 2037 to October 2040 from including renewal options that are reasonably certain to be exercised and in certain complementary leases changing classification.

Lease Expenses

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Finance lease cost
Amortization of right-of-use assets (1)	$	42,523	$	41,105	$	85,053	$	81,228
Interest on lease liabilities	28,456		28,357		56,678		57,244
Total finance lease cost	70,979		69,462		141,731		138,472
Operating lease cost	57,687		52,971		111,093		104,601
Variable lease cost	16,766		9,666		29,574		17,282
Total lease cost	$	145,432	$	132,099	$	282,398	$	260,355

(1)    Amortization of right-of-use assets is included within 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, except years and percent):

	Six Months Ended June 30, 2023			Six Months Ended June 30, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	55,175		$	55,929
Operating cash flows from operating leases	99,300			96,734
Financing cash flows from finance leases	66,462			69,556
Right-of-use assets obtained in exchange for lease obligations: (1)
Finance leases	$	157,376		$	74,954
Operating leases	209,133			313,034
	As of June 30, 2023			As of December 31, 2022
Weighted-average remaining lease term - finance leases (2)	15 years			15 years
Weighted-average remaining lease term - operating leases (2)	13 years			12 years
Weighted-average discount rate - finance leases	6		%	6		%
Weighted-average discount rate - operating leases	5		%	4		%
Finance lease right-of-use assets (3)	$	2,013,325		$	2,018,070

(1) Represents all non-cash changes in right-of-use assets.

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

(3) As of June 30, 2023 and December 31, 2022, we recorded accumulated amortization of finance lease right-of-use assets of $828.1 million and $840.0 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 June 30, 2023 are as follows (in thousands):

	Operating Leases		Finance Leases		Total
2023 (6 months remaining)	$	88,304	$	132,331	$	220,635
2024	201,938		252,911		454,849
2025	195,824		273,029		468,853
2026	191,409		242,209		433,618
2027	174,489		246,754		421,243
Thereafter	1,300,689		2,314,142		3,614,831
Total lease payments	2,152,653		3,461,376		5,614,029
Less imputed interest	(609,723)		(1,173,663)		(1,783,386)
Total	$	1,542,930	$	2,287,713	$	3,830,643

We entered into agreements with various landlords primarily to lease data center spaces and ground leases which have not yet commenced as of June 30, 2023. These leases will commence between year 2023 and 2026, with lease terms of 3 to 20 years and total lease commitments of approximately $567.4 million.