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Leases

6 Months Ended

Jun. 30, 2020

We lease office space, furniture and office equipment under various operating and financing leases. Our current leases have remaining lease terms of one year to 11 years, some of which include options to extend the leases for up to five years, and some of which include options to terminate the leases within one year.

Since 2010, we have sub-leased over one million square feet of office space. On January 1, 2019, the previously recorded liability relating to our global space consolidation initiatives of $85.8 million was offset as a reduction to our operating right-of-use assets.

Leases included in the condensed consolidated statement of financial condition as of June 30, 2020 and December 31, 2019 were as follows:



	Classification	June 30, 2020			December 31, 2019
		(in thousands)
Operating Leases
Operating lease right-of-use assets	Right-of-use assets	$	314,422		$	360,185
Operating lease liabilities	Lease liabilities	413,196			465,907

Finance Leases
Property and equipment, gross	Right-of-use assets	5,167			3,825
Amortization of right-of-use assets	Right-of-use assets	(1,866		)	(1,317		)
Property and equipment, net		3,301			2,508
Finance lease liabilities	Lease liabilities	3,281			2,544

The components of lease expense included in the condensed consolidated statement of income as of June 30, 2020 and June 30, 2019 were as follows:



		Three Months Ended June 30,						Six Months Ended June 30,
	Classification	2020			2019			2020			2019
		(in thousands)
Operating lease cost	General and administrative	$	22,411		$	26,506		$	45,415		$	53,648

Financing lease cost:
Amortization of right-of-use assets	General and administrative	426			291			903			577
Interest on lease liabilities	Interest expense	23			15			49			32
Total finance lease cost		449			306			952			609
Variable lease cost ⁽¹⁾	General and administrative	9,833			9,876			19,310			19,749
Sublease income	General and administrative	(9,626		)	(13,988		)	(19,241		)	(28,451		)
Net lease cost		$	23,067		$	22,700		$	46,436		$	45,555

⁽¹⁾ Variable lease expense includes operating expenses, real estate taxes and employee parking.

The sub-lease income represents all revenues received from sub-tenants. It is primarily fixed base rental payments combined with variable reimbursements such as operating expenses, real estate taxes and employee parking. We derive most of our sub-tenant income from our New York metro sub-tenant agreements. Sub-tenant income related to base rent is recorded on a straight-line basis.

Maturities of lease liabilities were as follows:



	Operating Leases			Financing Leases			Total
Year ending December 31,	(in thousands)
2020 (excluding the six months ended June 30, 2020)	$	51,618		$	942		$	52,560
2021	103,752			1,142			104,894
2022	89,650			757			90,407
2023	82,532			526			83,058
2024	79,612			23			79,635
Thereafter	43,017			—			43,017
Total lease payments	450,181			3,390			453,571
Less interest	(36,985		)	(109		)
Present value of lease liabilities	$	413,196		$	3,281

During October 2018, we signed a lease, which is scheduled to commence in the fourth quarter of 2020, relating to 218,976 square feet of space at our newly constructed Nashville headquarters. Our estimated total base rent obligation (excluding taxes, operating expenses and utilities) over the 15-year initial lease term is $134 million. During April 2019, we signed a lease, which commences in 2024, relating to approximately 190,000 square feet of space at a newly constructed site in New York City. Our estimated total base rent obligation (excluding taxes, operating expenses and utilities) over the 20-year lease term is approximately $448 million.



Lease term and discount rate:
Weighted average remaining lease term (years)
Operating leases	4.94
Finance leases	2.70
Weighted average discount rate
Operating leases	3.51	%
Finance leases	2.69	%

Supplemental cash flow information related to leases was as follows:



	Six Months Ended June 30,
	2020			2019
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used for operating leases	$	58,107		$	69,309
Operating cash flows used for financing leases	49			32
Financing cash flows from finance leases	959			567
Right-of-use assets obtained in exchange for lease obligations⁽¹⁾:
Operating leases ⁽²⁾	(1,223		)	4,156
Finance leases	1,695			—

⁽¹⁾Represents non-cash activity and, accordingly, is not reflected in the condensed consolidated statements of cash flows.

⁽²⁾ Represents net non-cash activity of extensions and reductions of lease obligations.

Leases

Leases included in the condensed consolidated statement of financial condition as of June 30, 2020 and December 31, 2019 were as follows:



	Classification	June 30, 2020			December 31, 2019
		(in thousands)
Operating Leases
Operating lease right-of-use assets	Right-of-use assets	$	314,422		$	360,185
Operating lease liabilities	Lease liabilities	413,196			465,907

Finance Leases
Property and equipment, gross	Right-of-use assets	5,167			3,825
Amortization of right-of-use assets	Right-of-use assets	(1,866		)	(1,317		)
Property and equipment, net		3,301			2,508
Finance lease liabilities	Lease liabilities	3,281			2,544

The components of lease expense included in the condensed consolidated statement of income as of June 30, 2020 and June 30, 2019 were as follows:



		Three Months Ended June 30,						Six Months Ended June 30,
	Classification	2020			2019			2020			2019
		(in thousands)
Operating lease cost	General and administrative	$	22,411		$	26,506		$	45,415		$	53,648

Financing lease cost:
Amortization of right-of-use assets	General and administrative	426			291			903			577
Interest on lease liabilities	Interest expense	23			15			49			32
Total finance lease cost		449			306			952			609
Variable lease cost ⁽¹⁾	General and administrative	9,833			9,876			19,310			19,749
Sublease income	General and administrative	(9,626		)	(13,988		)	(19,241		)	(28,451		)
Net lease cost		$	23,067		$	22,700		$	46,436		$	45,555

⁽¹⁾ Variable lease expense includes operating expenses, real estate taxes and employee parking.

Maturities of lease liabilities were as follows:



	Operating Leases			Financing Leases			Total
Year ending December 31,	(in thousands)
2020 (excluding the six months ended June 30, 2020)	$	51,618		$	942		$	52,560
2021	103,752			1,142			104,894
2022	89,650			757			90,407
2023	82,532			526			83,058
2024	79,612			23			79,635
Thereafter	43,017			—			43,017
Total lease payments	450,181			3,390			453,571
Less interest	(36,985		)	(109		)
Present value of lease liabilities	$	413,196		$	3,281



Lease term and discount rate:
Weighted average remaining lease term (years)
Operating leases	4.94
Finance leases	2.70
Weighted average discount rate
Operating leases	3.51	%
Finance leases	2.69	%

Supplemental cash flow information related to leases was as follows:



	Six Months Ended June 30,
	2020			2019
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used for operating leases	$	58,107		$	69,309
Operating cash flows used for financing leases	49			32
Financing cash flows from finance leases	959			567
Right-of-use assets obtained in exchange for lease obligations⁽¹⁾:
Operating leases ⁽²⁾	(1,223		)	4,156
Finance leases	1,695			—

⁽¹⁾Represents non-cash activity and, accordingly, is not reflected in the condensed consolidated statements of cash flows.

⁽²⁾ Represents net non-cash activity of extensions and reductions of lease obligations.

Leases

Leases included in the condensed consolidated statement of financial condition as of June 30, 2020 and December 31, 2019 were as follows:



	Classification	June 30, 2020			December 31, 2019
		(in thousands)
Operating Leases
Operating lease right-of-use assets	Right-of-use assets	$	314,422		$	360,185
Operating lease liabilities	Lease liabilities	413,196			465,907

Finance Leases
Property and equipment, gross	Right-of-use assets	5,167			3,825
Amortization of right-of-use assets	Right-of-use assets	(1,866		)	(1,317		)
Property and equipment, net		3,301			2,508
Finance lease liabilities	Lease liabilities	3,281			2,544

The components of lease expense included in the condensed consolidated statement of income as of June 30, 2020 and June 30, 2019 were as follows:



		Three Months Ended June 30,						Six Months Ended June 30,
	Classification	2020			2019			2020			2019
		(in thousands)
Operating lease cost	General and administrative	$	22,411		$	26,506		$	45,415		$	53,648

Financing lease cost:
Amortization of right-of-use assets	General and administrative	426			291			903			577
Interest on lease liabilities	Interest expense	23			15			49			32
Total finance lease cost		449			306			952			609
Variable lease cost ⁽¹⁾	General and administrative	9,833			9,876			19,310			19,749
Sublease income	General and administrative	(9,626		)	(13,988		)	(19,241		)	(28,451		)
Net lease cost		$	23,067		$	22,700		$	46,436		$	45,555

⁽¹⁾ Variable lease expense includes operating expenses, real estate taxes and employee parking.

Maturities of lease liabilities were as follows:



	Operating Leases			Financing Leases			Total
Year ending December 31,	(in thousands)
2020 (excluding the six months ended June 30, 2020)	$	51,618		$	942		$	52,560
2021	103,752			1,142			104,894
2022	89,650			757			90,407
2023	82,532			526			83,058
2024	79,612			23			79,635
Thereafter	43,017			—			43,017
Total lease payments	450,181			3,390			453,571
Less interest	(36,985		)	(109		)
Present value of lease liabilities	$	413,196		$	3,281



Lease term and discount rate:
Weighted average remaining lease term (years)
Operating leases	4.94
Finance leases	2.70
Weighted average discount rate
Operating leases	3.51	%
Finance leases	2.69	%

Supplemental cash flow information related to leases was as follows:



	Six Months Ended June 30,
	2020			2019
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used for operating leases	$	58,107		$	69,309
Operating cash flows used for financing leases	49			32
Financing cash flows from finance leases	959			567
Right-of-use assets obtained in exchange for lease obligations⁽¹⁾:
Operating leases ⁽²⁾	(1,223		)	4,156
Finance leases	1,695			—

⁽¹⁾Represents non-cash activity and, accordingly, is not reflected in the condensed consolidated statements of cash flows.

⁽²⁾ Represents net non-cash activity of extensions and reductions of lease obligations.