Leases

12 Months Ended

Dec. 31, 2019

LEASES

Leases as Lessor

Lease income related to the Company’s operating leases is comprised of the following:



	Year Ended December 31,
	2019		2018		2017
Lease income related to fixed lease payments	$	362,866	$	361,909	$	406,923
Lease income related to variable lease payments	116,928		116,141		128,968
Other (a)	1,892		4,447		2,248
Lease income	$	481,686	$	482,497	$	538,139


(a)	For the year ended December 31, 2019, “Other” is comprised of revenue adjustments related to changes in collectibility and amortization of above and below market lease intangibles and lease inducements. For the years ended December 31, 2018 and 2017, “Other” is comprised of amortization of above and below market lease intangibles and lease inducements.

As of December 31, 2019, undiscounted lease payments to be received under operating leases, excluding additional percentage rent based on tenants’ sales volume and tenant reimbursements of certain operating expenses and assuming no exercise of renewal options or early termination rights, for the next five years and thereafter are as follows:



	Lease Payments
2020	$	363,222
2021	327,131
2022	279,283
2023	230,164
2024	175,781
Thereafter	556,877
Total	$	1,932,458

As of December 31, 2018, undiscounted lease payments to be received under operating leases, excluding additional percentage rent based on tenants’ sales volume and tenant reimbursements of certain operating expenses and assuming no exercise of renewal options or early termination rights, were as follows:



	Lease Payments
2019	$	351,145
2020	314,081
2021	274,135
2022	227,417
2023	180,199
Thereafter	569,758
Total	$	1,916,735

The remaining lease terms range from less than one year to approximately 63 years and less than one year to approximately 64 years as of December 31, 2019 and 2018, respectively.

Many of the leases at the Company’s properties contain provisions that condition a tenant’s obligation to remain open, the amount of rent payable by the tenant or potentially the tenant’s obligation to remain in the lease, upon certain factors, including: (i) the presence and continued operation of a certain anchor tenant or tenants, (ii) minimum occupancy levels at the applicable property or (iii) tenant sales amounts. If such a provision is triggered by a failure of any of these or other applicable conditions, a tenant could have the right to cease operations at the applicable property, have its rent reduced or terminate its lease early. The Company does not expect that such provisions will have a material impact on its future operating results.

Leases as Lessee

The Company leases land under non-cancellable operating leases at certain of its properties expiring in various years from 2035 to 2073, exclusive of any available option periods. In addition, the Company leases office space for certain management offices and its corporate offices expiring in various years from 2020 to 2023, exclusive of any available option periods.

Upon adoption of the new lease accounting standard (ASU 2016-02 and related amendments) on January 1, 2019, the Company recorded lease liabilities and ROU assets of $103,432 for long-term ground and office leases where it is the lessee, calculated by discounting future lease payments by the Company’s incremental borrowing rate as of January 1, 2019. The incremental borrowing rate was determined through consideration of (i) the Company’s entity-specific risk premium, (ii) observable market interest rates and (iii) lease term. The weighted average incremental borrowing rate used to discount the future payments was 5.91% and the Company’s operating leases had a weighted average remaining lease term of 44 years as of January 1, 2019. The Company’s existing straight-line ground rent liabilities of $31,030 and acquired ground lease intangible liability of $11,898 were reclassified as of January 1, 2019 to be presented net of the ROU assets. During 2019, the Company extended the term of one office lease resulting in an additional lease liability and ROU asset of $321.

The following table summarizes total lease costs recognized during the period, including variable lease payments which were not significant, and non-cash rent expense. Lease costs recognized during the year ended December 31, 2019 are presented under the new lease accounting standard and lease costs recognized during the years ended December 31, 2018 and 2017 are presented under the standard in effect prior to the Company’s adoption of ASU 2016-02.



	Year Ended December 31,
	2019		2018		2017
Ground lease rent expense (a)	$	6,395	$	7,638	$	9,188
Office rent expense (b)	$	1,133	$	1,137	$	1,311
Office rent costs capitalized (c)	$	181	$	156	$	—


(a)	Included within “Operating expenses” in the accompanying consolidated statements of operations and other comprehensive (loss) income. Includes non-cash ground rent expense of $1,356, $2,404 and $2,710 for the years ended December 31, 2019, 2018 and 2017, respectively.

(b)

Office rent related to property management operations is included within “Operating expenses” and office rent related to corporate office operations is included within “General and administrative expenses” in the accompanying consolidated statements of operations and other comprehensive (loss) income. The Company has elected to not record a lease liability/ROU asset for leases with a term of less than 12 months. Office rent expense for the year ended December 31, 2019 includes $29 of short-term lease costs.


(c)	Office rent costs incurred as an indirect cost related to redevelopment projects are capitalized as a cost of the redevelopment project.

As of December 31, 2019, undiscounted future rental obligations to be paid under the long-term ground and office leases, including fixed rental increases, for the next five years and thereafter are as follows:



	Lease Obligations
2020	$	6,152
2021	6,283
2022	6,155
2023	6,102
2024	5,698
Thereafter	247,798
Total	$	278,188
Adjustment for discounting	(187,059		)
Lease liabilities as of December 31, 2019	$	91,129

The Company’s operating leases for ground leases and office leases had a weighted average remaining lease term of 44 years and a weighted average discount rate of 5.93% as of December 31, 2019.

As of December 31, 2018, future rental obligations to be paid under the ground and office leases, including fixed rental increases, were as follows:



	Lease Obligations
2019	$	6,448
2020	6,656
2021	6,716
2022	6,761
2023	6,769
Thereafter	279,916
Total	$	313,266