Commitments and Contingencies

(a) Operating Leases

We have a ground lease obligation on 2010 East Centennial Circle that expires in 2082. After February 2036, rent for the remaining term of the 2010 East Centennial Circle ground lease will be determined based on a fair market value appraisal of the property and, as result, rent after February 2036 is excluded from the minimum commitment information below.

We have ground leases on Paul van Vlissingenstraat 16 that expires in 2054, Chemin de l’Epinglier 2 that expires in 2074, Clonshaugh Industrial Estate I and II that expires in 2981, Manchester Technopark that expires in 2125, 29A International Business Park that expires in 2038, Gyroscoopweg 2E-2F, which has a continuous ground lease and will be adjusted on January 1, 2042, and Naritaweg 52, which has a continuous ground lease. In late 2011, we executed a lease for a new location for our headquarters, which began in May 2012, with a lease term of 12 years with an option to extend the lease for an additional five years. We also have operating leases at 111 8^th Avenue (2^nd and 6^th floors), 8100 Boone Boulevard, 111 8^th Avenue (3^rd and 7^th floors) and 410 Commerce Boulevard, which expire in June 2024, September 2017, February 2022 and December 2026, respectively. The lease at 111 8^th Avenue (2^ndand 6^th floors) has an option to extend the lease until June 2034 and the lease at 111 8^th Avenue (3^rd and 7^th floors) has an option to extend the lease until February 2032. The leases at 8100 Boone Boulevard and 410 Commerce Boulevard have no extension options. As part of the Telx Acquisition and European Portfolio Acquisition, leases relating to operating facilities, offices, and equipment under various lease agreements expire during the years ending December 2017 through December 2037.

We have a fully prepaid ground lease on 2055 E. Technology Circle that expires in 2083. We have a fully prepaid ground lease on Cateringweg 5 that expires in 2059. The ground lease at Naritaweg 52 has been prepaid through December 2036.

Rental expense for these leases was approximately $83.6 million, $24.6 million, and $16.2 million for the years ended December 31, 2016, 2015 and 2014 respectively.

The minimum commitment under these leases, excluding the fully prepaid ground leases, as of December 31, 2016 was as follows (in thousands):



2017	$	70,079
2018	73,474
2019	78,578
2020	81,403
2021	81,803
Thereafter	665,803
Total	$	1,051,140

(b) Capital leases

Future minimum lease payments and their present value for property under capital leases as of December 31, 2016 , are as follows:



2017	$	10,263
2018	10,268
2019	11,909
2020	12,004
2021	12,099
Thereafter	196,299
	252,842
Less amount representing interest	(90,658		)
Present value	$	162,184

As part of the acquisition of 29A International Business Park, the seller could earn additional consideration based on future net operating income growth in excess of certain performance targets, as defined in the agreements for the acquisition. The earnout contingency expires in November 2020. The maximum amount that could be earned by the seller is $50.0 million SGD (or approximately $34.5 million based on the exchange rate as of December 31, 2016). As of December 31, 2014, $12.6 million had been accrued related to this earnout agreement, which was subsequently paid in 2015. During 2015 and 2016, the remaining performance targets were achieved and the Company accrued an additional $23.8 million. The remaining earnout payments were made in 2016 per the terms of the earnout agreement. The amounts accrued were discounted based on their expected payment date and capitalized to building and improvements as the original purchase was accounted for as an asset acquisition.

One of the tenants at our Convergence Business Park property has an option to expand as part of their lease agreement, which expires in April 2017. As part of this option, development activities were not permitted on specifically identified expansion space within the property until April 2014. From April 2014 through April 2017, the tenant has the right of first refusal on any third party’s bona fide offer to buy the adjacent land. If the tenant exercises its option, we may either construct and lease to the tenant an additional shell building on the expansion space at a stipulated rate of return on cost or sell the existing building and the expansion space to the tenant for a price of approximately $24.0 million and $225,000 per acre, respectively, plus additional adjustments as provided in the lease. As of December 31, 2016 the tenant had yet to exercise its option.

As part of the acquisition of the Sentrum Portfolio, the seller could earn additional consideration based on future net returns on vacant space to be developed, but not currently leased, as defined in the purchase agreement for the acquisition. The initial estimate of fair value of the contingent consideration liability was approximately £56.5 million (or approximately $87.6 million based on the exchange rate as of July 11, 2012, the acquisition date). We have adjusted the contingent consideration to fair value at each reporting date with changes in fair value recognized in operating income. During the year ended December 31, 2015, we reduced the fair value by approximately £30.3 million (or approximately $45.9 million). The adjustment was the result of an evaluation by management that no additional leases would be executed for vacant space by July 11, 2015, the contingency expiration date. The final payment on the earnout was made in August 2015. We made earnout payments of approximately £0.7 million (or approximately $1.1 million based on the exchange rates as of the date of each payment) during the year ended December 31, 2015. During the year ended December 31, 2014, we made earnout payments of approximately £6.2 million (or approximately $10.3 million based on the exchange rates as of the date of each payment). From the acquisition date through December 31, 2015, we made earnout payments of approximately £23.8 million (or approximately $37.2 million based on the exchange rates as of the date of each payment). The earn-out contingency expired in July 2015. The change in fair value of contingent consideration for Sentrum was recorded as a reduction to operating expense of approximately $0.0 million, $43.0 million and $8.4 million for the years ended December 31, 2016, 2015 and 2014, respectively.

(d) Construction Commitments

Our properties require periodic investments of capital for tenant-related capital expenditures and for general capital improvements and from time to time in the normal course of our business, we enter into various construction contracts with third parties that may obligate us to make payments. At December 31, 2016, we had open commitments related to construction contracts of approximately $320.9 million.

(e) Legal Proceedings

Although the Company is involved in legal proceedings arising in the ordinary course of business, as of December 31, 2016, the Company is not currently a party to any legal proceedings nor, to its knowledge, is any legal proceeding threatened against it that it believes would have a material adverse effect on its financial position, results of operations or liquidity.