Leases

12 Months Ended

Dec. 31, 2019

Leases [Abstract]

Leases

Leases

The majority of our lease expenses are derived from our ground leases and a few corporate leases, which are primarily for office space. We recognize lease expense for these leases on a straight-line basis over the lease term. Many of our leases contain renewal options that can extend the lease term from one to ten years, or in certain cases, longer durations. The exercise of lease renewal options is at our sole discretion. Certain of our ground leases have the option to purchase the land at the end of the initial term. Our leases have one of the following payment options: (i) fixed payment throughout the term; (ii) fixed payments with periodic escalations; (iii) variable lease payments based on the Consumer Price Index (“CPI”) or another similar index; and (iv) a combination of the aforementioned. Our leases do not contain any material residual value guarantees or material restrictive covenants other than certain prohibitions as to the nature of business that can be conducted within the buildings which we own in order to limit activities that may be deemed competitive in nature to the ground lessor’s activities. As of December 31, 2019, we have no new ground leases or corporate leases that have not yet commenced.

As part of the adoption of Topic 842, a lease liability and a corresponding ROU asset was recorded on our accompanying consolidated balance sheets effective January 1, 2019. The lease liability was calculated as the present value of the remaining lease payments using the lease term at lease commencement and an incremental borrowing rate. In determining this calculation, we made the following assumptions and judgments:

• only material ground leases and corporate leases exceeding one year in duration were included in our lease population. Office equipment and other non-essential leases were excluded from this population due to immateriality; and

• a series of incremental borrowing rates were determined based on observed prices and credit spreads of our unsecured senior debt as of December 31, 2018 after applying treasury or other similar index rates as of January 1, 2019 to leases that correspond to the remaining lease terms, adjusted for the effects of collateral.

At adoption, the ROU asset was calculated as the sum of the lease liability, deferred rent of approximately $(19.0) million, and the above and below market leasehold interest balances as of December 31, 2018 of approximately $66.5 million, which were previously recorded as other intangibles and intangible liabilities on our accompanying consolidated balance sheets.

In addition, in November 2019, the commencement date of the previously disclosed ground lease occurred. Based on our analysis, we concluded that its classification was a finance lease.

Lessee - Lease Costs

Lease costs consisted of the following for the year ended December 31, 2019 (in thousands):

	Year Ended December 31, 2019
Operating lease cost	$	12,529
Variable lease cost	1,483
Finance lease cost:
Amortization of right of use assets	8
Interest on lease liabilities	25
Total lease cost	$	14,045

Lessee - Lease Term and Discount Rates

The following is the weighted average remaining lease term and the weighted average discount rate for our operating and finance leases as of December 31, 2019 (weighted average remaining lease term in years):

	December 31, 2019
Operating leases:
Weighted-average remaining lease term	47.3
Weighted-average discount rate	5.3	%
Finance leases:
Weighted-average remaining lease term	50.0
Weighted-average discount rate	4.4	%

Lessee - Maturity of Lease Liabilities

We have ground leases and other operating leases with landlords that generally require fixed annual rental payments and may also include escalation clauses and renewal options. These leases generally have terms up to 99 years, excluding extension options. The following table summarizes the future minimum lease obligations of our operating and finance leases as of December 31, 2019 under Topic 842 (in thousands):

Year	Operating leases			Finance leases
2020	$	10,308		$	125
2021	10,440			125
2022	10,630			125
2023	10,763			125
2024	9,948			126
Thereafter	622,618			9,281
Total undiscounted lease payments	$	674,707		$	9,907
Less: Interest	(476,057		)	(6,488		)
Present value of lease liabilities	$	198,650		$	3,419

Under the previous lease accounting standard, Topic 840, the following table summarizes the future minimum lease obligations of our operating leases as of December 31, 2018 (in thousands):

Year	Amount
2019	$	10,309
2020	10,408
2021	9,877
2022	10,031
2023	10,132
Thereafter	639,234
Total	$	689,991

Lessor - Lease Revenues and Maturity of Future Minimum Rents

We have operating leases with tenants that expire at various dates through 2043 which generally include fixed increases or adjustment based on the consumer price index. Leases also provide for additional rents based on certain operating expenses.

For the year ended December 31, 2019, we recognized $686.2 million of rental and other lease-related income related to our operating leases of which $154.3 million were variable lease payments.

The following table summarizes the future minimum rent contractually due under operating leases, excluding tenant reimbursements of certain costs, as of December 31, 2019 under Topic 842 (in thousands):

Year	Amount
2020	$	526,431
2021	475,822
2022	419,219
2023	366,336
2024	320,190
Thereafter	1,279,376
Total	$	3,387,374

Under the previous lease accounting standard, Topic 840, the following table summarizes the future minimum rent contractually due under operating leases, excluding tenant reimbursements of certain costs, as of December 31, 2018 (in thousands):

Year	Amount
2019	$	497,083
2020	448,956
2021	401,871
2022	341,889
2023	294,451
Thereafter	1,244,246
Total	$	3,228,496

A certain amount of our rental income is from tenants with leases which are subject to contingent rent provisions. These contingent rents are subject to the tenant achieving periodic revenues in excess of specified levels. For the years ended December 31, 2019, 2018 and 2017, the amount of contingent rent earned by us was not significant.

Leases

Leases

The majority of our lease expenses are derived from our ground leases and a few corporate leases, which are primarily for office space. We recognize lease expense for these leases on a straight-line basis over the lease term. Many of our leases contain renewal options that can extend the lease term from one to ten years, or in certain cases, longer durations. The exercise of lease renewal options is at our sole discretion. Certain of our ground leases have the option to purchase the land at the end of the initial term. Our leases have one of the following payment options: (i) fixed payment throughout the term; (ii) fixed payments with periodic escalations; (iii) variable lease payments based on the Consumer Price Index (“CPI”) or another similar index; and (iv) a combination of the aforementioned. Our leases do not contain any material residual value guarantees or material restrictive covenants other than certain prohibitions as to the nature of business that can be conducted within the buildings which we own in order to limit activities that may be deemed competitive in nature to the ground lessor’s activities. As of December 31, 2019, we have no new ground leases or corporate leases that have not yet commenced.

As part of the adoption of Topic 842, a lease liability and a corresponding ROU asset was recorded on our accompanying consolidated balance sheets effective January 1, 2019. The lease liability was calculated as the present value of the remaining lease payments using the lease term at lease commencement and an incremental borrowing rate. In determining this calculation, we made the following assumptions and judgments:

• only material ground leases and corporate leases exceeding one year in duration were included in our lease population. Office equipment and other non-essential leases were excluded from this population due to immateriality; and

• a series of incremental borrowing rates were determined based on observed prices and credit spreads of our unsecured senior debt as of December 31, 2018 after applying treasury or other similar index rates as of January 1, 2019 to leases that correspond to the remaining lease terms, adjusted for the effects of collateral.

At adoption, the ROU asset was calculated as the sum of the lease liability, deferred rent of approximately $(19.0) million, and the above and below market leasehold interest balances as of December 31, 2018 of approximately $66.5 million, which were previously recorded as other intangibles and intangible liabilities on our accompanying consolidated balance sheets.

In addition, in November 2019, the commencement date of the previously disclosed ground lease occurred. Based on our analysis, we concluded that its classification was a finance lease.

Lessee - Lease Costs

Lease costs consisted of the following for the year ended December 31, 2019 (in thousands):

	Year Ended December 31, 2019
Operating lease cost	$	12,529
Variable lease cost	1,483
Finance lease cost:
Amortization of right of use assets	8
Interest on lease liabilities	25
Total lease cost	$	14,045

Lessee - Lease Term and Discount Rates

The following is the weighted average remaining lease term and the weighted average discount rate for our operating and finance leases as of December 31, 2019 (weighted average remaining lease term in years):

	December 31, 2019
Operating leases:
Weighted-average remaining lease term	47.3
Weighted-average discount rate	5.3	%
Finance leases:
Weighted-average remaining lease term	50.0
Weighted-average discount rate	4.4	%

Lessee - Maturity of Lease Liabilities

We have ground leases and other operating leases with landlords that generally require fixed annual rental payments and may also include escalation clauses and renewal options. These leases generally have terms up to 99 years, excluding extension options. The following table summarizes the future minimum lease obligations of our operating and finance leases as of December 31, 2019 under Topic 842 (in thousands):

Year	Operating leases			Finance leases
2020	$	10,308		$	125
2021	10,440			125
2022	10,630			125
2023	10,763			125
2024	9,948			126
Thereafter	622,618			9,281
Total undiscounted lease payments	$	674,707		$	9,907
Less: Interest	(476,057		)	(6,488		)
Present value of lease liabilities	$	198,650		$	3,419

Under the previous lease accounting standard, Topic 840, the following table summarizes the future minimum lease obligations of our operating leases as of December 31, 2018 (in thousands):

Year	Amount
2019	$	10,309
2020	10,408
2021	9,877
2022	10,031
2023	10,132
Thereafter	639,234
Total	$	689,991

Lessor - Lease Revenues and Maturity of Future Minimum Rents

We have operating leases with tenants that expire at various dates through 2043 which generally include fixed increases or adjustment based on the consumer price index. Leases also provide for additional rents based on certain operating expenses.

For the year ended December 31, 2019, we recognized $686.2 million of rental and other lease-related income related to our operating leases of which $154.3 million were variable lease payments.

The following table summarizes the future minimum rent contractually due under operating leases, excluding tenant reimbursements of certain costs, as of December 31, 2019 under Topic 842 (in thousands):

Year	Amount
2020	$	526,431
2021	475,822
2022	419,219
2023	366,336
2024	320,190
Thereafter	1,279,376
Total	$	3,387,374

Under the previous lease accounting standard, Topic 840, the following table summarizes the future minimum rent contractually due under operating leases, excluding tenant reimbursements of certain costs, as of December 31, 2018 (in thousands):

Year	Amount
2019	$	497,083
2020	448,956
2021	401,871
2022	341,889
2023	294,451
Thereafter	1,244,246
Total	$	3,228,496

A certain amount of our rental income is from tenants with leases which are subject to contingent rent provisions. These contingent rents are subject to the tenant achieving periodic revenues in excess of specified levels. For the years ended December 31, 2019, 2018 and 2017, the amount of contingent rent earned by us was not significant.

Leases

Leases

The majority of our lease expenses are derived from our ground leases and a few corporate leases, which are primarily for office space. We recognize lease expense for these leases on a straight-line basis over the lease term. Many of our leases contain renewal options that can extend the lease term from one to ten years, or in certain cases, longer durations. The exercise of lease renewal options is at our sole discretion. Certain of our ground leases have the option to purchase the land at the end of the initial term. Our leases have one of the following payment options: (i) fixed payment throughout the term; (ii) fixed payments with periodic escalations; (iii) variable lease payments based on the Consumer Price Index (“CPI”) or another similar index; and (iv) a combination of the aforementioned. Our leases do not contain any material residual value guarantees or material restrictive covenants other than certain prohibitions as to the nature of business that can be conducted within the buildings which we own in order to limit activities that may be deemed competitive in nature to the ground lessor’s activities. As of December 31, 2019, we have no new ground leases or corporate leases that have not yet commenced.

As part of the adoption of Topic 842, a lease liability and a corresponding ROU asset was recorded on our accompanying consolidated balance sheets effective January 1, 2019. The lease liability was calculated as the present value of the remaining lease payments using the lease term at lease commencement and an incremental borrowing rate. In determining this calculation, we made the following assumptions and judgments:

• only material ground leases and corporate leases exceeding one year in duration were included in our lease population. Office equipment and other non-essential leases were excluded from this population due to immateriality; and

• a series of incremental borrowing rates were determined based on observed prices and credit spreads of our unsecured senior debt as of December 31, 2018 after applying treasury or other similar index rates as of January 1, 2019 to leases that correspond to the remaining lease terms, adjusted for the effects of collateral.

At adoption, the ROU asset was calculated as the sum of the lease liability, deferred rent of approximately $(19.0) million, and the above and below market leasehold interest balances as of December 31, 2018 of approximately $66.5 million, which were previously recorded as other intangibles and intangible liabilities on our accompanying consolidated balance sheets.

In addition, in November 2019, the commencement date of the previously disclosed ground lease occurred. Based on our analysis, we concluded that its classification was a finance lease.

Lessee - Lease Costs

Lease costs consisted of the following for the year ended December 31, 2019 (in thousands):

	Year Ended December 31, 2019
Operating lease cost	$	12,529
Variable lease cost	1,483
Finance lease cost:
Amortization of right of use assets	8
Interest on lease liabilities	25
Total lease cost	$	14,045

Lessee - Lease Term and Discount Rates

The following is the weighted average remaining lease term and the weighted average discount rate for our operating and finance leases as of December 31, 2019 (weighted average remaining lease term in years):

	December 31, 2019
Operating leases:
Weighted-average remaining lease term	47.3
Weighted-average discount rate	5.3	%
Finance leases:
Weighted-average remaining lease term	50.0
Weighted-average discount rate	4.4	%

Lessee - Maturity of Lease Liabilities

We have ground leases and other operating leases with landlords that generally require fixed annual rental payments and may also include escalation clauses and renewal options. These leases generally have terms up to 99 years, excluding extension options. The following table summarizes the future minimum lease obligations of our operating and finance leases as of December 31, 2019 under Topic 842 (in thousands):

Year	Operating leases			Finance leases
2020	$	10,308		$	125
2021	10,440			125
2022	10,630			125
2023	10,763			125
2024	9,948			126
Thereafter	622,618			9,281
Total undiscounted lease payments	$	674,707		$	9,907
Less: Interest	(476,057		)	(6,488		)
Present value of lease liabilities	$	198,650		$	3,419

Under the previous lease accounting standard, Topic 840, the following table summarizes the future minimum lease obligations of our operating leases as of December 31, 2018 (in thousands):

Year	Amount
2019	$	10,309
2020	10,408
2021	9,877
2022	10,031
2023	10,132
Thereafter	639,234
Total	$	689,991

Lessor - Lease Revenues and Maturity of Future Minimum Rents

We have operating leases with tenants that expire at various dates through 2043 which generally include fixed increases or adjustment based on the consumer price index. Leases also provide for additional rents based on certain operating expenses.

For the year ended December 31, 2019, we recognized $686.2 million of rental and other lease-related income related to our operating leases of which $154.3 million were variable lease payments.

The following table summarizes the future minimum rent contractually due under operating leases, excluding tenant reimbursements of certain costs, as of December 31, 2019 under Topic 842 (in thousands):

Year	Amount
2020	$	526,431
2021	475,822
2022	419,219
2023	366,336
2024	320,190
Thereafter	1,279,376
Total	$	3,387,374

Under the previous lease accounting standard, Topic 840, the following table summarizes the future minimum rent contractually due under operating leases, excluding tenant reimbursements of certain costs, as of December 31, 2018 (in thousands):

Year	Amount
2019	$	497,083
2020	448,956
2021	401,871
2022	341,889
2023	294,451
Thereafter	1,244,246
Total	$	3,228,496

A certain amount of our rental income is from tenants with leases which are subject to contingent rent provisions. These contingent rents are subject to the tenant achieving periodic revenues in excess of specified levels. For the years ended December 31, 2019, 2018 and 2017, the amount of contingent rent earned by us was not significant.