Leases

3 Months Ended

Mar. 31, 2024

Leases [Abstract]

Leases

Leases

Lessor Accounting

The Company’s properties generally are leased pursuant to non-cancelable, fixed-term operating leases with expiration dates through 2052. Some leases provide tenants with fixed rent renewal terms while others have market rent renewal terms. Some leases provide the lessee, during the term of the lease, with an option or right of first refusal to purchase the leased property. The Company’s single-tenant net leases generally require the lessee to pay minimum rent and all taxes (including property tax), insurance, maintenance and other operating costs associated with the leased property.

The Company's leases typically have escalators that are either based on a stated percentage or an index such as the consumer price index ("CPI"). In addition, most of the Company's leases include nonlease components, such as reimbursement of operating expenses as additional rent, or include the reimbursement of expected operating expenses as part of the lease payment. The Company adopted an accounting policy to combine lease and nonlease components. Rent escalators based on indices and reimbursements of operating expenses that are not included in the lease rate are considered variable lease payments. Variable payments are recognized in the period earned. Lease income for the Company's operating leases recognized for the three months ended March 31, 2024 was $318.1 million. Lease income for the Company's operating leases recognized for the three months ended March 31, 2023 was $324.1 million.

Future lease payments under the non-cancelable operating leases, excluding any reimbursements and one sale-type lease, as of March 31, 2024 were as follows:

Dollars in thousands	OPERATING
2024	$	680,129
2025	831,775
2026	734,080
2027	611,277
2028	497,470
2029 and thereafter	1,665,663
	$	5,020,394

Lessee Accounting

As of March 31, 2024, the Company was obligated, as the lessee, under operating lease agreements consisting primarily of the Company’s ground leases. As of March 31, 2024, the Company had 231 properties totaling 16.9 million square feet that were held under ground leases. Some of the ground lease renewal terms are based on fixed rent renewal terms and others have market rent renewal terms. These ground leases typically have initial terms of 40 to 99 years with expiration dates through 2119. Any rental increases related to the Company’s ground leases are generally either stated or based on CPI. The Company had 75 prepaid ground leases as of March 31, 2024. The amortization of the prepaid rent, included in the operating lease right-of-use asset, represented approximately $0.3 million of the Company’s rental expense for the three months ended March 31, 2024 and March 31, 2023.

The Company’s future lease payments (primarily for its 156 non-prepaid ground leases) as of March 31, 2024 were as follows:

Dollars in thousands	OPERATING		FINANCING
2024	$	8,760	$	1,523
2025	12,415		2,218
2026	12,503		2,255
2027	12,689		2,294
2028	12,809		2,326
2029 and thereafter	698,464		394,072
Total undiscounted lease payments	757,640		404,688
Discount	(528,417)		(329,919)
Lease liabilities	$	229,223	$	74,769

The following table provides details of the Company's total lease expense for the three months ended March 31, 2024 and 2023:

	THREE MONTHS ENDED March 31,
Dollars in thousands	2024			2023
Operating lease cost
Operating lease expense	$	4,465		$	5,107
Variable lease expense	1,228			2,136
Finance lease cost
Amortization of right-of-use assets	387			388
Interest on lease liabilities	937			918
Total lease expense	$	7,017		$	8,549
Other information
Operating cash flows outflows related to operating leases	$	4,040		$	5,960
Operating cash flows outflows related to financing leases	$	563		$	553
Financing cash flows outflows related to financing leases	$	110		$	101
Weighted-average years remaining lease term (excluding renewal options) - operating leases	45.8			47.4
Weighted-average years remaining lease term (excluding renewal options) - finance leases	57.7			58.7
Weighted-average discount rate - operating leases	5.7		%	5.8		%
Weighted-average discount rate - finance leases	5.0		%	5.0		%

Leases

Leases

Lessor Accounting

The Company’s properties generally are leased pursuant to non-cancelable, fixed-term operating leases with expiration dates through 2052. Some leases provide tenants with fixed rent renewal terms while others have market rent renewal terms. Some leases provide the lessee, during the term of the lease, with an option or right of first refusal to purchase the leased property. The Company’s single-tenant net leases generally require the lessee to pay minimum rent and all taxes (including property tax), insurance, maintenance and other operating costs associated with the leased property.

The Company's leases typically have escalators that are either based on a stated percentage or an index such as the consumer price index ("CPI"). In addition, most of the Company's leases include nonlease components, such as reimbursement of operating expenses as additional rent, or include the reimbursement of expected operating expenses as part of the lease payment. The Company adopted an accounting policy to combine lease and nonlease components. Rent escalators based on indices and reimbursements of operating expenses that are not included in the lease rate are considered variable lease payments. Variable payments are recognized in the period earned. Lease income for the Company's operating leases recognized for the three months ended March 31, 2024 was $318.1 million. Lease income for the Company's operating leases recognized for the three months ended March 31, 2023 was $324.1 million.

Future lease payments under the non-cancelable operating leases, excluding any reimbursements and one sale-type lease, as of March 31, 2024 were as follows:

Dollars in thousands	OPERATING
2024	$	680,129
2025	831,775
2026	734,080
2027	611,277
2028	497,470
2029 and thereafter	1,665,663
	$	5,020,394

Lessee Accounting

As of March 31, 2024, the Company was obligated, as the lessee, under operating lease agreements consisting primarily of the Company’s ground leases. As of March 31, 2024, the Company had 231 properties totaling 16.9 million square feet that were held under ground leases. Some of the ground lease renewal terms are based on fixed rent renewal terms and others have market rent renewal terms. These ground leases typically have initial terms of 40 to 99 years with expiration dates through 2119. Any rental increases related to the Company’s ground leases are generally either stated or based on CPI. The Company had 75 prepaid ground leases as of March 31, 2024. The amortization of the prepaid rent, included in the operating lease right-of-use asset, represented approximately $0.3 million of the Company’s rental expense for the three months ended March 31, 2024 and March 31, 2023.

The Company’s future lease payments (primarily for its 156 non-prepaid ground leases) as of March 31, 2024 were as follows:

Dollars in thousands	OPERATING		FINANCING
2024	$	8,760	$	1,523
2025	12,415		2,218
2026	12,503		2,255
2027	12,689		2,294
2028	12,809		2,326
2029 and thereafter	698,464		394,072
Total undiscounted lease payments	757,640		404,688
Discount	(528,417)		(329,919)
Lease liabilities	$	229,223	$	74,769

The following table provides details of the Company's total lease expense for the three months ended March 31, 2024 and 2023:

	THREE MONTHS ENDED March 31,
Dollars in thousands	2024			2023
Operating lease cost
Operating lease expense	$	4,465		$	5,107
Variable lease expense	1,228			2,136
Finance lease cost
Amortization of right-of-use assets	387			388
Interest on lease liabilities	937			918
Total lease expense	$	7,017		$	8,549
Other information
Operating cash flows outflows related to operating leases	$	4,040		$	5,960
Operating cash flows outflows related to financing leases	$	563		$	553
Financing cash flows outflows related to financing leases	$	110		$	101
Weighted-average years remaining lease term (excluding renewal options) - operating leases	45.8			47.4
Weighted-average years remaining lease term (excluding renewal options) - finance leases	57.7			58.7
Weighted-average discount rate - operating leases	5.7		%	5.8		%
Weighted-average discount rate - finance leases	5.0		%	5.0		%