LEASES

9 Months Ended

Sep. 30, 2019

Lessor

On May 29, 2019, we foreclosed on all of the membership interests of Hertz Broadway Tower, LLC, (“Hertz Broadway”), the owner of Broadway Tower.

As a result, we acquired Broadway Tower its related assets and business operations and assumed related liabilities. The Company assumed 51 commercial office leases for the building’s floor space and parking spaces. (See Note 4 for further discussion of this transaction).

Prior to this foreclosure transaction, Hertz Broadway accounted for the leases under ASC 840 - Leases. Thereafter, the Company adopted the requirements of ASU 2016-02 with respect to such leases. The lessor accounting model under ASU 2016-02 is similar to existing guidance, however, it limits the capitalization of initial direct leasing costs, such as internally generated costs. The adoption of ASU 2016-02 for this lease did not have an impact in our consolidated financial statements. The Company elected the practical expedient package outlined in ASU No. 2016-02 under which we were not required to reassess whether the agreements contain a lease. Accordingly, we carried forward the previous classification of the leases as operating and did not have to reassess previously recorded initial direct costs.

These lease agreements have been recorded in revenue during the three and nine months ended September 30, 2019. The Company’s operating leases have non-cancellable lease terms of 0.9 years to 10.1 years as of September 30, 2019. Certain leases with tenants include options to extend or terminate the lease agreements. The Company believes the residual value risk is not a primary risk because of the long-lived nature of the asset.

The following table presents minimum lease revenues and variable lease revenue for the three and nine months ended September 30, 2019 (in thousands).



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Lease revenue
Fixed rent - Minimum lease revenue	$	1,091	$	—	$	1,387	$	—
Variable lease revenue	66		—		87		—
Total lease revenue	$	1,157	$	—	$	1,474	$	—

Variable rent includes costs reimbursed related to property operating expenses, common area maintenance, insurance and property taxes.

The following table presents future minimum operating lease payments due to the Company over the next five years and thereafter (in thousands).



Years ending	Amount
Remainder of 2019	$	870
2020	3,744
2021	3,796
2022	3,416
2023	2,306
Thereafter	3,639
Total	$	17,771

Lessee

We have operating leases for our corporate headquarters office space and certain office equipment. Our leases have remaining lease terms of between one to four years. The lease for our corporate office includes an option to extend the lease term for up to five years. This option is not included in the calculation of the ROU assets and lease liabilities because the Company is not reasonably certain that it will exercise the option. Lease expense was $0.1 million for the three months ended September 30, 2019 and 2018, respectively, and $0.2 million for the nine months ended September 30, 2019 and 2018, respectively, which is included in general and administrative expenses in the accompanying condensed consolidated statement of operations. As disclosed in Note 15, Juniper Investment Advisors, LLC (“JIA”) has also sublet a portion of the Company’s office space. During the three and nine months ended September 30, 2019, we recorded expense reimbursements from JIA for the sublease of office space and certain overhead charges of $33 thousand.

Variable lease payments are not included in the calculation of the right-of-use asset and lease liability due to uncertainty of the payment amount and were $0.1 million and $0.1 million for the three months ended September 30, 2019 and 2018, respectively, and $0.1 million and $0.1 million for the nine months ended September 30, 2019 and 2018, respectively.

Supplemental cash flow information related to leases for the nine months ended September 30, 2019 (in thousands):



Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating lease	$	321

Non-cash investing and financing activities:
Right-of-use assets and lease liabilities recorded upon adoption of ASC 842
Right-of-use assets	$	1,574
Lease liabilities	$	1,693

Supplemental balance sheet information related to leases as of September 30, 2019 was as follows (thousands, except lease term and discount rate):



Operating leases
Operating lease right-of-use assets in other assets	$	1,330

Operating lease liabilities in accounts payable and other accrued expenses	$	1,431

Weighted average remaining lease term	2.8 years
Operating leases - Weighted average discount rate	7.1%

The following represents future payments on operating leases as of September 30, 2019 (in thousands):



Years ending	Amount
Remainder of 2019	$	214
2020	574
2021	575
2022	237
Total lease payments	1,600
Less imputed interest	(169		)
Total	$	1,431

As of December 31, 2018, future minimum lease payments required under these various lease agreements are as follows (in thousands):



Years ending	Amount
2019	$	305
2020	307
2021	307
2022	233
Total	$	1,152

LEASES