Commitments and Contingencies

12 Months Ended

Dec. 31, 2021

Commitments and Contingencies Disclosure [Abstract]

In the normal course of business, from time to time, the Company is involved in legal actions relating to the ownership and operations of its properties. In management’s opinion, the liabilities, if any, that ultimately may result from such legal actions are not expected to have a material adverse effect on the consolidated financial position, results of operations or liquidity of the Company.

The Company has signed several ground leases in which the Company is the lessee for the land beneath all or a portion of the buildings for certain properties. As of December 31, 2021, the Company’s lease liability, net of approximately $17.2 million, which is included in Other liabilities in the accompanying balance sheets, and related right-to-use asset, net of approximately $15.7 million, which is included in Other assets in the accompanying balance sheets, represents all operating leases in which the Company is a lessee. As of December 31, 2021, the Company’s weighted average remaining lease term is approximately 36.4 years and the weighted average discount rate used to calculate the Company’s lease liability is approximately 5.2%. Rent

expense under the Company’s ground leases was approximately $1.6 million, $1.7 million, and $1.6 million for the years ended December 31, 2021, 2020, and 2019, respectively.

The following table represents a reconciliation of the Company’s undiscounted future minimum annual lease payments under operating leases to the lease liability as of December 31, 2021 (in thousands):


	Operating Leases
2022	$	1,320
2023	1,345
2024	1,351
2025	1,356
2026	1,376
Thereafter	30,276
Total undiscounted future minimum lease payments	37,024
Future minimum lease payments, discount	(19,859)
Lease liability	$	17,165

Tax Protection Agreements

In connection with certain acquisitions from September 2013 through March 2017, the Company entered into Tax Protection Agreements with certain limited partners of the Operating Partnership. The Tax Protection Agreements require the Company, subject to certain exceptions, to indemnify the respective sellers receiving OP Units against certain tax liabilities incurred by them, as calculated pursuant to the respective Tax Protection Agreements, for a period of 12 years (with respect to Tax Protection Agreements entered into in September 2013), or 10 years (with respect to Tax Protection Agreements entered into from December 2014 through March 2017) from the date of the Tax Protection Agreements. If the Company were to trigger the tax protection provisions under these agreements, the Company would be required to pay damages in the amount of the taxes owed by these limited partners (plus additional damages in the amount of the taxes incurred as a result of such payment).