Operating Leases (Notes)

9 Months Ended

Sep. 30, 2020

Leases [Abstract]

Operating Leases

Operating Leases

Company as Lessor

For the nine months ended September 30, 2020 and 2019, the Company recognized rental property revenues of $330.4 million and $290.0 million, respectively, of which $31.2 million and $29.2 million, respectively, represented variable rental revenue.

Company as Lessee

The Company has three ground leases related to our office and grocery-anchored shopping center assets that generally have extended terms (e.g. over twenty years with multiple renewal options) and generally have base rent with CPI-based increases. The Company evaluated its renewal option periods in quantifying its asset and liability related to these ground leases. In determining the value of its right of use asset and lease liability, the Company used discount rates comparable to recent loan rates obtained on comparative properties within its portfolio. The Company is also, as of January 31, 2020 following the Internalization, the lessee of office space for its property support center which expires in May 2026, and of furniture and office equipment, which leases generally are three to five years in duration with minimal rent increases.

The Company recorded lease expense as follows:

(dollars in thousands)	For the nine-month periods ended September 30, 2020				Weighted average remaining lease term (years)	Weighted average discount rate
	Lease expense		Cash paid
Office space	$	1,942	$	1,903	5.2	3.0	%
Ground leases	44		38		35.7	4.4	%
Office equipment	282		282		2.3	3.0	%
Total	$	2,268	$	2,223

Future minimum rent expense for office space, ground leases and office equipment were:

For the year ending December 31:	Future Minimum Rents as of September 30, 2020
(in thousands)	Office space		Ground leases		Office equipment		Total
2020 (1)	$	723	$	13	$	91	$	827
2021	2,930		51		321		3,302
2022	2,855		51		149		3,055
2023	2,497		51		58		2,606
2024	3,139		51		39		3,229
Thereafter	3,163		1,136		—		4,299
Total	$	15,307	$	1,353	$	658	$	17,318
(1) Remaining three months

Operating Leases

Operating Leases

Company as Lessor

For the nine months ended September 30, 2020 and 2019, the Company recognized rental property revenues of $330.4 million and $290.0 million, respectively, of which $31.2 million and $29.2 million, respectively, represented variable rental revenue.

Company as Lessee

The Company has three ground leases related to our office and grocery-anchored shopping center assets that generally have extended terms (e.g. over twenty years with multiple renewal options) and generally have base rent with CPI-based increases. The Company evaluated its renewal option periods in quantifying its asset and liability related to these ground leases. In determining the value of its right of use asset and lease liability, the Company used discount rates comparable to recent loan rates obtained on comparative properties within its portfolio. The Company is also, as of January 31, 2020 following the Internalization, the lessee of office space for its property support center which expires in May 2026, and of furniture and office equipment, which leases generally are three to five years in duration with minimal rent increases.

The Company recorded lease expense as follows:

(dollars in thousands)	For the nine-month periods ended September 30, 2020				Weighted average remaining lease term (years)	Weighted average discount rate
	Lease expense		Cash paid
Office space	$	1,942	$	1,903	5.2	3.0	%
Ground leases	44		38		35.7	4.4	%
Office equipment	282		282		2.3	3.0	%
Total	$	2,268	$	2,223

Future minimum rent expense for office space, ground leases and office equipment were:

For the year ending December 31:	Future Minimum Rents as of September 30, 2020
(in thousands)	Office space		Ground leases		Office equipment		Total
2020 (1)	$	723	$	13	$	91	$	827
2021	2,930		51		321		3,302
2022	2,855		51		149		3,055
2023	2,497		51		58		2,606
2024	3,139		51		39		3,229
Thereafter	3,163		1,136		—		4,299
Total	$	15,307	$	1,353	$	658	$	17,318
(1) Remaining three months