Operating Leases

12 Months Ended

Dec. 31, 2021

Leases [Abstract]

Operating Leases

Operating Leases

Company as Lessor

For the years ended December 31, 2021, 2020 and 2019, the Company recognized rental property revenues of $394.0 million, $435.4 million and $395.1 million respectively, of which $42.7 million, $42.0 million and $40.1 million, respectively, represented variable rental revenue. The Company's future minimum rental revenues were:

For the year ending December 31:	Future Minimum Rents as of December 31, 2021
(In thousands)	New Market Properties		Preferred Office Properties		Total
2022	$	74,105	$	21,273	$	95,378
2023	66,206		21,544		87,750
2024	55,384		25,931		81,315
2025	43,289		26,210		69,499
2026	31,593		26,190		57,783
Thereafter	91,229		120,499		211,728
Total	$	361,806	$	241,647	$	603,453

Company as Lessee

The Company has one ground lease for which the Company has evaluated its renewal option periods in quantifying its related

lessee asset and liability. 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 subleases a portion of its leased office space to third parties; office rental expense is included net of the revenue from these subleases in the general and administrative expense line on the consolidated statements of operations. Revenue from subleased office space was approximately $0.9 million and $1.0 million for the twelve-month periods ended December 31, 2021 and 2020, respectively.

The Company recorded lease expense as follows:

(Dollars in thousands)	For the year ended December 31, 2021				Weighted average remaining lease term (years)	Weighted average discount rate
	Lease expense		Cash paid
Office space	$	2,913	$	2,930	4.0	3.0	%
Ground leases	23		15		43.0	4.5	%
Office equipment	125		125		2.7	3.0	%
Total	$	3,061	$	3,070

The Company's tenants often have the option to extend the lease within a specified amount of time, typically for an additional term of between five and ten years, at a specified rate increase. In addition, some leases have a termination right, under which the tenant will have a specified amount of time to notify the lessor of their intention to terminate a space. Terminations often include a specified dollar amount or a percentage of the rent remaining in the lease.

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

For the year ending December 31:	Future Minimum Rents as of December 31, 2021
(In thousands)	Office space		Ground lease		Office equipment		Total
2022	$	2,855	$	15	$	58	$	2,928
2023	2,497		15		39		2,551
2024	3,139		15		19		3,173
2025	2,808		17		12		2,837
2026	355		17		—		372
Thereafter	—		921		—		921
Total	$	11,654	$	1,000	$	128	$	12,782

The Company’s grocery-anchored shopping centers are geographically concentrated within the Sunbelt and Mid-Atlantic region of the United States. The Company’s retail tenant base primarily consists of national and regional supermarkets, consumer services, healthcare providers, and restaurants. Our grocery anchor tenants comprise approximately 44.0% of our gross leasable area. Our credit risk, therefore, is concentrated in the retail/grocery real estate sector. Amounts required as security deposits vary depending upon the terms of the respective leases and the creditworthiness of the tenant, with the exception of our grocer anchor tenants, who generally are not required to provide security deposits. Exposure to credit risk is limited to the extent that tenant receivables exceed security deposits. Security deposits related to tenant leases are included in security deposits and other liabilities in the accompanying consolidated balance sheets.

As of December 31, 2021, the Company’s approximately 1.1 million square foot office portfolio was 95% leased to a predominantly investment grade credit (or investment grade equivalent) tenant roster. For non-credit tenants, our leases typically require a security deposit or letter of credit, which limits worst case collection exposure to amounts in excess of those protections. Additionally, some credit tenant leases will include credit enhancement provisions that require a security deposit or letter of credit in the event of a rating downgrade. We conduct thorough credit analyses not only for leasing activities within our existing portfolio but also for major tenants in properties we are considering acquiring.

Operating Leases

Operating Leases

Company as Lessor

For the years ended December 31, 2021, 2020 and 2019, the Company recognized rental property revenues of $394.0 million, $435.4 million and $395.1 million respectively, of which $42.7 million, $42.0 million and $40.1 million, respectively, represented variable rental revenue. The Company's future minimum rental revenues were:

For the year ending December 31:	Future Minimum Rents as of December 31, 2021
(In thousands)	New Market Properties		Preferred Office Properties		Total
2022	$	74,105	$	21,273	$	95,378
2023	66,206		21,544		87,750
2024	55,384		25,931		81,315
2025	43,289		26,210		69,499
2026	31,593		26,190		57,783
Thereafter	91,229		120,499		211,728
Total	$	361,806	$	241,647	$	603,453

Company as Lessee

The Company has one ground lease for which the Company has evaluated its renewal option periods in quantifying its related

lessee asset and liability. 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 subleases a portion of its leased office space to third parties; office rental expense is included net of the revenue from these subleases in the general and administrative expense line on the consolidated statements of operations. Revenue from subleased office space was approximately $0.9 million and $1.0 million for the twelve-month periods ended December 31, 2021 and 2020, respectively.

The Company recorded lease expense as follows:

(Dollars in thousands)	For the year ended December 31, 2021				Weighted average remaining lease term (years)	Weighted average discount rate
	Lease expense		Cash paid
Office space	$	2,913	$	2,930	4.0	3.0	%
Ground leases	23		15		43.0	4.5	%
Office equipment	125		125		2.7	3.0	%
Total	$	3,061	$	3,070

The Company's tenants often have the option to extend the lease within a specified amount of time, typically for an additional term of between five and ten years, at a specified rate increase. In addition, some leases have a termination right, under which the tenant will have a specified amount of time to notify the lessor of their intention to terminate a space. Terminations often include a specified dollar amount or a percentage of the rent remaining in the lease.

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

For the year ending December 31:	Future Minimum Rents as of December 31, 2021
(In thousands)	Office space		Ground lease		Office equipment		Total
2022	$	2,855	$	15	$	58	$	2,928
2023	2,497		15		39		2,551
2024	3,139		15		19		3,173
2025	2,808		17		12		2,837
2026	355		17		—		372
Thereafter	—		921		—		921
Total	$	11,654	$	1,000	$	128	$	12,782

The Company’s grocery-anchored shopping centers are geographically concentrated within the Sunbelt and Mid-Atlantic region of the United States. The Company’s retail tenant base primarily consists of national and regional supermarkets, consumer services, healthcare providers, and restaurants. Our grocery anchor tenants comprise approximately 44.0% of our gross leasable area. Our credit risk, therefore, is concentrated in the retail/grocery real estate sector. Amounts required as security deposits vary depending upon the terms of the respective leases and the creditworthiness of the tenant, with the exception of our grocer anchor tenants, who generally are not required to provide security deposits. Exposure to credit risk is limited to the extent that tenant receivables exceed security deposits. Security deposits related to tenant leases are included in security deposits and other liabilities in the accompanying consolidated balance sheets.

As of December 31, 2021, the Company’s approximately 1.1 million square foot office portfolio was 95% leased to a predominantly investment grade credit (or investment grade equivalent) tenant roster. For non-credit tenants, our leases typically require a security deposit or letter of credit, which limits worst case collection exposure to amounts in excess of those protections. Additionally, some credit tenant leases will include credit enhancement provisions that require a security deposit or letter of credit in the event of a rating downgrade. We conduct thorough credit analyses not only for leasing activities within our existing portfolio but also for major tenants in properties we are considering acquiring.