Commitments and Contingencies

9 Months Ended

Sep. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

Lessee Arrangements — Ground Leases

The Company leases land under ground leases for 10 of its properties with lease durations ranging from 15 to 97 years as of September 30, 2020, which includes two ground leases acquired during the third quarter of 2020. As of September 30, 2020, the Company’s balance sheet includes ROU assets and liabilities of $56.2 million and $24.5 million, respectively. In determining operating ROU assets and lease liabilities for the Company’s existing operating leases upon the adoption of the new lease guidance as well as for new operating leases in the current period, if any, the Company was required to estimate an appropriate incremental borrowing rate on a fully-collateralized basis for the terms of the leases. Since the terms of the Company’s ground leases are significantly longer than the terms of borrowings available to the Company on a fully-collateralized basis, the Company’s estimate of this rate required significant judgment.

The Company’s ground operating leases have a weighted-average remaining lease term of approximately 32.3 years and a weighted-average discount rate of 4.33% as of September 30, 2020. For the three and nine months ended September 30, 2020, the Company paid cash of approximately $0.4 million and $1.1 million for amounts included in the measurement of lease liabilities and recorded expense of $0.3 million and $1.0 million, respectively, on a straight-line basis in accordance with the standard. The lease expense is recorded in property operating expenses in the consolidated statements of operations and comprehensive loss. The Company did not enter into any additional ground leases during the quarter ended September 30, 2020. The Company incurred rent expense on ground leases of $0.3 million and $1.0 million during the three and nine months ended September 30, 2019, respectively.

The following table reflects the base cash rental payments due from the Company as of September 30, 2020:


(In thousands)	Future Base Rent Payments (1)
2020 (remainder)	$	361
2021	1,445
2022	1,445
2023	1,445
2024	1,450

Thereafter	41,905
Total minimum lease payments (2)	48,051
Less: Effects of discounting	(23,593)
Total present value of lease payments	$	24,458

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(1)Assumes exchange rates of £1.00 to $1.29 for GBP and €1.00 to $1.17 for EUR as of September 30, 2020 for illustrative purposes, as applicable.

(2)Ground lease rental payments due for the Company’s ING Amsterdam lease are not included in the table above as the Company’s ground for this property is prepaid through 2050.

Litigation and Regulatory Matters

In the ordinary course of business, the Company may become subject to litigation, claims and regulatory matters. There are no material legal or regulatory proceedings pending or known to be contemplated against the Company.

On January 25, 2018, Moor Park Capital Partners LLP filed a complaint against (i) the Company and the OP; (ii) the Property Manager, Global Net Lease Special Limited Partner, LLC, an affiliate of AR Global that directly owns the Advisor and the Property Manager, and the Advisor; and (iii) AR Capital Global Holdings, LLC, and AR Global, in the Supreme Court of the State of New York, County of New York. On March 4, 2019, the parties entered into a settlement agreement pursuant to which the lawsuit was dismissed. The Company recorded a reserve of $7.4 million related to the then anticipated settlement payment during the fourth quarter of 2018 and subsequently paid the settlement amount during the first quarter of 2019. During the nine months ended September 30, 2019, the Company incurred approximately $1.0 million in additional legal expenses related to this litigation. These costs are included in acquisition, transaction and other costs in the consolidated statement of operations.

Environmental Matters

In connection with the ownership and operation of real estate, the Company may potentially be liable for costs and damages related to environmental matters. As of September 30, 2020, the Company had not been notified by any governmental authority of any non-compliance, liability or other claim, and is not aware of any other environmental condition that it believes will have a material adverse effect on the results of operations.