Leases

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Leases

Leases

Lessor    

We lease various spaces to tenants over terms ranging from one to 21 years. Certain leases have renewal options for additional terms. The leases provide for base monthly rentals and reimbursements for real estate taxes, escalations linked to the consumer price index or common area maintenance known as operating expense escalation. Operating expense reimbursements are reflected in our June 30, 2019 condensed consolidated statement of income as rental revenue and in our June 30, 2018 condensed consolidated statement of income as tenant expense reimbursement.

Rental revenue includes fixed and variable payments. Fixed payments primarily relate to base rent and variable payments primarily relate to tenant expense reimbursements for certain property operating costs. The components of rental revenue for the three and six months ended June 30, 2019 are as follows (amounts in thousands):

	Three months ended June 30, 2019		Six months ended June 30, 2019
Fixed payments	$	125,036	$	251,617
Variable payments	16,035		32,871
Total rental revenue	$	141,071	$	284,488

As of June 30, 2019, we were entitled to the following future contractual minimum lease payments (excluding operating expense reimbursements) on non-cancellable operating leases to be received which expire on various dates through 2038 (amounts in thousands):

Remainder of 2019	$	246,833
2020	490,405
2021	465,564
2022	434,808
2023	407,236
Thereafter	1,862,936
	$	3,907,782

As of December 31, 2018, we were entitled to the following future contractual minimum lease payments (excluding operating expense reimbursements) on non-cancellable operating leases to be received which expire on various dates through 2038 (amounts in thousands):

2019	$	485,441
2020	460,127
2021	423,365
2022	391,395
2023	362,738
Thereafter	1,536,461
	$	3,659,527

The above future minimum lease payments exclude tenant recoveries, amortization of deferred rent receivables and the net accretion of above-below-market lease intangibles. Some leases are subject to termination options generally upon payment of a termination fee. The preceding tables are prepared assuming such options are not exercised.

Lessee

We make payments under ground leases related to three of our properties. Minimum rent is expensed on a straight-line basis over the non-cancellable term of the leases. The ground leases are due to expire between the years 2050 and 2077, inclusive of extension options, and have no variable payments or residual value guarantees. As of June 30, 2019, our balance sheet included $29.4 million and $29.4 million in right-of-use assets and lease liabilities, respectively, that are associated with these three ground leases.

The rate implicit in the lease was not determinable for any of these ground leases and accordingly, we measured the related lease liabilities using discount rates based on estimated incremental borrowing rates. Our estimates required significant judgment given that the lease terms of our ground leases are significantly longer than the terms of borrowings on a fully-collateralized basis and considered factors such as U.S. Treasury rates and our own credit rating.

Information relating to the measurement of our lease liabilities as of June 30, 2019 are as follows:

Weighted average remaining lease term (in years)	50.8
Weighted average discount rate	4.49		%
Cash paid for operating leases six months ended June 30, 2019 (in thousands)	$	759

Future minimum lease payments to be paid over the terms of the leases as of June 30, 2019 are as follows (amounts in thousands):

Remainder of 2019	$	759
2020	1,518
2021	1,518
2022	1,518
2023	1,518
Thereafter	68,298
Total undiscounted cash flows	75,129
Present value discount	(45,725		)
Ground lease liabilities	$	29,404

Future minimum lease payments to be paid over the terms of the leases as of December 31, 2018 are as follows (amounts in thousands):

2019	$	1,518
2020	1,518
2021	1,518
2022	1,518
2023	1,518
Thereafter	68,298
	$	75,888

Leases

Leases

Lessor    

We lease various spaces to tenants over terms ranging from one to 21 years. Certain leases have renewal options for additional terms. The leases provide for base monthly rentals and reimbursements for real estate taxes, escalations linked to the consumer price index or common area maintenance known as operating expense escalation. Operating expense reimbursements are reflected in our June 30, 2019 condensed consolidated statement of income as rental revenue and in our June 30, 2018 condensed consolidated statement of income as tenant expense reimbursement.

Rental revenue includes fixed and variable payments. Fixed payments primarily relate to base rent and variable payments primarily relate to tenant expense reimbursements for certain property operating costs. The components of rental revenue for the three and six months ended June 30, 2019 are as follows (amounts in thousands):

	Three months ended June 30, 2019		Six months ended June 30, 2019
Fixed payments	$	125,036	$	251,617
Variable payments	16,035		32,871
Total rental revenue	$	141,071	$	284,488

As of June 30, 2019, we were entitled to the following future contractual minimum lease payments (excluding operating expense reimbursements) on non-cancellable operating leases to be received which expire on various dates through 2038 (amounts in thousands):

Remainder of 2019	$	246,833
2020	490,405
2021	465,564
2022	434,808
2023	407,236
Thereafter	1,862,936
	$	3,907,782

As of December 31, 2018, we were entitled to the following future contractual minimum lease payments (excluding operating expense reimbursements) on non-cancellable operating leases to be received which expire on various dates through 2038 (amounts in thousands):

2019	$	485,441
2020	460,127
2021	423,365
2022	391,395
2023	362,738
Thereafter	1,536,461
	$	3,659,527

The above future minimum lease payments exclude tenant recoveries, amortization of deferred rent receivables and the net accretion of above-below-market lease intangibles. Some leases are subject to termination options generally upon payment of a termination fee. The preceding tables are prepared assuming such options are not exercised.

Lessee

We make payments under ground leases related to three of our properties. Minimum rent is expensed on a straight-line basis over the non-cancellable term of the leases. The ground leases are due to expire between the years 2050 and 2077, inclusive of extension options, and have no variable payments or residual value guarantees. As of June 30, 2019, our balance sheet included $29.4 million and $29.4 million in right-of-use assets and lease liabilities, respectively, that are associated with these three ground leases.

The rate implicit in the lease was not determinable for any of these ground leases and accordingly, we measured the related lease liabilities using discount rates based on estimated incremental borrowing rates. Our estimates required significant judgment given that the lease terms of our ground leases are significantly longer than the terms of borrowings on a fully-collateralized basis and considered factors such as U.S. Treasury rates and our own credit rating.

Information relating to the measurement of our lease liabilities as of June 30, 2019 are as follows:

Weighted average remaining lease term (in years)	50.8
Weighted average discount rate	4.49		%
Cash paid for operating leases six months ended June 30, 2019 (in thousands)	$	759

Future minimum lease payments to be paid over the terms of the leases as of June 30, 2019 are as follows (amounts in thousands):

Remainder of 2019	$	759
2020	1,518
2021	1,518
2022	1,518
2023	1,518
Thereafter	68,298
Total undiscounted cash flows	75,129
Present value discount	(45,725		)
Ground lease liabilities	$	29,404

Future minimum lease payments to be paid over the terms of the leases as of December 31, 2018 are as follows (amounts in thousands):

2019	$	1,518
2020	1,518
2021	1,518
2022	1,518
2023	1,518
Thereafter	68,298
	$	75,888