Leases - The Company as Lessor

9 Months Ended

Sep. 30, 2020

LEASES - THE COMPANY AS LESSOR

The Company leases land and buildings to third parties under operating leases. Such activity is primarily composed of operating leases within its CRE segment.

Beginning in the quarter ended June 30, 2020, the Company began entering into rent relief arrangements with certain of its tenants due to the disruption from COVID-19 in the form of rent deferrals or other relief modifications that resulted in

changes to fixed contractual lease payments for specified months. Such other relief modifications included changing the nature of payments from fixed to variable (i.e., variable based on a percentage of the tenant's sales, typically subject to a minimum "floor" amount) or, in some cases, payment forgiveness. Consistent with lease accounting guidance and recent interpretations provided by the FASB in the Lease Modification Q&A, the Company elected to treat such eligible lease concessions (i.e., such rent deferrals, fixed-to-variable modifications or payment forgiveness arrangements that do not result in a substantial increase in the rights of the lessor or obligations of the lessee) outside of the lease accounting modification framework.

For rent deferrals, consistent with an acceptable method described in the Lease Modification Q&A, the Company accounts for the event as if no changes to the lease contract were made and continues to record lease receivables and recognize income during the deferral period. For the other relief modifications mentioned above that resulted in reductions to fixed contractual lease payments, consistent with the Lease Modification Q&A, the Company reports, for periods covered by the modification, reduced rental income (i.e., revenue) equal to the agreed-upon amounts (offset by any variable lease payments).

The Company continues to assess collectability on all such amounts due under leases and only recognizes revenue to the extent such amounts are probable of collection (or payment is received). During the three and nine months ended September 30, 2020, the Company projected a higher amount of uncollectable tenant billings due to COVID-19 and, as a result, during the three and nine months ended September 30, 2020, the Company recorded reductions in revenue of $5.6 million and $12.2 million, respectively, related to aggregate charges for CRE accounts receivable and unbilled straight-line lease receivables for which the Company assessed that the tenant's future payment of amounts due under leases was not probable. Further, during the three and nine months ended September 30, 2020, the Company recorded reductions of revenue of $0.7 million and $3.4 million, respectively, related to the allowance for doubtful accounts for other impacted operating lease receivables.

As a result of COVID-19, certain tenants experiencing economic difficulties have sought and may continue to seek current and future rent relief, which may be provided in the form of additional rent deferrals or other relief modifications, among other possible agreements. The Company is evaluating each request on a case-by-case basis and will apply lease accounting guidance (including the Lease Modification Q&A) consistently to leases with similar characteristics and similar circumstances. The future impact of any potential rent concessions in the context of lease accounting guidance and the Lease Modification Q&A is dependent upon the extent of relief granted to tenants as a result of COVID-19 in future periods and the elections made by the Company at the time of entering into such agreements.

The historical cost of, and accumulated depreciation on, leased property as of September 30, 2020 and December 31, 2019 were as follows (in millions):


	September 30, 2020		December 31, 2019
Leased property - real estate	$	1,515.9	$	1,511.3
Less: Accumulated depreciation	(145.6)		(125.0)
Property under operating leases, net	$	1,370.3	$	1,386.3

Total rental income (i.e., revenue) under these operating leases during the three and nine months ended September 30, 2020 and 2019 relating to lease payments and variable lease payments were as follows (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Lease payments	$	23.0	$	29.8	$	73.9	$	82.6
Variable lease payments	13.3		13.9		41.3		37.6
Total rental income	$	36.3	$	43.7	$	115.2	$	120.2

Contractual future lease payments to be received on non-cancelable operating leases as of September 30, 2020 were as follows (in millions):


	September 30, 2020
2020	$	29.6
2021	113.9
2022	102.7
2023	91.9
2024	79.8
2025	68.1
Thereafter	486.9
Total future lease payments to be received	$	972.9