
	December 31,
	2021 (a)		2020
Land	$	264,590	$	235,243
Buildings and improvements	1,248,664		1,205,111
Less: Accumulated depreciation	(199,664)		(172,319)
	$	1,313,590	$	1,268,035

(a)Amounts include four recently completed student housing properties located in Spain and Portugal (subject to net lease agreements), as further described in the “Real Estate Under Construction” section below.

The carrying value of our Real Estate — Land, buildings and improvements decreased by $65.3 million from December 31, 2020 to December 31, 2021, reflecting the impact of exchange rate fluctuations during the same period (Note 2).

Depreciation expense, including the effect of foreign currency translation, on our real estate was $37.2 million, $30.5 million, and $29.5 million for the years ended December 31, 2021, 2020, and 2019, respectively.

During the year ended December 31, 2021, we reclassified a property with a carrying value of $1.8 million from Net investments in direct financing leases to Real estate — Land, buildings and improvements in connection with a change in lease classification due to a lease termination (Note 5).

On December 30, 2021, we acquired an industrial facility located in Houston, Texas, which was deemed to be an asset acquisition, at a total cost of $10.9 million, including land of $1.9 million, building of $7.1 million, and an in-place lease intangible of $1.9 million (with an expected life of 15 years). In connection with this acquisition, the lease with this tenant at another property was terminated.

During the year ended December 31, 2021, we sold one property located in Zadar, Croatia, classified as Real estate — Land, buildings and improvements. As a result, the carrying value of our Real estate — Land, buildings and improvements decreased by $11.9 million from December 31, 2020 to December 31, 2021 (Note 13).

During the year ended December 31, 2021, we received $4.9 million of lease termination proceeds from one property in a two-property domestic portfolio, which will be recognized as other operating income ratably over the remaining lease term of the occupied property (lease expiration is in 2034). Accordingly, during the year ended December 31, 2021, we recognized less than $0.1 million within Other operating and interest income in the consolidated statements of income related to this lease termination. The vacant facility was sold in December 2021, as disclosed in Note 5 and Note 13.

Operating real estate, which consists of our self-storage, student housing (not subject to net lease agreements), and multi-family residential properties (our last multi-family residential property was sold on January 29, 2019), is summarized as follows (in thousands):


	December 31,
	2021		2020
Land	$	80,481	$	89,148
Buildings and improvements	397,107		507,850
Less: Accumulated depreciation	(80,035)		(73,569)
	$	397,553	$	523,429

The carrying value of our Operating real estate — land, buildings and improvements increased by $1.5 million from December 31, 2020 to December 31, 2021, reflecting the impact of exchange rate fluctuations during the same period (Note 2).

Depreciation expense, including the effect of foreign currency translation, on our operating real estate for the years ended December 31, 2021, 2020, and 2019 was $16.2 million, $16.0 million, and $15.2 million, respectively.

During the year ended December 31, 2021, we sold two student housing operating properties located in Cardiff and Portsmouth, United Kingdom. As a result, the carrying value of our Operating real estate — land, buildings and improvements decreased by $114.1 million from December 31, 2020 to December 31, 2021 (Note 13).


	Years Ended December 31,
	2021		2020
Beginning balance	$	180,055	$	235,751
Placed into service	(171,413)		(236,923)
Capitalized funds	97,099		153,539
Foreign currency translation adjustments	(7,850)		19,415
Capitalized interest	5,418		8,273
Ending balance	$	103,309	$	180,055

During the year ended December 31, 2021, we completed and placed into service the following student housing properties, which became subject to individual net lease agreements with minimum fixed rents and were reclassified to Real estate — Land, buildings and improvements on our consolidated balance sheets (in thousands):

Property Location(s)

Date of Completion

Total Capitalized Costs (a) (b)

Coimbra, Portugal

7/5/2021

35,096

Pamplona, Spain

7/8/2021

32,781

Seville, Spain

7/30/2021

46,593

Bilbao, Spain

8/24/2021

56,719

171,189

Property Location(s)

Reclassified to

Date of Completion

Total Capitalized Costs (a) (b)

Austin, Texas

Operating real estate — Land, buildings and improvements

8/4/2020

78,927

Barcelona, Spain (c)

Real estate — Land, buildings and improvements

8/4/2020

33,429

San Sebastian, Spain (c)

Real estate — Land, buildings and improvements

8/20/2020

38,532

Porto, Portugal (d)

Real estate — Land, buildings and improvements

10/30/2020

28,809

Malaga, Spain (d)

Real estate — Land, buildings and improvements

12/10/2020

50,975

230,672

(b)Amounts related to our international student housing properties are denominated in a foreign currency. For these properties, amounts reflect the euro on the date the assets were placed into service.

(d)Upon completion, these properties became subject to an individual net lease agreement with variable rent based on gross revenues, which converted to minimum fixed rent in the second year of operation.

In addition, during the year ended December 31, 2020, we placed into service approximately $6.3 million in capital investment projects at three of our net lease properties (non-cash investing activity).

During the years ended December 31, 2021 and 2020, total capitalized funds primarily related to construction draws for student housing development projects, and includes $5.0 million and $20.5 million, respectively, of accrued costs, which is a non-cash investing activity.

Capitalized interest includes interest incurred during construction, as well as amortization of the mortgage discount and deferred financing costs, which totaled $5.4 million, $8.3 million, and $7.1 million for the years ended December 31, 2021, 2020, and 2019, respectively, and is a non-cash investing activity.

As of December 31, 2021 and 2020, we had three and seven open student housing development projects, respectively, and aggregate unfunded commitments totaling approximately $55.4 million and $174.9 million, respectively, excluding capitalized interest, accrued costs, and capitalized acquisition fees.

Lease income recognized and included within Lease revenues — net-leased and Lease revenues — operating real estate in the consolidated statements of income are as follows (in thousands):


	Years Ended December 31,
	2021		2020		2019
Lease revenues — net-leased
Lease income — fixed	$	101,944	$	84,047	$	99,771
Lease income — variable (a)	18,237		15,096		15,468
Total operating lease income (b)	$	120,181	$	99,143	$	115,239

Lease revenues — operating real estate
Lease income — fixed	$	78,726	$	67,964	$	67,969
Lease income — variable (c)	2,416		2,218		2,620
Total operating real estate income	$	81,142	$	70,182	$	70,589

(a)Includes (i) rent increases based on changes in the CPI and other comparable indices and (ii) reimbursements for property taxes, insurance, and common area maintenance services.

(b)Excludes interest income from direct financing leases of $1.5 million, $3.2 million, and $3.9 million for the years ended December 31, 2021, 2020, and 2019, respectively (Note 5). Interest income from direct financing leases is included in Lease revenues — net-leased in the consolidated statements of income.

Scheduled future lease payments to be received (exclusive of expenses paid by tenants, percentage rents, and future CPI-based adjustments) under non-cancelable operating leases as of December 31, 2021 are as follows (in thousands):

During the years ended December 31, 2021, 2020, and 2019, total lease costs for operating leases totaled $0.8 million, $1.0 million, and $1.1 million, respectively, which is included in Property expenses, excluding reimbursable tenant costs and Reimbursable tenant costs in the consolidated statements of income. Additionally, we recognized reimbursable ground rent totaling approximately $0.4 million for each of the years ended December 31, 2021, 2020, and 2019, which is included in Lease revenues — net-leased in the consolidated statements of income.


		Years Ended December 31,
	Location on Consolidated Balance Sheets	2021			2020
Operating ROU assets — land leases	In-place lease and other intangible assets	$	34,496		$	37,339

Operating lease liabilities — land leases	Accounts payable, accrued expenses and other liabilities	$	7,287		$	8,084

Weighted-average remaining lease term — operating leases (a)		42.5 years			42.2 years
Weighted-average discount rate — operating leases (a)		6.8		%	6.8		%
Number of land lease arrangements		8			8
Lease term range		4 – 981 years			5 – 982 years

(a)Excludes ROU land lease asset totaling $7.4 million and $7.5 million as of December 31, 2021, and 2020, related to the student housing development project located in Swansea, United Kingdom, as it has no future obligation during the 983-year lease term.

Cash paid for operating lease liabilities included in the Net cash provided by operating activities for the years ended December 31, 2021, 2020, and 2019 was $0.7 million, $0.4 million, and $0.8 million, respectively. There are no land finance leases for which we are the lessee, therefore there are no related ROU assets or lease liabilities.

A reconciliation of the undiscounted cash flows for operating leases recorded on the consolidated balance sheet within Accounts payable, accrued expenses and other liabilities as of December 31, 2021 is as follows (in thousands):


Years Ending December 31,	Total
2022	$	596
2023	596
2024	596
2025	591
2026	480
Thereafter	18,833
Total lease payments	21,692
Less: amount of lease payments representing interest	(14,405)
Present value of future lease payments/lease obligations	$	7,287

In relation to the litigation with our former joint-venture partner, the arbitrator issued a final decision and awarded the joint-venture partner a settlement of $2.6 million during the year ended December 31, 2020. As of December 31, 2021 and 2020, all amounts payable to the joint-venture partner have been paid.

In addition, during the year ended December 31, 2020, the collectibility of the value added tax (“VAT”) receivable to be refunded by the Ghanaian government was no longer deemed probable. As such, we recorded a $2.8 million loss to write-off the VAT receivable during the year ended December 31, 2020, which is included within Other gains and (losses) on our consolidated statements of income.

We classify distributions received from equity method investments using the cumulative earnings approach. Distributions received are considered returns on the investment and classified as cash inflows from operating activities. If, however, the investor’s cumulative distributions received, less distributions received in prior periods determined to be returns of investment, exceeds cumulative equity in earnings recognized, the excess is considered a return of investment and is classified as cash inflows from investing activities.

We held an interest in an unconsolidated investment in our Self Storage segment that related to a joint venture for three self-storage facilities in Canada. This entity was jointly owned with a third party, which was also the general partner of the joint venture. On April 15, 2019, the joint-venture agreement was amended and our ownership and economic interest in the joint venture increased from 90% to 100%. We did not consolidate this entity because we were not the primary beneficiary due to shared decision making with the general partner and the nature of our involvement in the activities, which allowed us to exercise significant influence, but did not give us power over decisions that significantly affect the economic performance of the entity.

On December 23, 2020, we disposed of our sole equity method investment which was comprised of the three self-storage facilities located in Canada for total proceeds of $62.3 million. In conjunction with this disposal, we recognized a gain on sale of $12.9 million (inclusive of tax of $1.8 million) during the year ended December 31, 2020, which is included in Earnings (losses) from equity method investment in real estate in our consolidated financial statements. Upon closing of the sale, loans totaling $31.8 million encumbering these properties were repaid. Amounts are based on the exchange rate of the Canadian dollar on the date of the transaction.

On August 15, 2019, we closed on the disposition of the self-storage development project located in Vaughan, Canada. In conjunction with this disposal, we recognized a gain on sale of $0.2 million during the year ended December 31, 2019, which is included in Earnings (losses) from equity method investment in real estate in our consolidated financial statements.

We have recorded asset retirement obligations for the removal of asbestos and environmental waste in connection with certain of our investments. We estimated the fair value of the asset retirement obligations based on the estimated economic lives of the properties and the estimated removal costs provided by the inspectors. This liability was $1.2 million and $3.3 million as of December 31, 2021 and 2020, respectively. The liability was discounted using the weighted-average interest rate on the associated fixed-rate mortgage loans at the time the liability was incurred. We include asset retirement obligations in Accounts payable, accrued expenses and other liabilities in the consolidated financial statements.