Commitments and Contingencies

3 Months Ended

Mar. 31, 2022

As of March 31, 2022, the Company had seven operating and six direct financing lease agreements. The seven operating leases have durations, including assumed renewals, ranging from 20.6 years to 85.5 years, excluding an adjacent parking lot lease with a term of 2.5 years. The Company did not enter into any additional ground leases during the three months ended March 31, 2022.

As of March 31, 2022, the Company’s balance sheet included ROU assets and liabilities of $7.9 million and $8.1 million, respectively, which are included in operating lease right-of-use assets and operating lease liabilities, respectively. In determining operating ROU assets and lease liabilities for the Company’s existing operating leases upon the adoption of the lease guidance issued in 2019, as well as for new operating leases in the current period, the Company was required to estimate an appropriate incremental borrowing rate on a fully-collateralized basis for the terms of the leases. Because 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, including assumed renewals, of 34.7 years and a weighted-average discount rate of 7.37% as of March 31, 2022. For the three months ended March 31, 2022, the Company paid cash of $0.2 million for amounts included in the measurement of lease liabilities and recorded expense of $0.2 million on a straight-line basis in accordance with the current accounting guidance. The Company paid cash of $0.2 million for amounts included in the measurement of lease liabilities and recorded expense of $0.2 million for the three months ended March 31, 2021. The lease expense is recorded in property operating expenses in the consolidated statements of operations and comprehensive loss. The following table reflects the base cash rental payments due from the Company as of March 31, 2022:


	Future Base Rent Payments
(In thousands)	Operating Leases		Direct Financing Leases (1)
2022 (remainder)	$	482	$	65
2023	645		88
2024	632		90
2025	588		93
2026	599		95
Thereafter	22,560		7,312
Total minimum lease payments	25,506		7,743
Less: amounts representing interest	(17,386)		(2,905)
Total present value of minimum lease payments	$	8,120	$	4,838

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(1) The Direct Finance Lease liability is included in Accounts Payable and accrued expenses on the balance sheet as of March 31, 2022. The Direct Financing lease asset is included as part of building and improvements as the land component was not required to be bifurcated under ASU 840.

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 or its properties.

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 March 31, 2022, 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.