Rent Expense

3 Months Ended

Mar. 31, 2019

The Company leases the rights to parking structures at three of its properties, the air space above one property, and the land upon which 79 of its properties are located from third party land owners pursuant to separate leases. In addition, the Company has 10 corporate leases, primarily for office space.

The Company’s leases include both fixed and variable rental payments and may also include escalation clauses and renewal options. These leases have terms of up to 88 years remaining, excluding extension options, with a weighted average remaining term of 44 years.

Effective, January 1, 2019, the Company adopted ASU 2016-02, Leases which requires the operating leases mentioned above to be included in right-of-use lease asset, net on the Company’s March 31, 2019 consolidated balance sheets, which represents the Company’s right to use the underlying asset for the lease term. The Company’s obligation to make the lease payments are included in lease liability on the Company’s March 31, 2019 consolidated balance sheets. Based on the present value of the lease payments for the remaining lease term of the Company’s existing leases, the Company recognized right-of-use assets of approximately $126.7 million and lease liabilities for operating leases of approximately $61.0 million on January 1, 2019. Operating lease right-of-use assets and liabilities commencing or renewing after January 1, 2019 are recognized at commencement or renewal date based on the present value of lease payments over the lease term. As of March 31, 2019, total right-of-use assets and operating lease liabilities were approximately $126.3 million and $60.9 million, respectively. The Company has entered into various short-term operating leases, primarily for office spaces, with an initial term of twelve months or less. These leases are not recorded on the Company's consolidated balance sheets.

Because the rate implicit in each lease is not readily determinable, the Company uses a rate based on its incremental borrowing rate to determine the present value of the lease payments. The weighted average discount rate was 4.3% as of

March 31, 2019. The Company is not aware of any operating leases that have not yet commenced that would have a significant impact on its consolidated balance sheets.

As of March 31, 2019, the future minimum lease obligations under non-cancelable parking, air, ground, and corporate leases, exclusive of the assets classified as held for sale, were as follows (in thousands):



2019	$	2,174
2020	2,951
2021	2,592
2022	2,914
2023	2,908
Thereafter	138,078
Total undiscounted lease payments	$	151,617
Less: Interest	(90,753		)
Present value of lease liabilities	$	60,864

Lease costs consisted of the following for the three months ended March 31, 2019 (in thousands):



	March 31, 2019
Operating lease cost	$	444
Variable lease cost	225
Total lease cost	$	669