Rent Expense

6 Months Ended

Jun. 30, 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 ASC 842, Leases which requires the operating leases mentioned above to be included in right-of-use lease assets, net on the Company’s June 30, 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 liabilities on the Company’s June 30, 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 June 30, 2019, total right-of-use assets and operating lease liabilities were approximately $125.8 million and $60.7 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 June 30, 2019. There are no operating leases that have not yet commenced that would have a significant impact on its consolidated balance sheets.

As of June 30, 2019, the future minimum lease obligations under non-cancelable parking, air, ground, and corporate leases, were as follows (in thousands):



2019	$	1,265
2020	2,953
2021	2,952
2022	2,914
2023	2,909
Thereafter	138,076
Total undiscounted lease payments	$	151,069
Less: Interest	(90,377		)
Present value of lease liabilities	$	60,692

Lease costs consisted of the following for the six months ended June 30, 2019 (in thousands):



Operating lease cost	$	928
Variable lease cost	474
Total lease cost	$	1,402